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10:40pm (EST)
The bulls were looking for a big push higher in the market on Friday and although they ended the day in positive territory, it wasn’t enough to take the win away from the bears for the week.
The Dow ended at 10,328, up 20 for the session but down 143 points for the week. The index hit a high of 10,566 and the bulls pushed that number until Wednesday when a late day sell-off led to Thursday’s 133 point decline. The bulls’ effort was noteworthy but the market still remains in a tight trading range.
The Nasdaq was strong on Friday as it added nearly 32 points to close at 2,211 while the S&P 500 advanced 6 to close at 1,102. The Tech-heavy Nasdaq ended the week with a 21 point gain while the S&P 500 fell 4.
The trend is still higher and we still have near-term targets of 10,800 for the Dow; 2,275 on the Nasdaq and 1,175 for the S&P 500. We made these predictions in August and we thought we would have hit them by now. We probably would have but the Black Friday Dubai debacle killed the momentum.
There is still a chance the market rallies over the next 10 days although we continue to hear the talking heads calling for a pullback. In a sideways market it’s easy to say we head lower, especially after the run the bulls have had since March. The bears are banking on a higher dollar but we think the problem is with the euro, not the dollar.
The market CAN go higher as the dollar continues to rally but Wall Street experts don’t feel like this is the case. We also think Bernanke and the Fed should have raised rates which would have sent a strong message that the economy was on the mend despite 10% unemployment.
Another catalyst that could lead the market higher is that investors who might normally sell stocks for tax purposes late in the year could likely to hold off this time around. The rally is only nine months old and this means any capital gains on your investments would be considered short-term profits by the IRS. This doesn’t really affect us as option traders but it means a much higher tax rate for gains on stocks held for more than a year.
A couple of issues the bulls will have to face this week include the huge winter storm that may have kept shoppers home on a critical holiday shopping weekend. This will hurt the brick-and-mortar stores and we could see shares of Amazon.com (AMZN, $128.48, up $1.57), UPS (UPS, $57.98, down $0.25) and FedEx (FDX, $84.95, up $0.48) challenge their 52-week highs this week and next.
It also appears the White House and Senate leaders have the necessary votes to pass the health-care bill this week. This will likely be a market moving event as the legislation is predicted to extend coverage to more than 30 million Americans who lack coverage.
The bill will also ban industry practices such as denial of insurance on the basis of pre-existing medical conditions. The pencil pushers feel it will help reduce deficits by about $130 billion over 10 years, and much more down the road. We shall see.
As far as earnings for the week, there are a few companies worth mentioning that report on Monday: ConAgra Foods (CAG, $22.16, up $0.02), Jabil Circuit (JBL, $14.80, up $0.38) and Walgreen (WAG, $36.64, down $0.67) could be on the move.
As we head to press, Dow futures are 9, Nasdaq futures are up 2 while the S&P 500 futures are up a point. We still have to see how the overseas markets trade before Monday’s opening bell but the bulls are ready. We will be back in the morning with the current trades and a fresh update.
Bulls Get Healthier
Tuesday, March 23rd, 2010
12:45pm (EST)
The bulls continue their March towards new highs (no pun intended) as the President signs our nation’s new health bill today. The passage of the landmark legislation is now official and many of the changes will take place this year.
Obama said it gets the wheels rolling on ”desperately needed reforms” sought by generations of Americans. He also said America can afford this bill so we shall see.
In economic news, existing home sales fell less than expected as the National Association of Realtors reported sales of previously occupied homes fell 0.6% last month to an annual rate of 5.02 million units. Wall Street had expected sales would fall to 5 million.
Despite some turbulence, the Dow is flying higher and is up 44 points to 10,830. The S&P 500 is up 3 points to 1,168 while the Nasdaq is enjoying a 6 point pop and is at 2,402.
Folks, if we can hold these levels, we could be setting our sights and our next set of targets for the indexes we have been mentioning all week. We would list them but you already know the deal if you have been following us.
Turning to earnings, Walgreen’s (WAG, $35.74, up $0.31) is getting a slight nudge higher despite reporting numbers that failed to match expectations. The company reported a profit of $669 million, or $0.68 a share, versus $640 million, or $0.65 a share, in the year earlier period.
Sales rose 3% to $17 billion but Wall Street was looking for Walgreen to earn $0.71 a share on $17.2 billion in revenue. Although they missed, Walgreen’s earnings matched depressed expectations and gross margins came in better-than-expected which is why shares are seeing a little bump.
We have a lot to discuss in our Members Area and a few of our trades are making explosive moves today to the good. We also have a NEW trade that we will be going after so let’s get to it!
Tags: option picks, option signals, options alerts, stock options trading, WAG, Walgreen's earnings
Posted in Earnings, Market Commentary, Stock Earnings | Comments Off