Today’s premarket action was littered with bad data points, including signs that Europe is entering recession, and much worse-than-expected Industrial Production and Empire State Manufacturing numbers. However, as we’ve seen as of late, buyers are firmly in control of this market for the time being. There was a brief move lower on the heels of that data, but bulls stepped in and ramped markets significantly higher into mid day. Since then, however, stocks have pulled back slightly, but remain higher on the day. Currently, marekts are being led by the S&P 500 and Russell 2000, each about 0.4% higher. Technology is weak today, as AAPL’s recent swoon continues. The Nasdaq is slightly in the red for the session, while the Dow is about 0.3% higher. Metals and miners are getting hit hard yet again, with gold off 2%, silver down 2.7%, and miners off over 3%.
CHART OF THE DAY
BP Amoco (BP) – The oil conglomerate recently reported better-than-expected earnings, and the stock gapped significantly higher on those numbers. Since then, BP has consolidated nicely to fill its earnings gap, and looks poised for a move higher from here. There is peak put open interest at the May 43-strike, so those short these options have incentive to support BP above this strike into Friday’s expiraiton. In addition to this, sentiment in the options market has reached a bearish extreme. This creates the potential for an unwinding of these bearish bets, which could act as a tailwind toward BP going forward.
I like a long entry here with a stop on a close below 42.50. I would initially target a move to 44, with 45 as a stretch target.
WHAT I’M EXPECTING
There’s no sense in bucking the trend. That said, markets are long overdue for a pullback to work off the extreme overbought conditions. Be sure to trail your stops in any positions that are working, and quickly exit your losers as there are loads of opportunity in the market here and now.