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Bulls Win a Third Straight Week as Stocks Edge Higher

By: Schaeffer's Investment Research
Posted: 1/18/2013 4:22:00 PM
Referenced Stocks: AAPL;GE;GS;INTC;SBUX

"In a relatively uneventful day, the markets caught their breath after yesterday's strong rally," summarized Schaeffer's Senior Equity Analyst Joe Bell. The Dow Jones Industrial Average (DJI) broke higher in the afternoon after a sluggish start, closing the session at its highest point since December 2007. "Meanwhile, the CBOE Market Volatility Index (VIX) dropped to its lowest level since June 2007," Bell noted, "as investors continued to bid the market higher as the week drew to an end."

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

plus...

The Dow Jones Industrial Average (DJI) closed at its highest level in more than five years, though it failed to peg a new annual peak on an intraday basis. The index closed up 54 points, or 0.4%, today, and ended the week 1.2% higher. Of the 30 Dow components, 22 closed in positive territory, led by General Electric ( GE ), which rallied 3.5% after a well-received earnings report. The six losers were paced by Intel ( INTC ), which dropped 6.3% after its own earnings news. Microsoft (MSFT) and Hewlett-Packard (HPQ) were unchanged on the day.

The S&P 500 Index (SPX) reached another new multi-year high at the closing bell, ending the session with a gain of 5 points, or 0.3%. The Nasdaq Composite (COMP) was fractionally lower, off 1.3 points, or less than 0.1%. For the week, the SPX gained 0.9% while the COMP added 0.3%.

The CBOE Market Volatility Index (VIX) hit a 5-1/2-year low of 12.29, giving back 8.2%, or 1.1 points. On a weekly basis, the fear barometer shed 6.7%.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"There was a worse-than-expected University of Michigan survey for the first half of January, but it did very little damage to the overall market," Bell said. "The market also received earnings reports from Intel ( INTC ) and Advanced Micro Devices (AMD) that left little to be excited about. The technology sector was dragged down as a result but managed to close slightly higher on a weekly basis."

3 Things to Know About Today's Market :

Plus ... Yelp (YELP) is bolstering its arsenal of information by adding health-inspector grades to its restaurant reviews. This will be a gradual roll out; the grades will first be added to restaurants in the San Francisco area, then New York City. Ratings will vary based on the system in the municipal area, as New York, for example, provides letter grades (A, B, or C), while San Francisco rates on a numerical scale capped at 100.

Today's Top Tweet :

"the $VIX is getting hit because it's pricing in a 3 day weekend. A more accurate reading for downmove is in the vix futures $$"
@stevenplace, (Steve Place), 11:50 a.m.

5 Stocks We Were Watching Today :

  1. Facebook (FB) option speculators used a time spread to bet on more upside next week ... and even more upside down the road.
  2. Google (GOOG) enjoyed a price-target hike at Nomura ahead of the open.
  3. State Street (STT) rallied after its earnings release, prompting attention from call buyers.
  4. Starbucks ( SBUX ) option bulls bought calls ahead of the company's earnings report.
  5. QUALCOMM (QCOM) saw call buyers swoop in on a pullback in the shares.

EARNINGS

Question of the Day :

Q : What is time value?
A : Time value is the reason that a January 2014 call will be more expensive than its July 2013 counterpart -- because you're buying more time for the underlying stock to move as you expected. In-the-money options carry both intrinsic value and time value, while out-of-the-money options consist solely of time value. The loss of time value on your option is referred to as time decay , and it accelerates as the option draws closer to its expiration date. The rate at which your option will lose time value can be measured by theta, which is one of the infamous "Greeks."

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

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Commodities :

While crude futures gained 2.1% for the week, the February contract was little changed in Friday's trading, adding just 7 cents, or 0.1%, to $95.56 per barrel. Gold futures were lower on the day, with the front-month contract dropping $3.80, or 0.2%, to settle at $1,687 per ounce. On a weekly basis, the precious metal was 1.6% higher.

SCHAEFFER'S MARKET POSTURE

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