9:00am (EST)
The market got off to a good start on Thursday as news from overseas helped prop futures up for a strong start. The bulls didn’t waste any time grabbing the momentum after hearing a stronger-than-expected eurozone PMI reading and that retail spending is holding its own. We also had a number of stellar earning reports here at home which helped push the major indexes higher by 2%.
The Dow managed to finish the day with a gain of 202 points, or 2%, and is nestling at 10,322. There was room to run up to 10,400 which is where resistance lies but the bulls could only manage a run to 10,363. If the Dow can take out 10,400 then look for a possible run to 10,600.
The S&P 500 added 24 points, or 2.3%, and closed at 1,093 after reaching a high of 1097.50. A test of the 1,100 level once again proved to be too much and the index will either drift back down or the bulls make a push to 1,125-1,150 if they can break through.
The Nasdaq is also having trouble at resistance and we said to watch for a close around 2,250. The index settled at 2,245 after jumping nearly 60 points, or 2.7%. The high was 2,251.
Futures are slightly up ahead of today’s opening bell and there are a number of events the market is digesting as we go to press.
Amazon.com (AMZN, $120.07, up $2.64) is taking a hit this morning after reporting earnings that came in below Wall Street’s expectations. Shares fell 15% in extended trading last night following the results and were near $100 at one point.
The company said it earned $207 million, or $0.45 a share, versus $142 million, or $0.32 a share, in the year ago period. Analysts were looking for $0.54 a share. Revenue came in at $6.6 billion which was slightly ahead of the $6.5 billion that had been penciled in.
Here is where Amazon blew it.
For the current quarter, the company is forecasting between $6.9 billion and $7.6 billion in revenue, versus the Street’s figure of $7.2 billion, on average. The low-end number spooked investors and in pre-market action, shares are down $13, to $107.
We have been ”feeling” this correction in Amazon coming but we ran out of time with our July put options. Back in June, the chart was telling us a possible test of $95 was on the horizon and it could still happen. Which brings us to a good point. Folks, charts can be tricky to read but they are a trader’s best friend. However, when playing options, you have to be right by a certain amount of time and often times a few days or weeks can cost you a BIG payday.
The other point we want to make is that in choppy markets all you can try to do is preserve capital and trade lightly. You have to wait for the trades that hit returns of 200%, 300%, or even 500%, and they are coming once we break out of this range.
Also, you will have to take some risks on “cheap” out-of-the-money trades *(options under $1) and hope your higher “premium” trades of $1.50-$2.00 help offset those losses if they don’t work out. This is exactly how we are trading right now until we break out of this range.
The major indexes are now moving 2%-3% a day inside of this current range instead of 1% or less so we are setting up for a a huge move the longer we stay in this zone.
The bulls are also trying to bust through key resistance levels before they reach the upper end of this range so they still face some headwinds. The bears will be trying to hold the fort down at current levels and will be looking to gain some traction heading into the weekend.
In any event, today should be interesting. We will know the results of Europe’s bank stress tests at high noon! As we head to press, Dow futures are up 23 points to 10,290 while the S&P 500 futures are higher by 5 points to 1,092. The Nasdaq 100 futures are also up 5 to 1,858. Subscribers, check the Members Area for the updates.