8:40am (EST)
The bulls started off the week in rally mode as they powered the major indexes past their first level of resistance. We mentioned in our Weekly Wrap the carnage the bears have caused over the past few weeks which had sent the market down 17% from its April highs.
It is too early to say if last week was “the bottom” (which we doubt) but the bulls are making a run either way you slice it. As extreme as the volatility has been, not to mention the recent selloff, the market was due for a bounce and we should find out this week if it sticks.
The Dow jumped 214 points, or 1.9%, to settle at 11,482 and near its high for the day. The next levels of resistance are at 11,600 and 11,800 while short-term support remains at 11,200-11,000.
The S&P surged 26 points, or 2.2%, and ended at 1,204. We were looking for a close above 1,200 which we said could lead to a run up 1,225, and possibly 1,250, respectively. Support will be 1,175 and then 1,150 if the index falls back.
The Nasdaq soared 47 points, or 1.9%, and finished at 2,555. Our target for Monday’s close was 2,550 which opened the door for a trip back to 2,600-2,625. There is short-term support at 2,500 then 2,400.
One stock that made a strong move yesterday was Dendreon (DNDN, $12.65, up $2.28) which zoomed 22% following its recent drop from $36 to under $12 at the beginning of the month. Shares reached a low of $9.22 last week and we were on the fence on whether we should make Dendreon a covered call trade for our Weekly Wrap, or look at options for a possible rebound back above $10 for our Daily.
Our waffling caused us to miss a sweet opportunity to make 165% yesterday on an option trade after the calls we profile on our Watch List this morning opened at 28 cents. They closed at 75 cents and could be headed higher if Dendreon continues its rebound.
There is still risk shares could fall back below $10 but most of the damage has been done. We wouldn’t be surprised to see the rumor mill pick up on what company might make a bid for Dendreon but you can bet there have already been some back door meetings taking place. Whether or not anything materializes remains to be seen but volume was big so we are keeping an eye on both the stock and option chains.
Futures were pointing towards a slightly lower open when we hit the rack last night and started to get progressively worse over slower growth concerns in Europe. The overseas markets have been trading lower for much of the morning and here across the Atlantic, Wall Street will be opening in the red once trading begins.
Dow futures are lower by 103 points to 11,300 while the S&P futures are off by 17 points to 1,181. Nasdaq futures are down 27 points to 2,180. We have some important updates this morning and a number of new names on our Watch List as possible trade candidates to cover. Subscribers, check the Members Area for the juicy tidbits.
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