The market started today’s session relatively unchanged and mixed for the week so today’s gains or losses will likely decide which team wins. The bulls are hoping to at least hold the previous two days of gains while the bears are looking for their second consecutive week of making Friday (and Monday) painful. More on this in a minute.
There has been no economic news to influence trading and earnings have been mixed. The high-end retailers seem to be doing a good job of passing on costs while the lower-end stores struggle with prices increases, blotted inventories and lower expected sales.
The dollar is higher which is also weighing on stocks and today is options expiration day, which can sometimes trigger volatility and heavy volume. The action is favoring the bears so let’s see where we are at.
The Dow started the week at 12,595 and so currently down 81 points to 12,524. The index has traded to a low of 12,507 and has held 12,500 which will be crucial for the bulls to hold going into the close if they can’t bounce back.
The S&P 500 was at 1,337 at the start of Mondays trading and is lower by 8 points to 1,335. The bear have managed a push down to 1,332 but the bulls will be trying to hold current levels or at least 1,325.
The Nasdaq stood at 2,828 at the beginning of the week and is off by 20 points to 2,802. Tech is holding the 2,800 level which will be important going into next week.
In earnings news, Ann Taylor Stores (ANN, $28.40, down $1.80) is down 6% despite beating Wall Street’s expectations.
The company reported better-than-expected earnings as profits came in at $27.3 million, or $0.51 a share, on revenue of $523 million. Analysts were expecting Ann Taylor to report earnings of $0.48 a share on sales of $512 million. So why are shares trading lower? Their gross margins slipped from 59% to 57%.
Elsewhere, Gap (GPS, $19.25, down $4.04) is down 17% after beating estimates but lowered their full-year outlook. The company reported after the close on Thursday but shocked the suit-and-ties after they lowered guidance to $1.40-$1.50 a share, from $1.90, on average. As you can see, the 25% cut in 2011 earnings was not something investors wanted to hear.
As we wind down the week, the last hour of trading has provided lots of action over the past few weeks. If the bears win today’s session, it will be their second consecutive Friday win. Monday is the start of a new week and could provide clues if we are on the verge of a trend change for the market. This past Monday was a Debbie Downer and if this Monday is a Negative Nancy, it could mean investors are taking some profits off the table as the bulls try for one last push at resistance.
We aren’t sure if there will be a trend change or not because the rally has been so strong and the overall trend is still up. However, we are in a trading range and we have not experienced back-to-back negative Friday/ Monday closes since we called for this huge rally back in October 2010.
Our current trades are doing rather well today despite the market’s drop. We mentioned earlier in the week money is moving out of certain sectors and is going into Biotech and Consumer Staple stocks and we saw it coming.
We have updated our recommendations and have provided some comments on where we are at with them before we head out for the weekend. Make sure you raise your stops on some positions to protect profits like we mention and we are trying to close half of one trade that is approaching a 100% return. We also have NEW TRADE for today!!!
We will be back with our Weekly Wrap on Sunday so for those of you who havent signed up, we hope you take advantage of our special offer that we mentioned earlier today. Again, it is an incredible deal and one that will take your trading to the next level. Click here for more information about our option trading course and the special deal that awaits you.