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The Morning Hammer: 5 Thoughts on Today’s Market Action


Make sure you check out Doug Robertson's options webinar, which is scheduled for Thursday after the close. Click here for more details.

1) Biotech Looks Great

The SPX and NASDAQ are basically flat, but the Nasdaq Biotech ETF (IBB) is up 0.4%.

That's pretty impressive given that Biogen Idec (BIIB) is off -3.6% today as cold water was thrown on yesterday's takeover rumors.

BIIB is 7.8% of IBB, so biotech really is doing well on this shaky dayy.

The S&P Biotech ETF (XBI), which is muct more diversified, giving a better view of biotech overall, is up 0.7%.

2) Crude Oil Too Strong?

I'd rather see crude oil down into today's inventory number at 10:30 a.m. ET.

Oil has acted horribly and I'd rather just see an all-out collapse of expectations ahead of the data release.

Economists are pricing in a -1.75 million barrely draw. We're about to find out if that hurdle is low enough to clear.

3) Sentiment Weakening Just a Tiny Bit

The VIX is flat today, but other indicators show that traders are getting a tiny bit spooked.

The CBOE equity put-call ratio is still above the YTD average and the ISE Sentiment Index shows increased demand for put options.

But one thing I don't like is that the Investors Intelligence Survey has barely budged. 52.9% of newsletter writers are bullish, down just 1% from last week. That's still within range of II's danger zone.

On balance, I'd say that traders are still pretty complacent — just not extremely so.

4) Tesla on Tap

Tesla (TSLA) reports earnings today after the close, and a few options guys are chattering that Tesla options look cheap into earnings.

Tesla options are pricing in a $12.84 move, which is actually small relative to some of its recent post-earnings report reactions.

But I'm not so sure the options are cheap.

Tesla has recently announced a boatload of news, including a capital raise, launch of Model 3 reservations, and the SolarCity (SCTY) deal.

So Tesla may not have many big ‘shockers' left to move the stock.

And when you buy options into earnings, you want a big move in your direction. So tread carefully.

(by the way, if you're into options, make sure you sign up for Doug Robertson's webinar)

5) Respect Price

As of late, we've seen a lot of market commentators making “what goes up must come down”-type arguments against the market.

Yes, we've come a long way since the Brexit bottom.

But that's been for good reason. Earnings season has not been as bad as expected, and economic data has generally been pretty decent.

You must always remember the biggest lesson Mr. Market likes to teach — that price trends tend to last a lot longer and go further than may seem reasonable.

So always respect price… even when it seems crazy.

Remember, the most important question in markets is now who, what, why, or how.

It's WHEN.

A great thesis means zero without equally great timing. So avoid a rush to judgement when it comes to price.