"In the end, fiscal-cliff concerns dominated. No deal meant more
worry, and we sold off," sighed Schaeffer's Senior Technical
Strategist Ryan Detrick. The
Dow Jones Industrial Average (DJI)
languished below breakeven throughout the day as everyone began
ticking down the hours remaining until the calendar turns, bringing
with it potential tax hikes and spending cuts. Anxiety accelerated
as the closing bell approached, and the Dow finished on the
downside of 13,000 for the first time since Dec. 4.
Continue reading for more on today's market, including
- Why a break of
on the S&P 500 Index (SPX) would lead Senior Trading Analyst
Bryan Sapp to reconsider his bullish bias.
- Option Idea of the Week:
One potential trading approach
for Microsoft (
Who gets hurt
through high-frequency trading? Schaeffer's contributor Adam
Warner shares his thoughts.
- Reassuring words from the Oracle of Omaha, legal woes for
Apple Inc. (
) in China, and a dressing down for the U.S. government via our
Tweet of the day.
It was a mirror image of Thursday's session, with selling
pressure on the
Dow Jones Industrial Average (DJIA)
intensifying into the closing bell. The blue-chip average visited
its intraday low of 12,926.86 around 3:50 p.m., and closed off 158
points, down 1.2%, below the round-number 13,000 mark. All 30 Dow
components suffered losses, with Hewlett-Packard (
) shedding the most, down 2.6%. At the top of the heap was American
), backsliding just 0.04%. On the week, the Dow surrendered
S&P 500 Index (SPX)
suffered a 15.7-point, or 1.1% drop, but managed to hold narrowly
above the 1,400 level. The
Nasdaq Composite (COMP)
gave back 25.6 points, or 0.9%. The SPX was off 1.9% for the
holiday-shortened week while the COMP dropped 2%.
CBOE Market Volatility Index (VIX)
benefited from today's increased volatility, of course, leaping up
16.7% or 3.3 points to close at its highest point since mid-June.
On a weekly basis, the index surged 27.4%.
A Trader's Take
"In the end, fiscal-cliff worries dominated. No deal meant more
worry, and we sold off," said Detrick. "The economic data, however,
wasn't too bad. The Chicago purchasing managers index [PMI] and
home sales were both better than expected," he noted. "Of course,
it didn't matter because we had no fiscal-cliff deal in place, but
under the surface, the economic data across the board has been
pretty good. I wish I had more to say," Detrick continued, "but I'm
just tired of the fiscal-cliff drama and can't wait for it to be
over with so we can all move on with our lives."
3 Things to Know About Today's Market
- The daily fiscal-cliff update offered more of the same
inertia. President Barack Obama was scheduled to convene with
congressional leaders for the first time since Nov. 16 at 3:00
p.m., but a quick resolution was not expected. In fact, reports
shortly before the close indicated the commander in chief was
unwilling to submit a new offer from his side of the fence. A
House vote is rumored for Sunday night, however, and eternal
optimist Warren Buffett believes a resolution is (eventually)
likely, as he told BBC Radio, "In the end, 535 people in
Washington will not thwart the wishes of 312 million
- The National Association of Realtors' pending home sales
index increased by 1.7% in November to a reading of 106.4. This
edged out the 1.2% rise expected by economists. On a
year-over-year basis, the index climbed 9.8%, and is at its
highest point since April 2010. Also, the Department of Commerce
revised building permits marginally higher to show a 3.7%
increase in October, to a seasonally adjusted rate of
- Mediators have bought some time for importers on the East and
Gulf Coasts, as an impending strike of International
Longshoremen's Association members was delayed by 30 days. A work
stoppage -- the first of its kind since 1977 -- would be
unwelcome news for retailers,
who rely on shipments coming into the ports ahead of the busy
... SeaWorld Entertainment will be going public via private equity
firm Blackstone Group. Blackstone bought the theme park chain in
late 2009, and has turned it around significantly during the past
three years. In 2009, SeaWorld booked a loss of $58 million, and
through the first three quarters of 2012, the chain had collected
$86 million in profits. This reversal has come at a profound cost,
however, as Blackstone has invested heavily into sprucing up the
chain's 11 parks, and has assumed SeaWorld's sizable debt. A date
for the proposed IPO has not yet been announced.
Today's Top Tweet
" The courage the Greeks displayed in voting for their own
austerity is in stark contrast to what is happening in the US
(Bill Luby), 12:29 p.m.
5 Stocks We Were Watching Today
- Apple Inc. (
pay a $160,000 fine
to resolve copyright-infringement allegations in China.
- Netflix (
) bears employed a
short-term bear put spread
in anticipation of a plunge in the shares.
- Optimistic option players are looking for a rebound in
Green Mountain Coffee Roasters (GMCR) shares
- Call buyers targeted a
new annual high
in Citigroup (C).
- Research in Motion (RIMM) options bears
to call a top.
Question of the Day
: Why are short interest numbers important?
: Short interest is a measure of shorting activity by equity
traders, and is often a good gauge of overall investor pessimism.
As contrarians, we see rising short interest on a technically
strong security as a potentially bullish sign. If the stock
continues higher, traders who shorted the stock may wish to exit
their position by buying the shares, perpetuating a short-covering
rally, also known as a "short squeeze." For downtrending stocks,
however, increasing short interest can be a warning sign, as a
stock may suffer additional losses as bearish investors increase
their shorted positions.
For a look at today's options movers and commodities
activity, head to page 2.
Oil futures continued their slow decline on Friday, as the
February contract edged down 7 cents, or 0.1%, to $90.80 per
barrel. Gold futures for February delivery were also in the red,
off $7.80, or 0.5%, at $1,655.90 per ounce. For the week, oil
gained 2.4% while gold lost 0.3%.
At the end of every market day, the staff at Schaeffer's
Investment Research reviews the trading day in detail, covering
major events and key market developments. Don't miss this
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