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Friday, May 28th, 2010
9:05am (EST)
This is getting good…
The bulls finally showed some resiliency after what has been a rough two weeks and were determined to end Thursday’s session with a higher close. Not only that, they also brought reinforcements as the rally showed strength into the closing bell.
Once again, the euro played a big role in Wall Street’s rally, and the bulls got all of the news they needed after China dismissed water cooler talk that the country was looking to unload its European bond holdings. Spain also got in the mix as it approved nearly $20 billion for austerity measures as the developments helped strengthen the euro.
As a result, the “Big 3″ gained 3% and left the bears on defense heading into today’s final round for the week.
The Dow banged out a whopping 285 point gain yesterday, or 2.9%, to finish at 10,258 while the Nasdaq soared 82 points, or 3.7%, to finish at 2,277.
We report on all the indexes and at different times each one leads the market higher of lower. We have been nailing our targets and yesterday we said we were watching 1,100 on the S&P 500.
After struggling with this level for much of the session, the index managed to “break on through to the other side” as it added 35 points, or 3.3%, to settle at 1,103.
We aren’t sure if this is good or bad but it may have saved the bulls for a week or two if we have popped back into a trading range. Attention…the bulls might have bought some time through the first week of June.
The bears clearly were holding all of the market’s momentum but that changed in a New York minute on Thursday. However, we still think the market is due for another curveball and a test to the downside could come even harder and faster than we have previously anticipated.
Tags: DJIA, euro, option signals, stock option picks, stock options trading
Posted in Company Commentary | Comments Off
Tuesday, May 25th, 2010
1:00pm (EST)
It is rare that the market follows your road map on where you think it is headed but when it does it feels like you are following the yellow brick road…literally.
Futures were already pointing towards a nasty open this morning and the bears are following our game plan to a tee. The talking heads seem worried but keep mumbling about how we are “holding” levels and that we have bounced off the “bottom”. Please don’t get fooled by this technical jargon:
“The Dow is ONLY down 185 points now”…
“We are bouncing off the lows and we’d be buyers here”…
Folks, the market is in correction mode.
As we type, the Dow is currently down 179 points, or 1.8%, to 9,887. The index has traded to a low of 9,774 and we mentioned how the 9,800 level would come into play. If the bears can get a close below this level then you know where we are headed.
The S&P 500 is lower by 18 points, or 1.8%, and stands at 1,055 after touching a low of 1,040. We mentioned the 1,050 level as the key battle ground and look where we are at.
The Nasdaq is off by 40 points, or 1.8%, to 2,173 after kissing 2,140. We have now broken through the 2,200 level again which only leads us to believe that 2,000 will be challenged.
As far as economic news, a disappointing report on home prices added to the onslaught as the Standard & Poor’s/ Case-Shiller home price index fell 0.5% in March from February. Although U.S. home prices rose 2% for the quarter, it was another sign that housing remains sketchy despite mortgage rates that are at rock bottom levels. We have mentioned time-and-time again that the housing market will be key to any sustained rally.
Elsewhere, the Conference Board gave the bulls something to cheer about after they said the consumer confidence index rose for the third straight month, climbing to 63.3 in May from 57.7 in April. The pencil pushers had expected a reading of 59.
We market has a bounced off the lows today and it remains to be seen if we retest them or if the bulls make up some ground into the close. Either way, if we close below the aforementioned support levels it will only reaffirm our hunch that the bears, not the boys, are back in town again…the bears are back…the bears are back…
We thought we would leave you with a little Thin Lizzy as we prepare for the worst and hope for the best. Subscribers, check the Members Area for the updates.
Tags: bear market, bear market correction, DJIA, option picks, option signals, options alerts, put options, shorting stocks, stock options trading
Posted in Market Analysis, Market Commentary | Comments Off
Friday, April 9th, 2010
9:00am (EST)
“When everybody thinks alike, everyone is likely to be wrong.” – Humphrey Neill
There has been so much talk about a market pullback this week that we thought we would use today’s quote to put things in perspective.
