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Market Direction Intraday Comments for Aug 25 2014 – Breaking 2000

Aug 25, 2014 | Stock Market Outlook

Largely on the back of merger talk between Tim Horton’s and Burger King and a rise in European Stocks, there was enough momentum in stocks to push the SPX up over 2000 today. While largely ceremonial, these big round numbers hold emotional connections for investors. I would expect some sideways action as investors struggle through resistance at 2000. Often these types of numbers bring out sellers.

The Dow continues to struggle at 17000. just as it did at 16000 and 15000. While technically not of much significance for the overall market trend, emotionally investors use these numbers to adjust portfolios and unload some stock.

Market Direction Intraday SPX at 2000

The SPX chart below set for 1 minute shows the morning jump and then a pullback to 1996. From there investors bought and pushed the market to 2000. A short breather later, the SPX was up over 2000 and brushed 2001.95 before starting a pullback. A second push back to 2002 was not quite as successful and the SPX fell back below 2000 into the noon hour. It did not fall to 1996 but is trying to hold the 1997 level.

Market direction intraday Aug 25 2014

Outlook Into The Afternoon

Into the afternoon we should see investors try again to get a close above 2000. There is enough momentum here to get stocks back up and over. The big catalyst to the downside remains Ukraine. As long as the news remains fairly quiet the chance of a close at or above 2000 is good.

If Not 2000

If we do not see a close above 2000, I am expecting the market to close above 1996. That will set the S&P up for another attempt to close above 2000 for tomorrow.

Burger-King Stock (BKW) and Tim Horton Deal

Both stocks jumped on the news of a possible merger. Of the two companies I think Tim Horton’s is better managed and has better profits. Whether the deal is approved is questionable and I have no plans to be selling puts on either company. I also do not plan on stock ownership. These types of big jumps often end up with big drops as well. Just a year ago Burger King Stock was trading at below $20.00. Before the news this morning, BKW stock closed on Friday at $27.11 a gain of 35% since moving above $20 earlier this year, so the stock already has had a nice move. Whether this would create another fast food empire is unknown but it will definitely be interesting to watch this deal unfold.

Meanwhile Tim Horton Stock (THI) trades on both New York and the Toronto Stock Exchange under the same symbol.

THI Stock – New York

Over the past year I had been selling put options against THI on the Toronto Stock Exchange as the stock was definitely stuck in a straight pattern. This allowed me to use the Home On The Range strategy easily with Tim Horton’s Stock. The 12 month daily stock chart below is from New York where the options are in $5.00 increments and poorly traded. In Canada the options are in $1.00 and $2.00 increments making it easy to trade.

THI Stock to Aug 25 2014

Tim Horton Stock – Canada

The stock chart below from the Toronto Stock Exchange is the same as the chart from New York. Starting August 6 the stock rose reaching above $60.00. Obviously something was in the works for Tim Horton starting back on August 6. This kind of action is rarely investigated but certainly smacks of insider knowledge or some kind. Today the stock hit a high of $76.67 this morning on the Toronto Stock Exchange.

Tim Hortons stock Aug 25 2014

 

Market Direction Into The Afternoon

I see nothing that concerns me with the present market direction. As long as stocks continue to stay above the 1975 level, dips are worth trading against and I have been filled on a number of the stocks I wrote about yesterday in my 12 Trade Ideas For The Last Week Of August 2014.

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