By Gareth Soloway on July 12th, 2010 11:48am Eastern Time
After a monster rally last week, the markets seem to be pulling back slightly on extremely light volume. The SPDR S&P 500 ETF (NYSE:SPY) is down half of one percent on the day. Last week the markets surged for a five percent gain. This coincided with the upcoming options expiration this week and earnings announcements from companies like Alcoa Inc. (NYSE:AA), Intel Corporation (NASDAQ:INTC), Google Inc. (NASDAQ:GOOG), JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC),General Electric Company (NYSE:GE).
Options expiration is notorious for running the markets the opposite way of the crowd. In the last month, prior to last week, the markets had been hammered relentlessly. The SPY had dropped from $113.00 to $101.00 in just two weeks. Needless to say, the retail investor was panicking and buying puts like crazy from institutional sellers. Knowing the game as it is played, the institution will never pay off all those puts thus running the markets the opposite way into options expiration. By pushing the markets up and bringing those puts out of the money, the institutions can profit by the puts expiring worthless, keeping the premiums as pure profit. This is a classic event.
Earnings from Alcoa Inc. will be reported after the market closes today. Look for a number in the realm of $0.05 - $0.10 for the quarter. Revenue will also be key to analyze the slow down in the global economy due to the European default impact last quarter. Tomorrow after the market closes, Intel Corp. will report earnings. Look for earnings in the range of $0.45 per share. Watch the margins and revenue numbers as well as the future outlook. Wall Street will be very interested in the outlook with fear the global scene is beginning a double dip recession. To get more information, analysis, guidance, swing trade calls and education, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
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