11:40 pm (EST)
Market Commentary
The bears finally made some noise last week as they sent the market down 2%, on average. The bulls were making a run at Dow 10,000 and by Wednesday the index rallied to a high of 9,937 shortly after the Fed news. That is exactly when the bears stepped-in and made some noise. It remains to be seen if this is their entry point or just another whimper before the bulls power higher.
For the week the Dow dipped 155 points, or 1.6%, to finish at 9,665. The Nasdaq fell 42 points, or 2%, and ended at 2,090 while S&P 500 skidded 24, or 2.2%, and settled at 1,044. We had some crummy economic news that weighed on the market; a disappointing Durable Goods Report and a lousy Home Sales report.
September was supposed to be a down month if you were listening to the talking heads but I had mentioned that you have to trade the tape. Yeap, the rally has fooled a lot of investors since March and the bears may finally be gathering some confidence as we head into earnings season.
We will have to wait for the next leg to develop which should be this week. The market has traded much like we had planned and on August 23rd, I had this to say:
“The market has had an incredible run and the key levels we are watching are as follows.
For the Dow (currently 9,505), watch for 9,625 which was the November high. A run above this level clears the way for…dare I say it….Dow 10,000. There is support at 9,000 but a break below 8,900 would send up a warning signal.
As for the Nasdaq (2020), it looks like 2,100 is smooth sailing as long as the bulls continue to run this week. Above that, we get choppy but we could get a run to 2,275. Support is at 1,930 and further down at 1,800 or so. A break below that could lead to 1,600.
The S&P 500 (1,026) could easily make a stab at 1,100 now that it has surged past 1,000 but 979 will be key support near-term. There is really nothing stopping the index from hitting 1,150-1,175 which is where headwinds will pick up.” (END)
Last week, the Dow tagged 9,937, the Nasdaq traded to a high at 2,067 while the S&P hit 1,080. That was the road map we drew up in August and now we have to wait for the “shakeout”.
I mentioned on Friday that Alcoa (AA, $13.08, down $0.43) would kick off earnings season on October 7th. The key for 3Q earnings will be the revenue numbers. Most companies beat 2Q earnings by aggressive cost cutting but revenues were coming in a little lighter than expected.
I don’t think that will pass this go around.
There are a slew of economic reports due out this week which will influence the market and we have a few earnings reports that should provide some insight ahead of 3Q earnings.
We will also get an update on home prices, manufacturing, consumer confidence, construction spending, and factory orders. The big one though will be Friday’s unemployment report.
Both bulls and bears will be jockeying for position ahead of next week’s launch of 3Q earnings. The bulls are loaded with cash and there is even more on the sidelines while the bears will target unemployment and the lack of revenue growth.
Earnings (quotes are from Friday’s close):
Monday: Cal-Maine Foods (CALM, $27.78, up $0.10), Craftmade International (CRFT, $3.28, down $0.17) and TRC Companies (TRR, $3.80, up $0.01).
Tuesday: Allscripts-Misys Healthcare Solutions (MDRX, $18.35, down $0.22), Darden Restaurants (DRI, $35.60, up $0.16), Jabil Circuit (JBL, $11.87, down $0.66), Micron Technology (MU, $8.10, down $0.01), Nike (NKE, $58.64, up $0.47) and Walgreen (WAG, $33.68, up $0.03).
Wednesday: Actuant (ATU, $15.60, up $0.08), Diamond Foods (DMND, $29.40, flat) and Lawson Software (LWSN, $6.35, down $0.05),
Thursday: Accenture (ACN, $36.12, up $0.16), Constellation Brands (STZ, $15.30, down $0.17), CRA International (CRAI, $27.62, up $0.41), Global Payments (GPN, $44.76, down $0.70), Immucor (BLUD, $17.26, down $0.16) and Resources Global Professionals (RECN, $17.31, up $0.52).
Friday: None worth mentioning.
Subscribers, please check the Current Trades in the Members Area for the updates. They are listed under Monday, September 28, 2009.
Rick@MomentumOptionsTrading.com
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Are We There Yet?
Wednesday, October 14th, 2009
12:40pm (EST)
Is it me or does it feel like we are watching paint dry? In what should have been an easy grand-slam today, the Dow is having trouble punching through that 10,000 point brick wall. We got a strong pop and then lost some of the fizz shortly after the market opened but the bulls seem to be gathering more strength as we head into the afternoon. Currently, the Dow is up 113 points to 9,984 and has traded as high as 9,991 but we have yet to “break on through to the other side”…
One thing that worries me is that everyone expects all of this “new money” to come into the market, which it very well could, but I want to talk about the emotions of investors and the market in general. First off, where were all these people when the March lows were around and why didn’t they buy back then? When the Dow bottomed at 6,440 six months ago, I suggested buying longer-term call options to play the bounce as I knew we were in for a turnaround.
Our trading rules are simple. You buy call options during bull markets and you buy put options in bear markets. There are times when we are looking for direction which can cause some losing trades but overall, you want to stay AHEAD of the trend.
People were calling for a pullback in September and we said to stay focused on Dow 10,000. And we are almost there. Look, we don’t care about market direction. We want big moves. If the Dow does break 10K and we zoom higher, we will keep playing the upside with call options. If the market stalls from here and we have a sell-off, we will start buying put options.
The reason I say this is because we are still in a trader’s market and the market tends to hurt the most people at the most inopportune time. I’m not saying we are setting up for a correction but the Dow needs to break 10,000 today and hold.
There are a number of heavy hitters set to report earnings the rest of the week. International Business Machines (IBM, $127.21, up $0.19), Google (GOOG, $533.68, up $7.47), Goldman Sachs (GS, $193.01, up $5.78) and Bank of Amercia (BAC, $18.37, up $0.56) are on deck over the next few days.
Intel (INTC, $21.05, up $0.56) has treated us well today and our current subscribers easily cashed out for triple-digit returns. We have updated the trade in the Members Area so make sure you login in get our current comments.
Tags: Bank of America, Goldman Sachs, Google, International Business Machines, options blog, options trading strategies, Stock Market Blog
Posted in Company Commentary, Earnings, Market Analysis, Market Commentary, Option Trades | Comments Off