2/5 Morningline

Blue chip stocks (SPY) declined further the first half hour of trading after opening at the lower end of yesterday's sharp decline, approaching a key level in the retracement of the rise from last March.

Otherwise, among the financials, think steady.

Treasury long bonds (TLT) held steady at the midpoint of yesterday's range, and corporate junk bonds (JNK) were also steady, at the low end. The VIX, also steady, near the top of yesterday's rise (a rising VIX is bearish for stocks).

Emerging markets (EEM) gapped down this morning and then continued to fall. The etf is trading 1.9% below yesterday's close. The U.S. dollar is up against the euro (EUR/USD) and the Japanese yen (USD/JPY). The price of oil (USO), which is denominated in dollars worldwide, fell in response to the strengthening of the U.S. currency. Gold (GLD), often seen as a hedge against inflation, opened below the trading range set in yesterday's sharp decline. I've broadened my view in analyzing SPY with Fibonacci retracements, calculating it from the low of $67.10 set March 6 to the high of $115.14 set Jan. 19. The Fibs are used to calculate levels where prices, in pulling back from a high (or up from a low), tend to pause and possibility reverse again.

By that calculation, SPY is about $2 above the 23.6% retracement level, which has acted as support for SPY twice in 2009, and as resistance once in that year. If SPY breezes through around $103.80 and moves down to the next Fib level, 38.2%, that will in my book signal the end of the uptrend that has been in sway since March '09. Until that happens, we're in the midst of a correction within a bull market.

Among holdings, my CVS February iron condor remains in the max profit range, barely. Earnings will be announced before the markets open on Monday, so I have to decide today whether to take the money or run.

Speaking of running, let's run the numbers:

Indicators, at about 10:15 a.m. Eastern:

• Blue chip stocks etf (SPY) is trading at $105.87, entered macd bear mode at close on Jan. 20 (at $113.89)
• Fear index or volatility (VIX) 26.20, bull (bearish for stocks), Jan.20 (18.68)
• Treasury long bonds (TLT) $91.75, bear, Feb. 3 ($90.35)
• Corporate junk bonds (JNK) $37.69, bear, Jan. 19 ($39.87) 
• Emerging markets (EEM) $36.62, bear, Jan. 15 ($41.95)
• Gold (GLD) $103.28, bear, Feb. 4 ($103.32)
• Oil (USO) $35.60, bear, Feb. 15, ($38.40) (A phantom bull signal that showed Wednesday has disappeared, as sometimes happens with the macd.)

Forex currency pairs:

• Dollars per euro (EUR/USD) $1.3664, bear, Jan. 20 ($1.4106)
• Yen per dollar (USD/JPY) ¥89.30, bear, Jan. 12 (90.97) Phantom bull signal two days ago has vanished.)

Stock options holdings, February expiry:

• CVS, iron condor (p29/-p31/-c34/c36) $31.18, bear, Jan. 21 ($33.24) (Earnings is Feb. 8. Should I hold and risk a surprise?)
  
• ERTS, iron condor (p15/-p16/-c18/c19)  $17.07, bear, Feb. 3 ($17.04) (Earnings also Feb. 8; phantom bull signal two days ago disappeared, and a new potential bull signal is showing this morning.)
• MCO, covered call (-c30) $26.66, bear, Feb. 4 (26.39)
• PALM, covered call (s/-c13)  $10.24, bear, Jan. 26 ($11.17)

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