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February 21, 2014  Fri 7:12 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
Sentiment remains bullish this morning as stocks refuse to back down from near-record levels.

S&P 500 futures are up about 0.2 percent, while most European indexes are fractionally positive. Tokyo rallied almost 3 percent in the overnight session, accompanied by healthy gains in Seoul and Jakarta. Chinese indexes were mixed.

The S&P 500 closed yesterday barely half a percent below last month's record highs and is holding support above its key 50-day moving average. That suggests bullish momentum remains intact following a late-January pullback.

The Russell 2000 small-cap index and transportation stocks have also been strong in recent sessions following a period of weakness. If that continues, it may suggest another drop is less likely.

Our researchLAB market scanner has shown strength in energy, health care, utilities, and materials during the last week. Investors have also targeted gold and silver miners, car-rental stocks, Chinese Internet companies, solar-energy firms, and railroad suppliers. Financials and consumer-related names have lagged.

Existing-home sales at 10 a.m. ET, which tends to have little impact on sentiment, is the only item on today's economic . Next week's agenda is also relatively quiet. (See related story)

In company-specific news, Groupon fell 11 percent after forecasting an unexpected first-quarter loss. Hewlett-Packard rose 1 percent after beating forecasts on strong data-center demand. Emitus, a provider of senior-living facilities, is rallying 35 percent after agreeing to be purchased by Brookdale Senior Living, which in turn rose 3 percent. Dish Network is up 5 percent after profit beat estimates.

Oil is down fractionally, gold and silver are up slightly, and copper and agricultural products are little-changed. Weakness in the safe-haven Japanese yen, which tends to support risk appetite, is the main story in foreign-exchange markets.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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