Market backdrop
The morning's CPI inflation report came in roughly in line with expectations and moved the market far less than most thought it would. What matters more right now is the flood of capital pouring in. Nvidia is pulling in about half a trillion dollars, which really works as a lending facility. Intel just grabbed another $20 billion. Anthropic is talked about going public. With money moving like this, the CPI number hardly registers.
The S&P 500 is not the main worry. The bond market is the thing to watch. Bonds are signaling that they will handle inflation themselves if the Fed doesn't.
Caterpillar - bearish put spread
Caterpillar is now treated as part of the AI trade rather than mainly a construction company. Its trade setup looks very similar to Intel's. The recent trend over the past few weeks points down. The stock peaked near 1073 and pulled back toward the 800 area, where it has a bid holding it up. After earnings the stock rallied, but it is fading again.
The plan is to sell into any move up and take a bearish position, but not immediately. Give it time out to the October 16 options expiration. Buy the 800 puts and sell the 790 puts, a $10-wide put spread for a $3 debit. The strikes were picked not just by delta but on a view that price will drop under 800.
The chart: after the April earnings event, Caterpillar traded sideways with a floor near 850 and a ceiling near 933. It then trended up to those highs, then fell through a downward-sloping channel down to 776, a notable low. It gapped up on earnings and topped out near that same 933 ceiling, and now sits at support at the old 850 floor. A bearish view needs a break below the recent lows; a bullish view needs a push above 933, which has held firm. The stock has filled its gap level and printed a run of red candles without recovering after earnings.
Moving averages: the faster ones sit below the slower ones. The three short-term averages (5-day, 21-day, 63-day) are close together, with the 5-day near 851, lining up with the short-term trend line. The 251-day sits down at 72284, representing one year. RSI is trending higher but not making new relative highs and remains below the 50 midline after climbing out of oversold territory. Volume shows a heavy trading node between about 860 and 915, another between 750 and 775, and one to the upside at 975 to 1000. On the session, Caterpillar traded up more than 2% at 86177.
Starbucks - bullish call spread
Starbucks is showing more progress in its turnaround than anyone expected in its most recent earnings report. CEO Brian Nickel has a long record of rebounds - Taco Bell and Chipotle - and survived a guacamole crisis years ago. Now he has Starbucks looking poised to break into new territory.
The all-time high is around 117. The stock is currently channeling in the 104 to 108 region, looking coiled and ready to break up. The real signal of an upside break is a move into the 109 to 110 zone. The trade uses the September 18 expiration, about a month out: buy the 110 calls, sell the 115 calls, a $5-wide bullish call spread for a $120 debit. Risk is $1.20, upside about $3.80. To hit the full upside the stock needs to climb very close to or at its all-time high near 117.
The chart: 109-110 marks a double-top high. A downward-sloping trend line runs across the recent highs, and price is on the verge of pushing above it. Drawing a matching line across the recent lows forms a triangle, a narrowing range of compressing price. Low volatility often comes before higher volatility once a breakout hits, and being this close to the highs makes an upside breakout an interesting possibility, though not a sure thing.
Low levels to watch: 102 was a triple bottom in the short term, with other relative lows near 100 and near 99 intraday. Moving averages differ from Caterpillar - the faster ones sit above the slower ones and are spreading apart. The 5-day is near 106, about where today's lows sat; the 21-day at 105 could act as support if price slips. RSI is above the 50 midline and has broken above its own trend line ahead of price. Price still matters most, but momentum breaking out before price is a useful signal. Watch for price to clear its relative highs with RSI following. The nearest volume node is 103 to 106; another sits at 95 to 98 near the recent lows. On the session Starbucks was up half a percent, and up about 27% year to date.
Intel - bearish put spread
Intel posted its best revenue growth in about 15 years in its latest report. It is raising another $20 billion. Rather than buying back stock, Intel is selling it, which is worth respecting. More people should watch when firms do secondary offerings like this. Google did a secondary offering a few weeks back of nearly $85 billion, plus more bond offerings on top. Intel offered 15 billion for sale and ended up doing 20 billion, with only a marginal impact on the shares even though it dilutes shareholder value.
Set the dilution aside. This is a mad dash for cash. The real question: is this the end of it, or is it a lifeline, a sign that Intel needs cash right now, which is why it is selling stock? Everyone in semiconductors and across the whole AI sector should ask that.
The trade itself rests on trend rather than that question. Semiconductors look set for more downside - AMD hasn't had much impact, Micron is more memory, and the semiconductor ETF SMH is still in a downtrend. The trade uses the October 16 expiration: buy the 90 puts, sell the 80 puts, done for a $330 debit. Intel only needs a move to the 80-85 level to reach profit, which isn't dramatic.
The chart, from a neutral read: 80 stands out as a low after an upside gap (the green line), with the range roughly 80 to 90. The gap began near 69. More recently an upward-sloping channel (the white lines) was short-term and now looks breached; price broke down over the past few sessions and hasn't recovered above it, nor has it retaken the old highs near 104 set about a week ago. A bullish reading could see an inverted head-and-shoulders forming with a neckline around 104 based on closing prices. If an upside move comes, 108, 110, and 117 stand out as resistance.
Moving averages are clustered tightly between 99 and 101, a confluence point, with price sitting in the middle of them and no clear push either way. Price is below the 63-day quarterly EMA. A bullish outlook wants a strong close above it; a bearish trade setup would target a breakdown below 99. RSI is right on the 50 midline, a hair below, with no strong direction. Volume shows the recovery came off a small node around 81 to 88; the current area is muddled with no clear standout node, and trading thins out well above the 120-130 levels. On the session Intel traded 3% higher at about $100, with the trade looking for a move down of roughly $20.