The talking heads are telling you there are chinks in the bulls armor and the bears had every opportunity to take the market lower this week. However, going into today’s session, the Dow is EXACTLY where it closed at last Friday. So what we do today will count for the week.
Yesterday looked pretty bearish but the retail same-store sales helped put a floor on the downside. A surprise increase in initial jobless claims initially weighed on the market after the Labor Department said first-time filings for unemployment benefits unexpectedly jumped by 18,000 last week but things got better.
After opening lower, the bears took the market to its lows within the first 30 minutes of trading but that was it. By lunchtime, the bulls were in control and pushed the market into positive territory for the rest of the day.
The Dow enjoyed a 30 point gain, or 0.3%, to close at 10,927. The index touched a high of 10,949 but still remains just a 73-point session away from breaking 11,000. It would be hard for us to “short” the market here because we still believe the Dow can trade 11,000 before “correcting”.
The S&P 500 held exactly at 1,175 and finished with a 4 point pop, or 0.3%, to close at 1,186. This was a sign to us that the bulls will be around next week to fight. Meanwhile, the Nasdaq added 6 points and went to bed at 2,436.
Next week is a HUGE week for earnings and Alcoa (AA, $14.87, up $0.13) will officially kick-off the earnings parade on Monday. Intel (INTC, $22.31, down $0.14) announces earnings on Tuesday; Wednesday we hear from JPMorgan (JPM, $45.76, up $0.44); Thursday is Google’s (GOOG, $567.49, up $3.95) turn and Friday General Electric (GE, $18.56, up $0.06) briefs Wall Street – not to mention April option expiration day.
The way we see it? We have one bull on our right shoulder and one bear on our left shoulder. Either all of the good news is priced into this market or we easily set new highs.
For today, futures are pointing towards a higher open as the Dow futures are showing a 20 point pop and are at 10,903 while the S&P futures are up 3 points to 1,186. Nasdaq 100 futures are higher by 5 and are at 1,185.
We will be back at 1pm with the afternoon update…
Tags: AA, DJIA, GE, GOOG, INTC, JPM, option picks, option signals, options alerts, stock options trading
Posted in Market Analysis, Market Commentary | Comments Off
Wednesday, March 24th, 2010
9:05am (EST)
“Buy when you are scared to death; sell when you are tickled to death.” - Market Maxim
That was our exact feeling in February after the market stalled in mid-January and was trending lower. From our February 25th, 9am update:
“We continue to feel the current volatility is pointing towards a big move for the market and Greece’s debt is not NEW news. It’s hard to imagine the bulls giving up here and today’s open will be nasty. However, we think there is one more move higher before the Dow fades, and it will be interesting to see how well the bulls battle back this morning.” (END)
At the time, the Dow was at 10,374 and its futures were down 87 points going into the open. By our afternoon update, the index was down 150 points and Wall Street analysts were calling for a break below 10,000. So what did we do? We started looking for call options as a bullish way to play the market.
It was hard for us to believe the rally was really over and first quarter earnings were stellar. However, we knew coming off the “Santa Claus” rally that the bulls might rest which is why we went longer out on some of our option trades in January. We weren’t ready to start buying put options because we didn’t think the Dow would fall below 10,000.
That day, the Dow fell to a low of 10,155. That was 700 points and nearly a month ago. We have been talking about Dow 10,800 and how we could power higher if we got through this level…mission accomplished.
The Dow finished Tuesday with a triple-digit gain, adding 102 points, to close at 10,888. The index hit a high of 10,893 today as 28 of its 30 components ended higher.
Caterpillar (CAT, $62.41, up $2.46), which we had on our Watch List in the Members Area, exploded 4% higher and added some fluff to the Dow’s final outcome.
The S&P 500 closed 1 point under our 1,175 target after adding 8 points, or 0.7%, to settle at 1,174. Next stop…1,200. if all goes well.
The Nasdaq, which has been teasing us by kissing our 2,400 target, finally closed above this level and finished at 2,415, up 20 points, or 0.8%. Tech continues to shine and could be on its way to 2,500.
Of course, that was yesterday and this morning the market has a new set of problems to deal with. Futures were slightly lower but got worse after Fitch Ratings slashed Portugal’s debt rating. Don’t forget Ireland, Greece, and Spain.
