Midday Options Update: Stocks Rebound, then Fall in Response to GM's Credit Rating Cut

Strategic Insights -

In today's Midday Options Update, Bernie Schaeffer discusses the notable activity in the market, focusing on General Motors (NYSE:GM), IBM (NYSE:IBM), Merck (NYSE:MRK), Ford Motor (NYSE:F), and Procter & Gamble (NYSE:PG). Stocks opened lower this morning after four days of gains, but the Dow Jones Industrial Average (DJIA) recovered and tested the 10,400 level by 10:00 a.m. Eastern time. The market reaction was influenced by the news from General Motors, which announced a three-week high, and the interest of Kirk Kerkorian's Tracinda Corporation in GM.

Key Takeaways:

  • The Dow Jones Industrial Average (DJIA) tested the 10,400 level by 10:00 a.m. Eastern time, a significant recovery from opening lower.
  • General Motors (NYSE:GM) announced a three-week high in the market, boosted by the news.
  • Kirk Kerkorian's Tracinda Corporation expressed interest in GM, influencing the market.
  • IBM (NYSE:IBM) is undergoing a reduction in force of 10,000 to 13,000 people, mostly in Europe, and a restructuring to create smaller, more flexible operating units.
  • Merck (NYSE:MRK) announced Richard Clark as the new CEO and president, succeeding Raymond Gilmartin.
  • Ford Motor (NYSE:F) is in a fascinating position, with its stock trapped beneath its 10-day moving average for six days, but it vaulted above its 20-day moving average yesterday.
  • Procter & Gamble (NYSE:PG) is in a safe uptrend, supported by its 20-month moving average, which is almost a straight line.
  • The sentiment data for PG suggests that the upside path of least resistance is positive, with a Schaeffer's put/call open interest ratio (SOIR) of 1.13.
  • The short-interest ratio for PG is 4.24 days to cover, not enough to fuel much of a short-covering rally.

Statistics:

  • The Dow Jones Industrial Average (DJIA) fell 0.57% by 2:10 p.m. Eastern time.
  • The S&P 500 Index (SPX) lost 0.46%.
  • The Nasdaq Composite (COMP) shed 0.28%.
  • By 2:10 p.m. Eastern time, 1,953,872 calls and 1,549,040 puts had crossed the tape.
  • The composite put/call ratio was 0.79.
  • The CBOE put/call volume ratio for equity options stood at 0.85.
  • The Schaeffer's put/call open interest ratio (SOIR) for PG is 1.13, indicating that puts outnumber calls right now.
  • The short-interest ratio for PG is 4.24 days to cover.

Sources:

  • Schaeffer's Midday Options Update, accessed on [date]
  • General Motors (NYSE:GM), accessed on [date]
  • IBM (NYSE:IBM), accessed on [date]
  • Merck (NYSE:MRK), accessed on [date]
  • Ford Motor (NYSE:F), accessed on [date]
  • Procter & Gamble (NYSE:PG), accessed on [date]
  • Zacks, accessed on [date]
  • Schaeffer's Investment Research (www.SchaeffersResearch.com), accessed on [date]