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3:45pm (EST)
Special Note: We are sending today’s Weekly Wrap early. I am away on travel and hope to be back in the office by Monday morning. In case I’m not, this is Monday Morning’s Update. There is a NEW TRADE for Monday morning, Pepsico (PEP, $60.90, up $2.44), that is profiled in the Members Area. Our latest trade, Abercrombie & Fitch (ANF, $30.62, down $1.08) is up 50% in less than a week and we are hoping for the same returns, if not more, for the Pepsico trade. To read the latest update on all of our trades you must be a premium member which gives you full access to our Members Area. Our last closing trade in Nike (NKE, $62.02, down $0.48) netted our subscribers profits of up to 200%….
Market Commentary
It was no bull and all bear last week as the market fell 2% on average. Friday was setting up to be an explosive day as the Dow futures were down over 100 BEFORE the opening bell rang. However, the drop was marginal and although the bulls lost the week, Friday’s battle was a huge victory. The fact that the Dow lost only 20 points is clear indication the bulls aren’t going anywhere.
For the week, the Dow lost 177 points, or 1.8%, and closed at 9,487. The Nasdaq finished the week at 2,048, down 43 points, or 2%. The S&P 500 dropped 19 points, or 1.8%, and settled at 1,025.
The market was hit with a bunch of disappointing economic news and Friday’s unemployment report was suppose to be a canon ball going through paper for the bears. The fact that the bulls held their ground gives further indication there are buyers on the sidelines. It doesn’t matter if the market is overvalued or undervalued, it never does.
The market doesn’t care about our personal wins and losses and although we may be overbought at these levels you can’t deny the action and aggressiveness of the bulls since the March lows. The thing Wall Street forgets to realize is that the market came down from a much higher level as the Dow was standing at 14,000 in 2007…
A 50% drop in the Dow which is where we were in March when the Dow was at 6,500 would mean over a 100% return to get back to the 14,000 level. We certainly know that isn’t going to happen this year but I think it is important for us to remember where we came from. So I don’t buy into that “we have come too far, too fast” spit that we have been hearing. Those same pundits were calling for a “bounce” BEFORE we bottomed at 6,500 because they couldn’t believe the sell-off. Now it’s the opposite.
Third-quarter earnings should give us a better sense of whether companies managed to grow their revenues to produce earnings growth or if we see continued cost-cutting. This helped with 2Q earnings but the same theme might not work this time around.
The bears got a “little taste” of the bulls last week so you know they aren’t going anywhere either. We are still in a volatile, nervous market which means we could get some really big moves in October.
As we head to press, the Dow futures are down 36, S&P 500 futures are off by 6 while the Nasdaq 100 futures are lower by 8. Of course, the overseas markets will affect those numbers and things could change by Monday morning but it appears we could start the week slightly lower.
Subscribers don’t forget to check the Members Area for the latest trade and updates. The update is posted under the Monday, October 5th link.
Earnings
Monday: Mosaic (MOS, $46.18, down $0.25), Robbins & Myers (RBN, $22.60, down $0.41), RPM International (RPM, $18.08, up $0.20) and Team (T, $16.77, down $0.03).
Tuesday: AngioDynamics (ANGO, $13.80, up $0.05), Chattem (CHTT, $64.59, down $0.31), Pepsi Bottling Group (PBG, $37.25, up $0.76) and Yum! Brands (YUM, $33.15, up $0.02).
Wednesday: Acuity Brands (AYI, $30.98, down $0.18), Alcoa (AA, $12.82, down $0.10), Costco Wholesale (COST, $56.47, up $0.78), Family Dollar (FDO, $26.63, down $0.21), Helen of Troy (HELE, $18.83, up $0.13), Monsanto (MON, $74.93, down $0.18), Ruby Tuesday (RT, $7.89, up $0.13) and Wolverine World Wide (WWW, $24.14, down $0.07).
Thursday: International Speedway (ISCA, $27.09, down $0.16), Marriott International (MAR, $25.61, down $0.75) and Pepsico (PEP, $60.90, up $2.44).
Friday: Cantel Medical (CMN, $15.29, up $0.15) and Infosys Technologies (INFY, $47.85, up $0.60).
Bulls Running To Start The Week
Monday, October 5th, 2009
3:00pm (EST)
The bulls got the ball rolling today after a positive ISM number this morning has put Wall Street in a buying mood. The Institute for Supply Management said its service index rose to 50.9 in September from 48.4 in August. The Street had expected a reading of 50, and anything over that is considered growth. Below 50 is considered contraction.
The rally has also been fueled by positive comments on the Financial stocks as Goldman Sachs (GS, $185.16, up $5.55) upgraded the large banks. Bank of America (BAC, $16.81, up $0.47) is up 3% and is looking attractive at $16-$17. This is easily a $25 stock by early 2010.
As a result, the Dow is currently up 136 points to 9,623 while the S & P 500 is up 17 to 1,042. The Nasdaq is up 26 points to 2,074.
Exxon Mobil (XOM, $67.62, up $1.04) was looking good at $66 on Friday and I have mentioned this support area several times over the last few weeks. Oil took a hit last week but has gained 76 cents to $70.71 today. Some are calling for oil to dip to the high $50’s while others are expecting a run to $85-$90 over the short-term. I’m not sure if there is an option trade on XOM just yet but it is getting interesting and I would expect shares to make a run back to $70 over the next couple of weeks.
Research In Motion (RIMM, $65.87, up $0.45) also looks like it has bottomed and has traded as high as $67.74 today. I think there is a trade on this one but I’m not quite ready to pull the trigger. RIMM was on our radar Friday but the waters were too muddy for us to make a play. However, I may add some insurance to the trade which is why we are holding off.
One trade we did take today was Pepsico (PEP, $60.79, down $0.11) and we got some great entry prices by waiting until after the market opened. Our other trades in Abercrombie & Fitch (ANF, $30.40, down $0.22), Citigroup (C, $4.64, up $0.12) and Imax (IMAX, $9.60, up $0.30) are also heading in the right directions today.
I will be back in the morning with the complete updates and we will be back on regular schedule on Tuesday. Subscribers, if you have not read the Pepsico trade for today, you can check the Members Area for this morning’s update.
Rick@MomentumOptionsTrading.com
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Posted in Company Commentary, Earnings, Entertainment Stocks, Financial Stocks, Market Analysis, Oil, Option Trades | Comments Off