The indices moved higher on Thursday and they were all in positive territory for the entire day except for a brief period where the Dow was in negative territory near midday. The Russell led the way with a gain of 1.1% while the other three had much more modest gains.
The Nasdaq tacked on 0.40% and the S&P moved up 0.28%. The Dow lagged the others but still managed a gain of 0.09%. IBM hurt the Dow as it lost 5.5% on the day after a disappointing earnings report.
[hana-code-insert name=’adsense-article’ /]Nine of the 10 sectors moved higher on Thursday with the tech sector the lone one to finish in the red with a loss of 0.2%The healthcare sector led the way with a gain of 0.73% and it was followed by the communication services sector which tacked on 0.57%.
My scans continued to produce negative results with 28 names on the bearish list and 20 on the bullish side.
Of the stocks on the bullish list, 15 of the 20 were from three segments of the market—utilities, consumer staples, and precious metals.
The barometer dropped to -11.7 from -1 once these results were added in to the equation.
With the large number of safety oriented stocks and the number of utilities stocks on the bullish list, today’s trade idea is a bullish one on the Utilities Select Sector SPDR (NYSE: XLU). The ETF was one of the names on the bullish list and the Tickeron Trend Prediction Engine I have mentioned in the past also generated a bullish signal on the XLU in the last two days. Past predictions from the prediction tool have been accurate 93% of the time.
The XLU has been moving higher within the confines of a trend channel over the last seven months. The fund dropped in the last few weeks, but it hasn’t quite gotten to the lower rail. The daily stochastic readings hit oversold territory earlier this week and they made a bullish crossover last night. We saw a similar pattern in late July just before the XLU rallied 10%.
Buy to open the December 62-strike calls on XLU at $2.60 or better. These options expire on December 20. In order for these options to double the fund will need to reach $67.20. We only need the fund to move up 5.6% for the options to double. I suggest a target gain of 100% with a stop at $62.70.
— Rick Pendergrat
[hana-code-insert name=’stansberry-article’ /]