Schaeffer's Trading Floor Blog

Good Morning

by 4/21/2005 8:19 AM
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We start the trading day on a giddy note as S&P futures trade more than seven points above fair value...what is being labeled as the "reason" for such strong action? - you guessed it - earnings!

Yes, the same "catalyst" that failed to inspire confidence yesterday is now being given credit for this morning's rally. As I said last night - earnings continue to roll out so the market still has plenty of opportunity for volatility...

If you note a bit of cynicism, it is because I flipped on the TV and was reassured that this morning's pop was the "all-clear" sign because things really aren't that bad...that bad?!?!?!?

The SPX just hit its highest point since mid-2001 and sits roughly 350 points above the late 2002/early 2003 lows. Perhaps the question should be - are things that "good"...If the 90 or so points that the SPX has pulled back from its recent high is considered "that bad" then I guess my ability to judge was permanently thrown-off during the 2002 drop...

That being said, the S&Ps do point to sharply higher open. Oil is down 56 cents to 53.47 and gold is down 2.20 to 434.50...

P.S. - Has anyone else noticed I have a tendency to rant in the morning? I seriously need to consider de-caf...

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Final Figures

by 4/20/2005 4:54 PM
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Not an encouraging session for the bulls...

Index Index Value Point Change Percent Change
S&P 500 (SPX) 1137.5 -15.3 points -1.33 percent
Dow Jones Industrial Average (DJIA) 10012.4 -115 points -1.1 percent
Nasdaq Composite (COMP) 1913.8 -18.6 points -0.96 percent
Russell 2000 (RUT) 585.0 -10.0 points -1.68 percent
CBOE Market Volatility Index (VXO) 16.83 2.40 points 16.6 percent

The COMP was the "leader" as it lost just under one percent while RUT was hit the hardest. Overall we see...

...that internet stocks held some gains while losses of one percent were too common to mention.

Today offered a few interesting points...At the open we saw that semis couldn't gain traction despite Intel's report...then we saw how the VXO was trading "at support"...by the mid-point of the day we discussed how it was curious that the bulls weren't jumping in despite "good" earnings ...and by the end of the day we saw how the VXO was moving off support...and this follows yesterday's discussion of how some were calling Monday's low "it" on the downside.

Earnings continue to roll out so the market still has plenty of opportunity for volatility. Tomorrow morning I will update the index charts...


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Into the Close

by 4/20/2005 4:17 PM
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The bulls failed to make a stand...


Chart Courtesy of Thomson/ILX

...and it appears that the closing bell is the only "reason" the SPX stopped declining...

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Bob says - "In relatively steep market drops, are you aware of influences from margin calls? --are there any? If so, what are they? ... just wondering."

My response - To be honest, I don't have a whole lot to offer, other than I don't see how it would be beneficial. In theory, this could exacerbate a decline as brokers would sell out of positions in order to cap their risk. Right after the bubble peak this was a hot topic. I recall a particularly wild day (I believe it was in early April) that saw a sudden surge in aggressive selling and was attributed to margin call selling.

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What a difference a few hours can make. Check out how the chart below differs from what we saw this morning...


Created with SuperCharts by Omega Research

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