Bulls go back to work less enthusiastically on Monday “mourning” anxieties tied to Greece. As of 12:05 ET the SP-500 (SPY) is off 0.25% in technically constructive profit-taking rather than a straight-forward and bound for failure, retest of 2011’s May highs.
On an otherwise ultra-light news session with nary an economic report or corporate confessional worthy of marquee billing, trader focus and subsequent profit-taking on Monday has been tied to Greece’s dragging inability to compromise with creditors and whether it will avoid defaulting on its mountain of ticking debt.
In those intertwined markets of notice, despite Monday’s renewed headline credit market worries, the EUR/USD has reversed early losses to trade up 0.15%. The price action hints at default risk or a last minute resolution meant to elicit a collective sigh of relief, as likely priced into the market at this juncture.
Following Friday’s gap breakout to fresh eleven-year highs in the leading NASDAQ, the tech-heavy index is off a modest 0.35%. The SP-500 is seeing similar productive behavior after breaking out to fresh relative highs from a two and one-half week lateral range some 2.5% below its May 2011 highs.
Brent crude is trading higher by 0.75% and continuing to widen its spread over the US Oil Fund (USO). Colder weather hitting Europe and geopolitics out of Iran and Syria are finding favor over potential weakened demand tied to a potential Greek default in Brent crude futures.
Conversely, default risk and beefed up Canadian supplies for WTI which sets the price basis for USO, are keeping a lid on shares. Intraday, USO is off 0.75% and near 200SMA support for a third session of testing.
The CBOE Volatility Index ($VIX) is up about 5.0% to around 18% and 5% - 6% below its 10SMA. The action follows Friday’s lows near 16% and levels last seen in July 2011 as the sentiment gauge showed a fairly stretchy differential of 13% relative to its 10SMA, just shy of a full-blown short-term complacency signal of 15%.
On the corporate confessional side, shares of Sohu.com (SOHU) are off 14% and testing its 50SMA for support in a doji / hammer pattern. The erstwhile China-based internet portal beat top and bottom-line views for its fourth quarter but slashed its first quarter profit range to $0.50 - $0.55 compared to Street forecasts of $1.06 and cut revenues to $219M - $225 versus views of $239M.
Bulls were spied toying around in Hasbro (HAS) after the company issued a penny beat on earnings of $1.06, in-line sales growth of 4.0% and raised its quarterly dividend 20% from $0.30 to $0.36 per share. Intraday, shares of HAS are up 2.50% in a large fuzzy and huggable, bullish engulfing candle following out-the-gate profit-taking just through 10SMA support.
And shares of HMO outfit Humana (HUM) are off 5.50% and look to be in ambulatory care technically after the company issued mixed-to-weak results. By the numbers, Humana earned an in-line $1.20 per share and came up short of sales forecasts with growth of 9.4%. Looking forward, the company cut its Q1 EPS guidance to $1.35 - $1.45 versus the Street’s $1.80.
For its fiscal year, Humana raised its earnings by $0.10 but an estimated range of $7.50 - $7.70 still falls below consensus forecasts of $7.99. Technically, Monday’s pressure in HUM has the stock gapping below 50SMA support within a bearish flag, but testing its July 2011 highs for support.
Finally and in those sometimes accurate heat-seeking option markets, coin and dvd kiosk giant Coinstar (CSTR) reports after the close this evening and traders are putting some fresh money into the surrounding money February contracts with heavy overall volume tipping more than 15,000 contracts compared to a daily deposit of about 2,500.
Most active are the out-of-the money February 55 calls on volume of 2,600 which nearly doubles its existing open interest. Priced at $1.60, naked long bets would require a move of 16% by expiration or a move from $50 to $58.20 to realize a double in premium. Our guess is most folks feeding the machine today are spread traders using various verticals, given the rather stiff fee for receiving any future payments.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
