Bulls Hold the Reins as Winning Streak Continues

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"First things first -- it was Tuesday, so of course the bulls came out swinging," quipped Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. "Think about this for a second. It is nearly May, and Tuesday has been down just twice all year on the S&P 500 Index (SPX)! It is also the only day that has a positive return in 2014. Sparking today's move higher were mostly positive earnings across the board, but the big one was Netflix, Inc. ( NFLX ). NFLX had solid earnings, and this helped all the momentum names get some serious buying attention today. After breaking down significantly the past month, money poured into areas like small-caps and biotech." The Dow Jones Industrial Average (DJI) was in positive territory the entire session and closed with a solid gain, just over 100 points shy of its all-time peak.

Continue reading for more on today's market, including :

  • Apple Inc. ( AAPL ) reports quarterly earnings tomorrow night , and bearish options bets have rarely been more prevalent.
  • Is MannKind Corporation ( MNKD ) headed for another surge higher? These aggressive options buyers think a further rally is in the cards .
  • Speculators flooded the McDonald's Corporation ( MCD ) options pits in the wake of the fast food giant's first-quarter earnings disappointment.
  • Plus ... The existing home sales reading drops (again), Botox parent Allergan, Inc. ( AGN ) receives an unexpected buyout offer, and Tesla Motors Inc (TSLA) motors into China.
Trading Topic of the Week -- 5 Reasons to Dodge Directional Risk: Lower the risk of a 100% loss . When you're playing straddles, at least one of your options will typically expire with some intrinsic value remaining.

At its high point today, the Dow Jones Industrial Average (DJI - 16,514.37) was perched at 16,565.71, less than 100 points away from its all-time peak of 16,631.63. By the close, the blue-chip index had pared its gains to a more modest 65.1 points, or 0.4%. The Home Depot, Inc. (HD) rose 2.2% to lead the Dow's 19 advancers today, while Exxon Mobil Corporation (XOM) brought up the rear, dropping 0.6%.

The S&P 500 Index (SPX - 1,879.55) continued its uptrend, gaining ground for the sixth consecutive session to add 7.7 points, or 0.4%. Elsewhere, the tech-laden Nasdaq Composite (COMP - 4,161.46) was again the day's outperformer, rising 39.9 points, or nearly 1%.

The CBOE Volatility Index (VIX - 13.19) made a few moves into positive territory, but ultimately closed down 0.06 point, or 0.5%. In intraday trading, the market's "fear gauge" dipped south of 13, touching the 12.90 mark.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"Don't look now, but the SPX is up for the month and a good day away from new all-time highs. In fact, the SPX is up six days in a row currently. You'd think that'd be bearish, but turns out it is a good sign for the bulls," noted Detrick. "In 2013, the SPX had four six-day win streaks and a week later, it was higher every time. In fact, it was also higher every time two weeks later. In other words, this much near-term strength is rare, and bodes well for continued higher prices in the near-term."

5 Items on Our Radar Today :

  1. In more M&A news from the pharmaceutical sector, Botox manufacturer AGN received an unsolicited $45 billion bid from Valeant Pharmaceuticals Intl Inc (VRX) and Bill Ackman's Pershing Square Capital Management. If accepted, Allergan shareholders would receive $48.30 in cash and 0.83 shares of VRX common stock for every AGN share owned. The offer is a roughly 31% premium over Allergan's April 10 price (the day before Pershing expanded its ownership stake to over 5%.) (Forbes)
  2. The National Association of Realtors' measure of existing home sales dipped 0.2% in March, marking the gauge's third consecutive monthly decline. The reading was better than economists were expecting, however, given the challenges of harsh winter weather and elevated prices. (USA Today)
  3. Dow component MCD said its first-quarter profit slipped 5.2%, falling short of analysts' expectations . Revenue rose 1.4%, roughly in line with the Street's consensus view, but same-store sales in the U.S. were a weak spot, down 1.7% from the year-ago period. (FOX Business)
  4. Ahead of tomorrow's earnings release, Facebook Inc (FB) scored a notable price-target hike (and upgrade) from Credit Suisse today.
  5. As Tesla Motors Inc (TSLA) makes its approach into the Chinese market, one short-term skeptic sold a weekly call spread .

EARNINGS

For a look at today's options movers and commodities activity, head to page 2.

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Commodities :

Oil futures tumbled to a two-week low, amid expectations for an increase in domestic crude inventories. (The U.S. Energy Information Administration issues its report on supplies tomorrow.) The May contract -- which expired today -- slipped $2.24, or 2.2%, to settle at $102.13 per barrel.

Gold continued to lose ground, slipping for a third consecutive session to trade at a three-week low. By the bell, the June contract had lost $7.40, or 0.6%, to rest at $1,281.10 an ounce.

SCHAEFFER'S MARKET POSTURE



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: NFLX , AAPL , MNKD , MCD , AGN

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