2/17 Morningline

Blue-chip stocks (SPY) gapped this morning, opening half a percent above yesterday's close, before dropping back a bit and trading in a very narrow range. The move puts SPY right at resistance at $110.50 set Jan. 26 through Feb. 3. If it breaks past that level, then the next resistance is around $115.

The macd is showing a strengthening bull signal that appeared late yesterday. The long-term trend is sideways -- this baby has basically been going nowhere as it trades between $104 and $115. On a Fibonacci retracement  trellis based on the rise from $67.10 last March to the $115.14 high set in mid-January, the $103.80 level is the 23.6% retracement level, a significant point in Fibonacci Thought.

The rise since Feb. 5 puts SPY about halfway between the 23.6% retracement and the January top.

In my experience, Fibonacci retracements tend to go deeper . . .

. . .than the 23.6% level. Further down on the Fib trellis are the 38.2% retracement at $96.79, 50% at $91.12, and 61.8% at $85.45. I would, frankly, want to see the 61.8% level touched before I could treat this retracement seriously. That's a 22% decline from the present level. So don't pack away your bear mask yet. Just saying. Two other big movers this morning: High-yield corporate debt (JNK opened 0.6% above yesterday's close on an upward gap. With JNK, you can either see it as an interest-rate effect. Generally, I see it more as an indicator of confidence in the private sector. If the price of high-yield corporates goes up, then that means bond-holders are more confident that the companies won't default on their debt and so are willing to accept a lower rate of interest. The dollar strengthened greatly against the yen (USD/JPY), traversing 0.9% low to high so far today. The dollar also strengthened agains the euro (EUR/USD), but to a lesser degree.

Bob Prechter lays out the theory and practice of Elliott Wave analysis, including Fibonacci levels. The must-have book for anyone interested in these useful analytical tools.

Let's run the numbers:

Indicators, at about 10:20 a.m. Eastern (yes, I'm running late):

• Blue chip stocks etf (SPY) is trading at $110.23, entered macd bull mode at close on Feb. 15 (at $109.74)
• Fear index or volatility (VIX) 22.26, bear (bullish for stocks), Feb. 12 (22.73)
• Treasury long bonds (TLT) $90.02, bear, Feb. 9 ($91.18)
• Corporate junk bonds (JNK) $37.93, bear, Jan. 20 ($39.63) 
• Emerging markets (EEM) $39.62, bull, Feb. 16 ($39.43)
• Gold (GLD) $109.77, bull, Feb. 12 ($107.04)
• Oil (USO) $37.69, bull, Feb. 10, ($36.51)

Forex currency pairs:

• Dollars per euro (EUR/USD) $1.3692, bull, Feb. 16 ($1.3770)
• Yen per dollar (USD/JPY) ¥90.08, bull, Feb. 16 (90.13)

Stock options holdings, February expiry:

• CVS, iron condor (p29/-p31/-c34/c36) $33.83, bull, Feb. 10 ($33.21)
  
• ERTS, iron condor (p15/-p16/-c18/c19)  $16.60, bear, Feb. 9 ($15.96)
• MCO, covered call (-c30) $27.23, bear, Feb. 4 (26.39)
• PALM, covered call (s/-c13)  $9.75, bear, Jan. 26 ($11.17)

Stock option holdings, March expiry:

• AOD, long shares, $8.37, bear, Jan. 21 ($9.03)
• AKS, iron condor (p19/-p20/-c25/c26), $23.03, bull, Feb. 12 ($21.68)
• CAL, covered call (-c19), $19.90, bull, Feb. 16 ($19.88)
• CSCO, iron condor (p22/-p23/-c25/c26), $23.90, bull, Feb. 8 (23.50)

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