It looks like we are getting to a point in which longer-term investors are starting to find value in the beaten down stocks. Today we saw the action tilting towards the financial and retail sectors. Money continues to drain out of the commodity space.
If this rotation can last it would prove to be a healthy sign for the market--but one that might take months to play out. I don't see a sudden flipping of the switch from the structural equation that has made the financials a black hole and commodities a super nova.
Maybe this earnings season which kicked off tonight with Alcoa (AA - commentary - Cramer's Take). Alcoa beat on revenues and met consensus EPS estimates. How traders react to the largely in-line Alcoa results will be a good gauge of investor sentiment.
Anyway, technology is losing its luster as VM Ware (VM - commentary - Cramer's Take) gets added to the list of RIMM and ORCL that have warned that things don't look so bright for this summer.
Shares of VMWare, and its compatriot EMC (EMC - commentary - Cramer's Take) both got whacked and saw option volume trade about five times the daily average and implied volatility jump 25% on the day.
Financials led the late day rally as stocks such as Wachovia (WB - commentary - Cramer's Take) got a nice bounce and saw above-average call buying. Investors such as Gus ( one of my readers) took stabs at catching the knives and so far they are unscathed. Most of the option activity was focused on buying calls with at least six months remaining until expiration, suggesting the activity is being prompted by value investors willing to wait for a turnaround in the sector.
Steven Smith Blog Fannie and Freddie In Play Again 7/8/2008 9:22 AM EDT The news surrounding the two should keep them on the most active list today.
Steven Smith Blog Stocks Rebound from Lows 7/7/2008 4:59 PM EDT It looked like some real fear was coming into the market, but it was not to be.
Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.To read more of Steve Smith's options ideas take a free trial to TheStreet.com Options Alerts.
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