9:05am (EST)
The market continued its winning ways on Wednesday as the bulls celebrated St. Patrick’s Day with a bang. We mentioned yesterday the Dow was poised to test our near-term target of 10,800 and we almost hit it.
We got some good economic news that helped fuel yesterday’s rally. The Labor Department said the Producer Price Index (PPI) fell by a steeper-than-anticipated 0.6% in February as declining energy prices sparked the index’s sharpest drop-off in seven months.
As a result Dow finished higher for the seventh straight session with all three major indexes settling at new highs.
The Dow finished with a 48 point gain, or 0.5%, and closed at 10,733 after touching an 18-month high of 10,767. If we can break 10-8 then we could easily see 11,000 come into play, quickly.
Not to be outdone, the S&P 500 added 7 points, or 0.6%, to finish at 1,166. Our target of 1,175 will now come into play and then possibly a push to 1,200.
The Nasdaq also notched another 52-week high and actually kissed our 2,400 target. The index settled at 2,389, up 11 points (0.5%) after touching the 2,400 level for the first time since September 2008.
In earnings news, Nike (NKE, $70.88, up $0.50) is getting a lift this morning after the company reporting earnings of $1.01 a share for the quarter, versus $0.99 a share in the same period last year. Wall Street was expecting the company to report a profit of $0.89 a share.
Sales came in at $4.7 billion versus $4.4 billion last year. Analysts were looking for sales of $4.6 billion. Gross margins increased to 46% from 43% in the same period.
There were a lot of nervous traders on Wall Street who were worried about the quarter and future orders. Those fears were put to bed after Nike said worldwide future orders for Nike brand athletic footwear and apparel, scheduled for delivery from March through July, was $7 billion, or 9% higher than orders in the year-earlier period.
Wall Street considers the futures an indicator of future sales and this is why we are seeing the continued strength in the stock ahead of the bell.
Shares of Nike jumped in after-hours trading last night to over $73 and the gains have held as the stock is showing a pre-market bid of $74+. We were all over this trade like moths on a campfire and our subscribers are easily looking at triple-digit profits on a call option trade we profiled yesterday. In fact, it could turn out to be our biggest trade of the year so far once we close it.
As we head to press, the Dow futures are up 16 point to 10,679 while the S&P 500 futures are showing a 1 point gain and are at 1,162. The Nasdaq 100 futures are showing a 3 point pop to 1,937. Current subscribers, check the Members Area for the hot details.
Palm Drops The Ball
Friday, March 19th, 2010
9:10am (EST)
The market ended mixed on Thursday despite a number of fantastic earnings reports and an upbeat round of economic data. The bulls took 2-out-of-3 from the bears after the latest jobless report revealed that initial claims for unemployment benefits fell by 5,000 last week. It was the third consecutive decline in jobless filings and sets the stage for an improving jobs report in April.
The Labor Department also said its Consumer Price Index (CPI) was unchanged in February, suggesting that inflation remains relatively tame. In other economic news, the Conference Board’s index of leading economic indicators rose 0.1% and the Philadelphia Fed Index for March came in at 18.9, which was slightly above the reading of 18 that Wall Street had been expected.
As a result, the Dow rallied 46 points, or 0.4%, and settled at 10,779. The index traded as high as 10,784 and went out near its high which was a good sign as we zone in on our target of 10,800. We know we are within spitting distance, and if we were playing horseshoes this would work but we really would like to see a close above this level today. That would pave the way for Dow 11,000 depending on what happens with healthcare this weekend.
The Nasdaq added a deuce and closed at 2,391 but traded in a tight range as we try to close above the 2,400 level we have mentioned. We touched this level on Wednesday but missed the mark yesterday as the index only made it to a high of 2,394.
The lonesome loser was the S&P 500 which slipped a half-point to finish at 1,165. Our target is 1,175 then a possible run to 1,200.
Folks, we have been flagging these targets since August and we nailed it when the indexes traded near these levels in January. The market then faded but we knew these targets would come into play once the bulls got back on track. However, now that we are here again, you can see where we are running into resistance and it will be important for the bulls to make a statement to get us through this level.
Today is “Triple Witching” so we could see some added volatility with the March options expiring. There will be battles fought at all levels and a lot of key strike prices will come into play as both the bulls and bears try to get the prices they want.
We can give you a great example this morning and all you have to do is watch the action in Palm (PALM, $5.65, up $0.28) today and into the closing bell. The company reported earnings last night and in after-hours trading shares were below $5. Palm issued a revenue forecast for the current quarter that was far below analysts’ expectations.
The company said it lost $18.5 million, or $0.13 a share versus a loss of $95 million, or $0.89 a share, in the year-earlier period. Revenue more than tripled to $350 million compared to $90 million but Palm is a mess.
Wall Street was expecting the company to report a loss of $0.42 a share on revenue of $316 million.
The problem with Palm is that their inventory is built up at wireless carriers and sales aren’t as brisk as they once were. Even their CEO admitted to “execution missteps” in a conference call and said they are working “aggressively” to boost sales.
Yeah, good luck buddy catching Apple (AAPL, $224.65, up $0.53)
Palm is facing a rapidly closing window to carve out a space in the competitive smartphone market and this report shows how they have dropped the ball.
As far as action, watch the March 5 puts (UPY100320P00005000, $0.17, down $0.03) and the April 5 puts (UPY100417P00005000, $0.44, down $0.05) today. We had the March puts on our Watch list Monday and Tuesday and they were at 10 cents. We should have backed the truck up because we had a feeling this dog was going below $5.
Shares of Palm are at $4.62, down $1.01 in pre-market trading.
As we head to press, Dow futures are up 11 to 10,728; S&P 500 futures are up 3 to 1,163; Nasdaq 100 futures are higher by 2 to 1,945. Subscribers, check the Members Area for the updates.
Tags: AAPL, options picks, Palm, stock option signals, Triple Witching
Posted in Earnings, Market Commentary | Comments Off