9:00am (EST)
“The bulls have momentum but a final resolution on the Fiscal Cliff could get stretched until the last minute of 2012. We have said we would like to see a deal get done by December 21st and that means the zombies will be working overtime. The December holiday adjournment for Congress is this Friday, December 14th. It will likely get extended by a week and why we went on record and said the 21st for a deal to get done.
Of course, the zombies do not want to hang around past their scheduled time off but it is highly unlikely a deal gets done this week. The red zombies still do not want to raise taxes and there is talk now the blue zombies are prepared to drive America off the Cliff, if necessary, to get their way. The Democrats will blame everything on the Republicans and vice-versa but we still expect a compromise, or a kick of the can down the road, before Christmas.
The zombies can then pat themselves on the back and say how hard they worked on overtime to get a deal done before we do it all over again at some point in 2013. If there is no deal by Christmas, the market could still rally into yearend as hopes of a last-minute agreement before the December 31st deadline would still be in play. If the zombies do push us off the Cliff, expect a major pullback in January.
We haven’t talked much about the Friday/ Monday closes in recent weeks because they have been mixed of late. The bears have been winning the Monday’s and pushing lower prices into Wednesday’s before the bulls rebound to close out the week with Friday wins. In trending markets, if the bulls are in control you will usually see up Friday/ Monday’s and when the bears are dominating, lower Friday/ Monday’s. If the bulls are going to make a run they will once again need to start a Monday off strong. This would signal more money coming into the market.
The other bullish sign we are seeing is the strength in the Financial stocks. The Financial Select Sector Spider (XLF, $16.02, up $0.13) is nearing its 52-week and multi-year highs after closing above its 50-day MA late in the week. It’s early, but a run to $20 could be in the cards at some point in 2013.
We will be watching American Express (AXP, $56.61, up $0.49) and JPMorgan Chase (JPM, $42.56, up $1.09) as a way to play the pop. The 52-week high for AXP is $61.42 and we may use call options for our Daily to play a possible run to $60.
The 52-week peak for JPM is $46.49 and there are some cheap options we can play for a run past $45 over the next few weeks.
We correctly predicted Apple’s (AAPL, $533.25, down $13.99) drop to $520 last week as shares kissed $518.63 on Wednesday before bouncing back on Thursday and slipping again on Friday. We missed a golden opportunity for a quick trade to make 200% on the December call options but we still have the stock on our Watch List. Apple will need to get in back in gear if it is going to help the bulls rally as it is a big component of the major indexes.
The talk all week was the “death cross” the stock is headed for unless there is a sudden reversal this week. This technical term refers to when the 50-day MA falls below the 200-day MA but we doubt the final nail is in Apple’s coffin as better days are ahead. A close above $550 would be very bullish for a run back to $600 but there could be a retest to $520 on further weakness. A close below $520 would suggest $500-$475 will come into play.
We said on Wednesday the market faced a make or break moment as further damage by the bears could have fueled additional selling pressure. The trading range from the mid-October highs and the November lows is still in play as the bulls continue to push the top of the range. Although trading has been choppy, the bulls are making higher highs and higher lows for the most part that should continue despite the possibility of more negative rhetoric from DC this week.
We gave yearend price targets for the major indexes last week and said we believe the Dow could push new highs by the end of the year. We are officially making it 13,777.77 as there could be some “fluff” if resistance at the highs is cleared. If we win the contest we will give the iPad to the second best guess (sly grin). Our target for the S&P is 1,492 and for the Nasdaq we will go with 3,140. For the Russell 2000 we have a target of 867.
The big event this week will be the Fed meeting on Wednesday. We mentioned a few weeks ago there was talk of QE4 and it could be bullish or bearish for the market if announced. The “Operation Twist” quantitative easing Ponzi scheme has run its course as the Fed’s purchase of short-term treasuries to buy long-term treasuries is scheduled to end this month. QE4 would be the purchase of long-term treasuries but Big Ben could put the pressure back on the zombies.
Bernanke has been vocal in the past for the zombies to get their house in order but with the fragility of the economy in his hands, he will keep the printing presses on (and rates low). We expect the Fed will continue to add $40-$50 billion a month to the system but Bernanke’s speech on Wednesday at 2:15pm could be crucial as far as market direction for the week.
If Tech and Apple can rebound and the Financial stocks can keep their momentum then the bulls will have something to work with. A higher Monday close and a framework from the zombies to get a deal done would also add to the momentum. If these events start to take a negative tone, expect the bears to attack and make a push back to the bottom of the current trading range.” (from 12/9/2012 Weekly Wrap)…
The bulls had their 3-week winning streak snapped as Tech stayed in a funk with Apple (AAPL, $509.79, down $19.90) dipping to new lows. The market powered past resistance on Tuesday and was flat on Wednesday before the bears found their groove. Tuesday’s rally was enough to zoom past the first level of support and the bulls nearly caught the second wave before the tide came in on Bernanke’s comments.
We said midweek we didn’t think there was enough momentum to clear the next hurdle but there was a good chance paper-thin support (which was prior resistance) would hold. Friday’s action was tight as the zombies wasted a golden opportunity to make a statement concerning the Fiscal Cliff and in our midday update we pointed out the market was still UP for the week.
The talking heads and slick talking pros are bailing on the bulls but the technical picture still looks semi-bullish. It is amazing to see where the action is pinned at and the charts we have drawn up for you show you the exciting battle that lies ahead. This week should be interesting as the deadline for the Cliff draws near and as Air Force One warms up the engines for a trip to Hawaii – deal or no deal.
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JPMorgan Chase (JPM), Wells Fargo (WFC) on Deck/ New Trade/ Profit Alert (QQQ)!
Thursday, April 11th, 2013
12:45pm (EST)
After a slow start, the bulls have continued their journey to new highs despite multiple downgrades on Microsoft (MSFT, $x28.79, down $1.50) that had dragged on Tech. Financial stocks are trading slightly higher as the Financial Select Spiders (XLF, $18.60, up $0.10) continue their assault on $20.
Two stocks that could give the XLF a lift will be the results from JPMorgan Chase (JPM, $49.43, up $0.18) and Wells Fargo (WFC, $37.75, up $0.18) as both companies will be reporting before the bell on Friday. The Financial stocks, in general, need to continue to show strength if the Dow is going to clear 15,000 and the S&P 1,600.
We have looked at some possible option trades for both of these stocks but the safer way to play the move up or down could be the XLF. Of course, the near-term April options on JPM and WFC could return a 2 or 3-baggers depending on which side of the trade you take but using call or put options on the XLF will limit the damage if you are wrong as it is more broad based.
We are extremely bullish on JPMorgan but Wells Fargo always makes us nervous when they confess to Wall Street. Many analysts don’t understand their business model so Wells Fargo shares can trade erratic after announcing earnings. We have a few open positions for the Weekly Wrap in the Financial space and those stocks will likely move in tandem when the numbers hit the Street tomorrow and as much as we would like to take a trade on the other 2, we will likely sit on the sidelines as we have another trade we are excited about
As far as the market, the Dow is up 62 points to 14,865 while the S&P 500 is higher by a 6-pack to 1,594. The Nasdaq is up 2 points to 3,299 but has traded above 3,300.
We have a lot more to cover inside our Members Area including another New Trade and a 52% Profit Alert! Subscribers, hit the MA for the latest updates and we will be back in the morning with a full update.
Posted in Financial Stocks, Market Analysis, Market Commentary | Comments Off