There are worries this morning that the economic recovery will be slower than other countries that use the euro, hurting Portugal’s ability to repay its debt. Debt problems in Europe have been one of the few events that spook this market so we will see how much of a role this plays in today’s action.
The market got some good news when the Durable Goods figures were released but futures are still pointing towards a slightly lower open. As we head to press, Dow futures are down 34 to 10,794 while the S&P futures are off 5 points to 1,165. Nasdaq 100 futures are lower 6 by to 1,956.
We have a lot to cover in our Members Area so let’s get to it.
Tags: CAT, Caterpillar, DJIA, option picks, options trading
Posted in Market Analysis, Market Commentary | Comments Off
Sunday, March 14th, 2010
Expiration Week Could Bring Fireworks and Fat Profits
1:30pm (EST)
The bulls pushed the market higher at the open on Friday after Wall Street got some encouraging news from the retail sector as domestic retail sales increased 0.3% last month versus expectations for a 0.3% drop. The Dow ran to a high of 10,644, up 33 points, but tapped the brakes after we got the consumer sentiment numbers.
The University of Michigan/Reuters preliminary consumer sentiment index fell to 72.5 from 73.6 in February and was expected to show a slight increase to 73.8. The market struggled with direction afterwards and finished mixed as all three indexes darted in and out of positive territory for the remainder of the day.
The Dow was the lone winner and closed at 10,624, up 12 points for the day. After closing lower on Monday, the index is on a 4-session winning streak which helped fuel a 58 point gain for the week, or 0.6%. It was the second straight week of gains and 4 out of the last 5 have been up. We like how the Dow held the 10,600 level and our short-term target remains 10,800 then maybe a run to 11,000.
We talked about the 1,150 level ALL week for the S&P 500 and how we would love to see a CLOSE above that level. After kissing this level on Thursday, the index made another 52-week intraday high of 1,153 on Friday but closed less than a point lower to settle at 1,149.99. Seriously, how crazy is that? If the market FADES from here, then this will be the clue we topped out again. For the week, the index was up 11 points, or 1%, and we are targeting 1,175 and then 1,200 if we continue higher.
And finally, the Nasdaq also hit a new peak at 2,376 before finishing a point lower for the day and closed at 2,367. For the week, Tech led the way as the index surged 41 points, or 1.8%. Our near-term target is 2,400.
We are hoping to see some fireworks this week and it’s possible with the March option contracts expiring on Friday. This usually brings added volatility.
We have been talking a lot about the current market conditions and right now the crowd is betting against a market breakout. We have tried to explain the difference between 2008, 2009, and the current environment. In 2008, the trend was down and last year the trend was up. Folks, basically we are right at the levels we were two years ago. Below is a 5-year chart on the Dow that also shows the years before were less volatile.
You can also see where the market made wild price swings and we saw trading sessions where the Dow would move anywhere from 500 to 800 points lower or higher on any given day over the past couple of years. We haven’t seen that type of action in a while as we are back to more “normal” levels. This chart also shows the two aforementioned resistance levels we are watching for the Dow – 10,800 and then 12,000.
The talking heads are saying we have come too far too fast as the Dow has been breathing fire since last March. The 1-year “anniversary” of the bulls marriage could end up being a two-year gig if we had to go on record right now. However, no one knows where the market will be in a year from now, let alone every day so we often ignore 1-year predictions.
We mention all of this because sometimes expectations can be high but the easy money in the market has already been made. The difference now is that instead of “trend” trading, we are “swing” trading. We have to accept this but at anytime the market can breakout to new highs OR hit resistance and fade. After fading, we could get a correction but we aren’t seeing that right now.
We think the rally still has legs but it feels like we are running on egg shells. There are some catalysts that we are watching that could ease our concerns…if unemployment can continue to improve and 1Q earnings come in solid then we will take the top off the convertible and put it in cruise control.
This week is also known as “Triple Witching” and this means the March options could make explosive moves. Triple Witching is when the contracts for stock index futures, stock index options, and stock options all expire on the same date. The event happens four times a year and occurs on the third Friday of March, June, September and December. It is an event dubbed as “Freaky Friday” on Wall Street.
We have talked about the key resistance levels for the Dow, Nasdaq and S&P 500 and despite the title, triple witching has actually proved to be a bullish time for the market over the last couple of years. No one really knows where the market will close this Friday when the March options expire but if you are bullish or bearish this is the BEST week to make speculative trades because the options are so cheap.
For instance, if a stock is at $40, you only have to pay 30 cents, or $30 per contract, on a $41 call option if you think the shares have a shot at $41-$42. This means you have the chance at making profits of up to 200%-300% if the stock makes just a 5% move. Here is how it works.
When a stock is at $40 there will be a huge battle for the bulls to keep it above $40 as where the short-sellers will try to take shares back under $40. If shares are at $40 and they makes just a 5% move it gets the stocks to $42. Those 30 cents options are now worth $1.00. If you bought a call option for 30 cents to buy the stock at $41 then the option would be worth $1 because it is considered in-the-money. So what is the return? 233%.
It gets better. If the stock rallies 8%, it gets shares to $43 and the call options would be worth $2. This means your profits are 567%. Of course, the downside risk is that the stock falls below $40 or doesn’t even make it to $41. This would mean the options expire worthless. So basically, it are risking $30 to make $100 or $30 to make $200. Sounds like Vegas, huh?
We recently started a “Watch List” for our subscribers and we will be profiling quite a few March expiration trades on companies that could be making huge moves this week. In fact, we are profiling 8-10 trades that could be triple-digit winners and they will be released Monday morning. We won’t be taking all of these trades put we could add one or two to our current portfolio.
The market will mainly trade on economic news this week and rhetoric out of Washington could help or hinder the current rally. Earnings are still trickling in and there are a few notable companies that will be reporting. The big test will come in April when we get first-quarter results as we will be able to see what companies have been doing so far in 2010.
If earnings continue to improve and the job market rebounds then we could get the mother of all rallies. Confidence is weak right now but there are a number of catalysts that can take us even higher. There is also the risk that things get worse for the economy but the market is always looking ahead and we think it likes what it sees.
We will be back in the morning with the economic news and an earnings preview on the companies reporting this week. The Members Area will also be full of new possible trades and we can’t wait for the action. We will see everyone at 9am (EST), sharp, on Monday morning.
Tags: DJIA, option picks, option signals, options volatility, stock options trading
Posted in Hot Stocks, Market Analysis, Weekly Wrap | Comments Off
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Bulls Throw Kitchen Sink Back At Bears
Friday, May 28th, 2010
9:05am (EST)
This is getting good…
The bulls finally showed some resiliency after what has been a rough two weeks and were determined to end Thursday’s session with a higher close. Not only that, they also brought reinforcements as the rally showed strength into the closing bell.
Once again, the euro played a big role in Wall Street’s rally, and the bulls got all of the news they needed after China dismissed water cooler talk that the country was looking to unload its European bond holdings. Spain also got in the mix as it approved nearly $20 billion for austerity measures as the developments helped strengthen the euro.
As a result, the “Big 3″ gained 3% and left the bears on defense heading into today’s final round for the week.
The Dow banged out a whopping 285 point gain yesterday, or 2.9%, to finish at 10,258 while the Nasdaq soared 82 points, or 3.7%, to finish at 2,277.
We report on all the indexes and at different times each one leads the market higher of lower. We have been nailing our targets and yesterday we said we were watching 1,100 on the S&P 500.
After struggling with this level for much of the session, the index managed to “break on through to the other side” as it added 35 points, or 3.3%, to settle at 1,103.
We aren’t sure if this is good or bad but it may have saved the bulls for a week or two if we have popped back into a trading range. Attention…the bulls might have bought some time through the first week of June.
The bears clearly were holding all of the market’s momentum but that changed in a New York minute on Thursday. However, we still think the market is due for another curveball and a test to the downside could come even harder and faster than we have previously anticipated.
Tags: DJIA, euro, option signals, stock option picks, stock options trading
Posted in Company Commentary | Comments Off