Markets Head Lower Despite Cyprus Bailout News

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"It was all about Cyprus," said Schaeffer's Senior Equity Analyst Joe Bell as the Dow Jones Industrial Average (DJI) started with a roar on news out of Europe but then crossed into the red roughly an hour into the trading day. "For such a tiny country, they sure do know how to grab the headlines. After coming to a resolution, most sectors responded positively this morning. But when a European official made comments about how the Cyprus bailout could be a model for other European countries, markets quickly sold off."

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

  • Schaeffer's Senior Trading Analyst Bryan Sapp on why the market dropped even after positive news out of Cyprus; plus, Zions Bancorporation ( ZION ) is a possible candidate for a short-squeeze rally.
  • Schaeffer's contributor Adam Warner on what higher volume for the iPath S&P 500 VIX Short Term Futures ETN (VXX) and a relatively tight range for the CBOE Market Volatility Index (INDEXCBOE:VIX) means for markets as a whole.
  • And how bullish option traders were not deterred by a new downgrade on Research In Motion Ltd ( BBRY ).
plus...
  • The markets start strong but finish weak, a deal in Cyprus leaves many wondering what's next, and Apple Inc. ( AAPL ) becomes a target for short-term bulls.

The Dow Jones Industrial Average (DJI) got a bit of good news to start the day with the announcement of the Cyprus settlement, and even touched a new all-time high of 14,563.75 in early action. But the Dow wound up dropping 64 points, or 0.4%, to finish at 14,447.75. The 30-member Dow saw only seven of its members advance, led by Wal-Mart ( WMT ), which climbed 0.8%. Bank of America ( BAC ) led the 23 decliners by falling 1.3%.

The S&P 500 Index (SPX) also fell, giving back 5 points, or 0.3%, to close at 1,551.69 -- but not before setting a new five-year high of 1,564.91 and coming within just a few points of a new all-time peak. The Nasdaq Composite (COMP) finished at 3,235.30, down 9.7 points, or 0.3%.

The CBOE Market Volatility Index (VIX) gained 0.2 point, or 1.3%, to close at 13.74.

A Trader's Take :

"If you like defensive sectors, you probably loved today's action," Bell said. "With almost every major sector in the red, defensive names were the place to be this afternoon."

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

3 Things to Know About Today's Market :

  • Cyprus reached a $13 billion bailout deal with the European Union, but the long-term implications for the country and the European economy still remain unclear. (The Washington Post)
  • Federal Reserve Chairman Ben Bernanke said today in London that the central bank's current bond-buying program is aimed to stimulate the U.S. economy and is not a way to devalue the dollar and create international competition. (MarketWatch)
  • The Dell (DELL) buyout saga continued with another twist today, as two more bids were received from groups led by activist investor Carl Icahn as well as the Blackstone Group -- and both could be more than the one proposed by company founder and CEO Michael Dell. (CNNMoney)

5 Stocks We Were Watching Today :

  1. Apple ( AAPL ) rose on the charts, leading option traders to bet that the upswing would continue through the end of the week.
  2. Option bears were looking for headwinds to continue slowing down United Continental Holdings (UAL).
  3. eBay (EBAY) fell today, but that didn't stop traders from targeting a short-term rise for the online auctioneer.
  4. A barrage of good news for Facebook (FB) led to a big bunch of back-month call trades.
  5. Videogame retailer GameStop (GME) drew bullish attention ahead of its earnings this week.

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 enjoyed their highest close in more than a month, with news of the Cyprus deal allaying concerns about overseas demand. May-dated oil finished at $94.81 per barrel, up $1.10, or 1.2%.

April gold dropped $1.60, or 0.1%, to close at $1,604.50 on a see-saw day that included an early sell off that was followed later by a rally that allowed the precious metal to retake the $1,600-an-ounce threshold.

SCHAEFFER'S MARKET POSTURE

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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: AAPL , BAC , BBRY , WMT , ZION

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