by Ian Harvey
Has a market bottom been achieved? Who really knows for certain! Each new day brings either gain or pain – and trading courage is a must!
Looking at yesterdays positive figures -- the major averages ended the session up more than 1 percent for the day for their best day since December 4th, with the Dow Jones Industrial Average (DJIA) up 225 points on the day and the broader S&P 500 Index (SPX)clawing its way out of correction territory – it would seem that good things are starting to happen and may be on the rise. However, the Dow and Nasdaq Composite (COMP) remained in correction territory in the close Thursday.
Analysts attributed much of the advances in stocks to short-covering on firming oil prices. Also helping boost traders' positive movements was an acceptable earnings report from blue chip JPMorgan Chase & Co. (NYSE: JPM), as well as dovish remarks, that indicated possibility of an even more gradual pace of tightening, from St. Louis Fed President James Bullard.
If anything energy is putting in a temporary bottom – which means that stocks could be setting up for a tradable rally.
However, looking internationally, today, there may be more negative figures appearing for the major indices and stocks therein, which may mean that the market bottom will be re-tested, as festering global growth concerns and elevated geopolitical uneasiness are keeping global sentiment on edge, which is very likely to bubble over into the U.S. market.
U.S. crude oil futures fell in Asian trade today, heading lower after posting the first significant gains for 2016 in the previous session.
Also, Chinese shares fell again today, with the Shanghai index closing lower than at any time since December 2014, leaving most traders and investors, who had put their faith in Beijing's measures to end last summer's crash, having their fingers burnt. As well, the yuan weakened sharply offshore for the currency market.
There may be some bounces along the way, but it appears that the markets are resetting to lower growth in 2016 and 2017, which at this stage is an unknown – but certainly not “falling off a cliff” situation.
At this stage the prior bottoms have held -- the S&P opened higher, traded up to 1,898, then traded down to 1,878, similar to the September lows, and then just continued to hold.
Chipotle Mexican Grill Inc. (CMG) has performed admirably for the past couple of days – 3% gain yesterday on top of a 6% gain the day before – after Credit Agricole upgraded the stock to “Buy” from “Outperform”. In the option scene “Calls” have been outnumbering puts 3:2 with the January 15th 450.00 call getting the most attention from traders. Maybe Stock Options Made Easy (S.O.M.E.) members will see some of this action!
GoPro Inc (NASDAQ: GPRO), after the wearable action camera maker warned that quarterly revenue would come in below forecasts, has been slashed dramatically – and members at S.O.M.E. have at the opportunity to gain a 600% from this situation by using a January 15th 18 put option.
It may be worth considering further research in regard to Noble Corp. PLC (NE) where puts are outnumbering calls 27:1 as the bears primarily target the February 19th 8.00 put.
Moving on, further insight into how the U.S. economy and corporate America will be available today, with reports on consumer sentiment, retail sales and manufacturing, and several big financial names - Citigroup Inc (NYSE: C), Wells Fargo (NYSE:WFC), U.S. Bancorp (NYSE:USB), BlackRock (NYSE:BLK) and PNC Financial (NYSE:PNC) - releasing quarterly earnings.
So, once again, if a market bottom has materialized in this violent market atmosphere, be prepared to make the most of the situation -- keep your cash ready, bolster your trading courage as we discussed yesterday, and be prepared to dive-in at the most appropriate opportunity available!