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Out-the-gate headline relief has taken a backseat to further dredging efforts from America’s Anchor Bankers. As of 10:45 ET the “Cubes” (QQQQ) and “SPYder” (SPY) are off fractionally from 0.10% to 0.35% on less active but seasonally accepted levels of investor participation.

Monday began sprite enough following the removal of some geopolitical uncertainty since Wall & Main closed up shop Friday afternoon. Over the weekend Russia announced it was withdrawing troops from Georgia, thus easing fears of further conflict and potential Black Gold supply disruptions. Separately, a resignation by the increasingly unpopular President Musharraf of Pakistan also enjoyed some brief “Hip, Hip, Hurray!” headline prodding following weeks of political uncertainty and possible impeachment by the new coalition government.

Unfortunately for the bulls, following last week’s slug of poor reports and broker calls in the financials (XLF, GS, MS, JPM, BAC, WB), Monday’s freshest efforts are becoming more difficult to shake off as traders look to book profits. Spearheading and reversing investors’ out-the-gate cheer is a bearish article on GSE’s Freddie (FRE) and Fannie (FNM).

This weekend Barron’s wrote of the increased likelihood of the U.S. Treasury swooping in to save GSE’s Fannie and Freddie, following recent optimism the mortgage players might be able to stave off such action via the capital markets. Intraday, shares of FNM and FRE are off roughly 17% each and closing in on retests of their respective July credit market crisis lows.

Not helping matters, this morning’s WSJ wrote some disparaging remarks that Broker / Dealer Lehman Bros (LEH) could face another $1.8B charge in its current quarter. Trader response is showing some contained appreciation for the story as shares are down 3.50% near 15.62.

The US Oil Fund (USO) is currently off fractionally by .10 at 91.71 in conditions a wee bit more volatile than expressed by the current equilibrium of sellers and buyers. Monday’s catalysts appear worthy of the intraday tug-o-war in the Black Gold proxy. For the bears, the troop pullout in Georgia and reports of Tropical Storm Faye moving away from Gulf production facilities should ease supply concerns. On the other hand, oil bulls are trying to keep prices in check after an OPEC official was quoted as saying the cartel may announce a production cut at the group’s September 9 meeting and a slight but favorable bit of profit-taking in the US Dollar (UUP).

On the earnings front, a trio of potentially influential names has reported mixed results that were good for some initial upside, but now falling prey to the mischievous “Sell the News” reaction. Home supplies giant Lowes (LOW) bested estimates with its 7.9% profit decline while issuing mixed guidance. For it third quarter the company lowered its earnings range below consensus views, while raising its estimates for FY08. For their part, traders are reacting cautiously as shares tack on .20 to 24.70 in front of rival Home Depot’s (HD) Tuesday report and a slug of various retailers on deck throughout the week.

Another group in the earnings spotlight this week is the solar group (TAN). Trina Solar (TSL) turned in mixed results for its second quarter. The PV module manufacturer announced a profit miss of 0.13 in turning in earnings of $0.68 per share on slightly-better-than-expected revenues. However, profits were up handily from the year ago period’s $0.32 figure, while sales jumped roughly 140% to $17.10M.

Additionally and grabbing investors attention and US Greenbacks in the early going, management at Trina boosted the company’s FY08 revenue forecast to a range of $850M - $900M and above Street views of $795M. Intraday, shares of TSL are off 1.50 near 29.50 in volatile trade now more than three points removed from prior convictions as to what matters most. Reporting in chronological order this week are Renesola (SOL), Suntech (STP) and China Sunergy (CSUN).

Shares of heavyweight Aussie-based miner BHP Billiton (BHP) are tacking on a slight .33 gainer to 65.55 and somewhat well-removed from early session highs of 67.12. The company posted a 30% increase in profit growth in establishing a sixth-straight record full-year profit. Some short-term concern over the global economy was raised, but its long-term forecast remained bullish as the company fully expects demand for its commodities to remain strong.

Elsewhere, a separate article penned by Barron’s was bullish on semiconductor (SMH) Broadcom (BRCM). Talking with analysts at Cowen, the publication said shares could rise by 40% by 2010 based on the company’s increasing market share and right product mix within the increasingly popular “smart phone” arena.

Shares of BRCM are currently up .48 at 27.94. For options traders, put-to-call activity is skewed heavily in favor of bullish bets with a current reading of 0.18 versus its average “one-to-one” of 0.96. Most active on the session are the OTM November 30 Calls. Slightly more than 5,100 have traded with a current market price of 1.80 on implieds of 45%, representing a theoretical buyer’s edge of 28% in weighing Broadcom’s longer-term IV / SV relationship.

And finally, the NAHB’s Housing Market Index will be released at 1:00 ET. Analysts expect an unchanged reading of 16.0. In front of the report, the homebuilders ETF (XHB), along with the rest of the market are falling victim to a bit of slight profit-taking. Not that the latter truly needed it per this market observer, but halfway through the lunchtime hour the indices are steeped in red by about 1.25%. Ultimately, last week was a decent one for bulls insofar that bad financial reports were shaken off as it relates to the broader market. However, in recognizing that the group itself faired much worse (XLF off 2.75% weekly); being appreciative of fresh worrisome-sounding reports likely to force the bulls’ hands, is now today’s market-leading reality. 

Chris Tyler
Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler’s Forum
 
The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual. 

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