This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

This Market Is Driving Everyone Crazy

NEW YORK ( TheStreet) -- This market has been anything but easy to navigate since the start of this year.

The first quarter is nearly over and the S&P 500  (^GSPC) has gained just 1% this year after surging 30% in 2013. Last week, was full of noise from Crimea, the FOMC (Federal Open Market Committee) rate decision, bank stress test results, and quarterly options expiration. Adding the cacophony, Federal Chairman Janet Yellen hinted at a possible rate hike in six months, prompting a sell-off in Treasury bill, a course that only began to reverse by the end of the week.

Friday's market performance, or rather lack thereof, has left traders scratching their heads. The market opened, made new highs and then gave everything back and then some. The bleeding began with the biotech sector, iShares NASDAQ Biotechnology Index, (IBB), which took the NASDAQ down with it. The biotech's had already been showing signs of deterioration, but Senator Henry Waxman (who will be retiring at the end of this congressional session) apparently wants to garner a reputation for popping the biotech bubble on his way out. In case you missed it, he has sent a letter to Gilead Sciences (GILD) asking them to justify the suggested $84,000 price of their Hepatitis C vaccine, Sovaldi. Although I consider it just noise, it finally gave the market reason to begin selling off the froth in the biotech stocks.

There is no denying that things look to be deteriorating within our market. Look no further then the momentum stocks that are often looked upon by traders to determine risk appetite. Stocks such as Google (GOOG), Priceline (PCLN) and Netflix (NFLX) have been starting to give back recent gains. This should come as no surprise to anyone who has watched how far they have come in just a years time. At the start of this year, I wrote a piece about the potential for mean reversion to rear its ugly head among some momentum stocks that is particularly relevant now and you can read here.

Headed into next week the economic calendar is light and we will have the opportunity to determine if the high from Friday becomes a short-term top or not. With a flattening yield curve that may be underway due to the potential for rate hikes, financials may be the best barometer of where the market is headed. Moreover they may stand to benefit from the release next week by the Fed with a more detailed verdict on each firm's capitalization plans and possible dividend hikes.

For clues as to how next week will play out keep an eye on the CBOE Volatility Index, (VIX.X) and the sectors that look to be the beneficiary of rotation and leading the way, particularly the financials Financial Select Sector SPDR, (XLF), and semiconductors(Market Vectors Semiconductor, (SMH). The demand for US treasures and the high growth momentum stocks will also be a source of information for the near term.

Spy Weekly Open Interest Last Wednesday right before the FOMC decision there was a very large block order of the SPDR S&P 500 ETF Trust, SPY 190 calls. We have no way of knowing if this was a hedge or an outright bet. Regardless, I surmise that it was bought with regard to the outcome of the meeting and not about what is going to happen next week. We had a similar open interest on SPY earlier this year (first week of February) and those calls expired worthless. I do not think this can help us determine if we are going lower or higher next week, but I would say it is very likely we won't end above 190.



For more information about me please visit my site at www.sassyoptions.com and follow me on twitter at @Sassy_SPY

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $122.79 -0.16%
FB $95.00 -2.10%
GOOG $633.00 0.17%
TSLA $266.88 1.20%
YHOO $37.48 -0.50%

Markets

Chart of I:DJI
DOW 17,745.98 -5.41 -0.03%
S&P 500 2,108.63 +0.06 0.00%
NASDAQ 5,128.7850 +17.0520 0.33%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs