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Tuesday, August 10th, 2010
9:00am (EST)
Trying to predict the market is never an easy gig, but if you have solid technical analysis it can help. The bulls broke through resistance on Monday as the market looks ahead towards today’s Fed meeting.
Many of you know we have been in a choppy market, but we have used upside targets, along with support levels to predict where this market has been and where it could be headed. We were bullish up until the end of April which is when we started recommending put option trades. At the time, the Dow was trading above 11,000, and the charts were telling us a pullback was coming.
By the end of May, the Dow was at 10,000 but had dipped to a low of 9,787 on the May 6 “flash crash”. Check.
From there, we thought we could see more selling, but the Dow formed a tight trading range for 4 weeks afterward. In fact, the Dow was still around 10,000 on June 28, BUT did trade to a low of 9,600 by July 2. Check. We got the correction again.
Now, here we are a little over a month later and the Dow is above 10,700. Folks, these are 10% moves that no one is noticing on a MONTHLY basis. Aside from second quarter earnings, the picture of the economy hasn’t changed and appears to be getting worse. Does this mean the market is due for another pullback? Maybe, maybe not.
The bulls managed to break through key resistance levels once again on Monday, and today’s Fed meeting could be the straw that breaks the camel’s back or one that gives the bears some ammunition.
The Dow added 45 points, or 0.4%, to finish at 10,698. The index traded to a high of 10,719 and resistance will come in at 10,800. A break above these levels will no doubt lead to a run at Dow 11,000.
The S&P 500 gained 6 points, or 0.6%, to close at 1,127. The index kissed the 1,125 level all last week and actually closed at 1,127 last Wednesday as well. The next stop should be 1,150 but it’s not a given.
The Nasdaq showed the most muscle as it popped 17 points, or 0.8%, to settle at 2,305 which was the high for the session last Wednesday. Resistance will come in at 2,350.
The bears did have some ammo yesterday but failed to capitalize on the Hewlett-Packard (HPQ, $42.60, down $3.40) news or the fact that Goldman Sachs (GS, $155.40, up $0.22) lowered their S&P 500 year-end 2010 price target to 1200 from 1250.
This still represents a 7% advance from current levels but Goldman cut their 2011 earnings estimates for the index while at the same time upping the 2010.
As far as today, all eyes will be on the Federal Reserve’s highly anticipated assessment of the economy, which is set to hit Wall Street shortly after 2pm (EST). It’s no secret the FOMC will keep interest rates at rock-bottom levels but many of the suit-and-ties are hoping the central bank will do something to stimulate the economy again.
The two words that could either thrill Wall Street or scare the heck out of investors are “quantitative easing” (QE). The Fed doesn’t have many options left as Fed fund rates are already at 0.0%-0.25% but QE could be the wild card that makes or breaks this market. It is a form of monetary policy to where the Fed could buy some mortgage-back securities from the banks which in turn would get them to loan more cash. Or, they could buy treasuries. Either one of these options would “stimulate” the economy and quiet down fears of deflation, but the Fed is walking a tight rope.
As you can see, the stage is set for either the bulls to shine or for the bears to steal the show.
Futures are pointing towards a lower open as we head to press. Dow futures are down 94 points to 10,572 while the S&P futures are lower by 12 to 1,114. The Nasdaq 100 futures are lower by 17 points to 1,897. Subscribers, check the Members Area for the updates.
Tags: GS, HPQ, option picks, stock options trading
Posted in Market Analysis, Market Commentary | Comments Off
Monday, August 9th, 2010
12:50pm (EST)
The bulls have kept the market in positive territory for the majority of the session although the bears sniffed red shortly after the open. The Dow and S&P 500 briefly slipped into negative ground but quickly bounded off their lows and are challenging key resistance levels once again.
The Dow is currently up 35 points to 10,688 and has traded as high as 10,696. The S&P is up 4 points and is trading at 1,125 while the Nasdaq is higher by 10 points to 2,298.
The Dow could challenge 10,800 if it can get above 10,700. If the S&P can clear 1,125-1,130 then there is an air pocket up to 1,150 which is the upper end of our current target for the index. The Nasdaq is trying to clear 2,300 and make a run at 2,350 but continues to struggle with this level.
We still believe any sustained rally will depend on how the financial stocks trade and the trend is still lower for the sector. Bank of America (BAC, $13.84, down $0.12) is near its 52-week low of $13.30; Morgan Stanley (MS, $27.42, down $0.23) and JPMorgan Chase (JPM, $40.04, down $0.40) both continue to trade lower…
McDonald’s (MCD, $73.03, up $1.29) is up nearly 2% after reporting great same-store sales numbers and posting its biggest monthly increase in U.S. sales in more than a year.
The company said sales jumped 5.7% in the U.S. and Europe sales were strong as they rose 5.3%. Overall, global sales climbed 7%. Mickey D’s is benefitting from its new fruit smoothies and frappes which seem to be going over well with customers during these hot summer months.
The Fed will talk on Tuesday so look for the indexes to continue to test resistance or trend lower for the rest of the session. Subscribers, check the Members Area for the latest updates.
Tags: bac, call options, GS, how to trade options, JPM, MCD, momentum options trading, Momentum stocks, MS, option picks, option stock picks, options alerts, options newsletter, options track record, put options, stock options trading, volatile options
Posted in Company Commentary, Financial Stocks, Market Analysis, Market Commentary | Comments Off
Friday, August 6th, 2010
12:45pm (EST)
The bulls put up a good fight as they held the market’s slide at the open and were pushing their way towards even before succumbing to the pressure. The bears are trying to break key technical levels ahead of the weekend and have come close to doing so.
The unemployment numbers were horrible but the President will tell you we added private sector jobs every month for 7 straight. Give us a break. Businesses are still reluctant to hire and are running lean and mean. Many companies are still outsourcing work and are only hiring on an “as needed” bases.
We could go on and on but what is the point? Things move slow in Washington and no matter how you spin it, unemployment is going to bust 10% again.
Naturally, the markets are lower on today’s news but the bears still have work to do.
The Dow is down 140 points, or 1.3%, to 10,534 and has fallen below the 10,600 level. The S&P 500 is off by 15 points, or 1.4%, to 1,110 and 1,100 will be the battle ground going into the close. The Nasdaq is lower by 30 points, or 1.3%, to 2,263 and 2,250 should be where the party is at.
As far as specific stocks, Goldman Sachs (GS, $154.64, down $1.28) has been making some noise this week and hit a high of $157 on Wednesday which is strong resistance. We mentioned before financial regulation was passed that banks would figure out a way around Washington if it would cut into their profits.
It was almost a given “Golden Slacks” would be the first to make waves.
The company plans to spin-off part of its prop trading operations as early as today to grow earnings. The new laws limit banks from playing with their own money in the financial markets which controls risk but limits profits. Goldman saw the writing on the wall and it was a no-brainer they would eventually do this. Look for others to follow.
Tesla Motors (TSLA, $19.70, down $0.75) is back below $20 after announcing earnings this week. The recent IPO reported a loss of $39 million, or $5.04 per share, versus a loss of $11 million, or $1.56 per share, a year ago. Revenue came in at $28 million.
Tesla makes the Roadster, a car that costs over $100,000. The company isn’t expected to turn a profit for a few years, if then, and the next car (a sedan) it plans to build will run you $60,000. Big price tags to go green that the consumer won’t be able to afford.
The continued losses will eventually catch up the stock. Shares are volatile and have traded to a low of $14.98 since going public. The 6-week high is $30.42 and the option pits are usually pretty active. We think there could be a trade here.
We have a lot to cover in our Members Area and we are going to add a NEW TRADE today. We have closed out two winners this week and some of our other trades are showing signs of life. We are still in a choppy market but August is shaping up to favor the bears and they could be on the verge of waking up.
We will be back over the weekend with our Weekly Wrap which will be out Sunday afternoon.
Tags: call options, Goldman Sachs, GS, how to trade options, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, put options, stock options trading, Tesla Motors, volatile options
Posted in Financial Stocks, Market Analysis, Market Commentary, Option Trades | Comments Off
Wednesday, August 4th, 2010
9:00am (EST)
The bulls struggled all day on Tuesday as the market stayed in the red and were unable to build on Monday’s gains. Weak earnings and a round of disappointing economic news put a halt to the current rally but the bulls did well by holding losses to less than 0.5%, on average, for the major indexes.
The Dow finished with a 38 point loss and closed at 10,636 after touching the 10,600 level. Procter & Gamble (PG, $59.94, down $2.12) had the biggest impact on the Dow as it fell over 3% and accounted for 16 negative points for the index. Pfizer (PFE, $16.34, up $0.86) bucked the trend after reporting a strong quarter and added 7 points to the Dow after popping over 5%.
The S&P 500 slipped 5 points and settled at 1,120. The index is still battling the 1,125 mark which was yesterday’s high. A possible run to 1,150 is in the cards, but the index could be trending back towards the critical 1,100 level.
Finally, the Nasdaq dropped a dozen points and ended the session at 2,283 after failing to crack the 2,300 level, yet again. This area has been tough to clear for the bulls, but the index is still above its 200-day moving average.
It is still too early to tell, but the market could be setting up like it did last week where we saw nice gains to start the week then the indexes faded on the back half. Of course, it’s hard to predict what type of curveballs or surprises the market might get from now until Friday (which is when the jobs report comes out), and we will get more economic news before then that could have an impact on trading. Either way, the bulls have got to be frustrated that there has been no real follow-through while the bears remain on the mat in a chokehold.
Earnings have been strong and we have a few more weeks before the majority of companies are done and over with. So far, they are beating estimates, and on many accounts they are beating both the top and bottom line numbers. The one thing that seems to be holding this market back is the Financial stocks, but they could be bottoming and will have to be the catalyst for the next leg higher. The bulls will need their help if they are going to break resistance.
We are watching Bank of America (BAC, $14.34, down $0.10), Goldman Sachs (GS, $153.19, up $0.45) and American Express (AXP, $44.60, down $0.39) which are starting to show signs of life with BAC being our favorite. We have some call options listed on our Watch List and at some point we will be pulling the trigger on a trade.
Bank of America tested $20 in April and is down 30% from those highs. The 52-week high is $19.86 and we think shares will be at $22 by 2012, or 18 months from now. This would equal a 50% from current levels if you bought the stock, but the call options we are looking at could be worth a 200% return if Bank of America hits our target price. And, you would only have to put up a fraction of the cost.
One thousand shares at current prices would cost you over $14,000 to own Bank of America. However, you can CONTROL 1,000 shares of Bank of America until 2012 for $1,500 with call options. When you figure in the capital and time frame, ask yourself, would you rather make $8,000 on $14,000 or $3,000 on a $1,500 investment by waiting 18 months?
We know which door we are picking, and we are just waiting for confirmation. These options are ready for action.
We will be back in the afternoon with a look at a few companies that knocked the cover off of the earnings ball last night and this morning. We will also get some economic data that will influence direction and we will bring you those figures as well.
As we head to press, Dow futures are higher by 17 points to 10,611 while the S&P 500 futures are up 2 points to 1,120. Nasdaq 100 futures are showing a gain of 7 points to 1,900. Futures were pointing towards a slightly lower open but turned positive after the ADP report showed the private sector added more jobs than expected.
Tags: bac, call options, GS, how to trade options, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, PG, put options, stock options trading, volatile options
Posted in Earnings, Financial Stocks, Market Commentary | Comments Off
Tuesday, July 20th, 2010
9:00am (EST)
The bulls managed to take the market higher on Monday, but they will likely give back all of those gains today and then some. Futures are pointing towards a nasty open after International Business Machines (IBM $129.79, up $1.76) missed on their revenue number.
Yesterday, the Dow Jones added 57 points, or 0.6%, to finish at 10,154. The index traded to a high of 10,187 but ran into resistance which is currently at the 10,200 level. If futures hold and selling pressure picks up then we could see a drop below 10,000 today.
The S&P 500 gained 6 points, or 0.6%, and closed at 1,071 but ran into trouble at the 1,075 level as the index touched a high of 1,074. The next level of support will come in at 1,050 but that will fall if the bears have their way.
The Nasdaq added nearly 20 points, or 0.9%, to settle at 2,198 but once again had trouble with the 2,200 level. The index traded to a high of 2,201 but will could take a huge bath if Tech tanks.
Of course, the big story this morning is IBM’s earnings which were pretty good despite the revenue miss. The company reported a profit of $3.4 billion, or $2.65 a share, versus $3.1 billion, or $2.34 a share, in the year ago period. Analysts were expecting $2.58 a share.
Revenue came in at $23.7 billion, up from $23.3 billion but was below the $24.2 billion Wall Street had factored in. The company said currency changes cut revenue by $500 million in the quarter.
Shares of IBM are down $6.29, to $123.50 in pre-market action. IBM alone will account for over a 40 point loss on the Dow.
Elsewhere, Texas Instruments (TXN, $25.55, up $0.78) also missed on their revenue number despite profits tripling. The company earned $769 million, or $0.62 a share, versus $260 million, or $0.20 a share, a year earlier.
Revenue came in at $3.5 billion while expectations were for $3.52 billion. Although TI provided some decent numbers going forward, shares are getting clipped this morning. In early action, the stock is down $1.45, to $24.10.
As we head towards the opening bell, Dow futures are off by 74 to 9,986 while the S&P 500 futures are down 9 to 1,054. The Nasdaq 100 futures are showing a loss of 17 points and are at 1,789.
This just in, Goldman Sachs (GS, $145.68, down $0.49) missed on their revenue number. Earnings beat Wall Street’s estimates but they fell a little short in some areas of their business. Shares are down $4 in pre-market action.
Tags: call options, Goldman Sachs earnings, GS, how to trade options, IBM, momentum options trading, Momentum stocks, option picks, option stock picks, options alerts, options newsletter, options track record, put options, stock options trading, TXN, volatile options
Posted in Covered Calls, Earnings, Market Commentary | Comments Off
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Bulls Back in Familiar Territory
Tuesday, August 10th, 2010
9:00am (EST)
Trying to predict the market is never an easy gig, but if you have solid technical analysis it can help. The bulls broke through resistance on Monday as the market looks ahead towards today’s Fed meeting.
Many of you know we have been in a choppy market, but we have used upside targets, along with support levels to predict where this market has been and where it could be headed. We were bullish up until the end of April which is when we started recommending put option trades. At the time, the Dow was trading above 11,000, and the charts were telling us a pullback was coming.
By the end of May, the Dow was at 10,000 but had dipped to a low of 9,787 on the May 6 “flash crash”. Check.
From there, we thought we could see more selling, but the Dow formed a tight trading range for 4 weeks afterward. In fact, the Dow was still around 10,000 on June 28, BUT did trade to a low of 9,600 by July 2. Check. We got the correction again.
Now, here we are a little over a month later and the Dow is above 10,700. Folks, these are 10% moves that no one is noticing on a MONTHLY basis. Aside from second quarter earnings, the picture of the economy hasn’t changed and appears to be getting worse. Does this mean the market is due for another pullback? Maybe, maybe not.
The bulls managed to break through key resistance levels once again on Monday, and today’s Fed meeting could be the straw that breaks the camel’s back or one that gives the bears some ammunition.
The Dow added 45 points, or 0.4%, to finish at 10,698. The index traded to a high of 10,719 and resistance will come in at 10,800. A break above these levels will no doubt lead to a run at Dow 11,000.
The S&P 500 gained 6 points, or 0.6%, to close at 1,127. The index kissed the 1,125 level all last week and actually closed at 1,127 last Wednesday as well. The next stop should be 1,150 but it’s not a given.
The Nasdaq showed the most muscle as it popped 17 points, or 0.8%, to settle at 2,305 which was the high for the session last Wednesday. Resistance will come in at 2,350.
The bears did have some ammo yesterday but failed to capitalize on the Hewlett-Packard (HPQ, $42.60, down $3.40) news or the fact that Goldman Sachs (GS, $155.40, up $0.22) lowered their S&P 500 year-end 2010 price target to 1200 from 1250.
This still represents a 7% advance from current levels but Goldman cut their 2011 earnings estimates for the index while at the same time upping the 2010.
As far as today, all eyes will be on the Federal Reserve’s highly anticipated assessment of the economy, which is set to hit Wall Street shortly after 2pm (EST). It’s no secret the FOMC will keep interest rates at rock-bottom levels but many of the suit-and-ties are hoping the central bank will do something to stimulate the economy again.
The two words that could either thrill Wall Street or scare the heck out of investors are “quantitative easing” (QE). The Fed doesn’t have many options left as Fed fund rates are already at 0.0%-0.25% but QE could be the wild card that makes or breaks this market. It is a form of monetary policy to where the Fed could buy some mortgage-back securities from the banks which in turn would get them to loan more cash. Or, they could buy treasuries. Either one of these options would “stimulate” the economy and quiet down fears of deflation, but the Fed is walking a tight rope.
As you can see, the stage is set for either the bulls to shine or for the bears to steal the show.
Futures are pointing towards a lower open as we head to press. Dow futures are down 94 points to 10,572 while the S&P futures are lower by 12 to 1,114. The Nasdaq 100 futures are lower by 17 points to 1,897. Subscribers, check the Members Area for the updates.
Tags: GS, HPQ, option picks, stock options trading
Posted in Market Analysis, Market Commentary | Comments Off