Markets are mixed today, after weakness around the open was met with buying. Futures were significantly higher at about 8:00 this morning, but those prints faded into the cash open, and the selling continued until about 10:30. However, indexes are currently near their highs of the day after dip buyers stepped back in and supported the 1550 level on the S&P 500 yet again. Presently, the Nasdaq is leading markets higher, up 0.7% on the day amid strength in Yahoo (YHOO) and Apple Computer (AAPL). The Russell 2000 is trading near breakeven on the session, while the S&P 500 is up about 0.2% for the day. Perhaps much of the reason equities were higher this morning can be found in the currency/commodity complex. The euro was significantly higher amid positive headlines out of Europe, and metals gapped up significantly this morning. Although gold and silver are each about 1% higher, their opening gaps were met with selling. Metals continue to trade in the ranged defined by the move between 4/12 and 4/15.
CHART OF THE DAY
Paychex (PAYX) – The payroll and outsourcing company has been very strong as of late, up 13% year-to-date and 18% over the past 52 weeks. The shares have been ushered higher recently by their 20-day moving average, a trendline that has acted as support since early March. Despite its recent strength, sentiment toward PAYX remains skeptical. Currently, the Schaeffer’s Open Interest Put/Call Ratio (SOIR) ranks in the 92nd percentile, indicating that option activity has been more bearish only 8% of the time over the course of the past 52 weeks. This creates the potential for a bullish options unwind should PAYX continue higher. Additionally, analysts seem to despite PAYX, as only 1 of the 23 covering the equity have it rated a “buy.” This creates the potential for future upgrades, which could act as a tailwind going forward.
I like a long entry here with a stop on a close below 34.50. I would initially target a move to 38, with 40 and 45 as stretch targets.
WHAT I’M EXPECTING
Given that 1550 support held yet again on the S&P 500, I’d look for a move back to the top of the range, near 1570. From there, markets may gyrate for a bit, but I’m ultimately looking for a significant break of 1550 and then a test of 1525 and 1500. Above 1575, this thesis is wrong.