This past week the markets crept higher as our bearish plays drifted lower...
WE WERE EVEN STOPPED OUT OF ONE PLAY--OUR FEB 44 PUTS ON CLF
Every major index ended up higher for the week and that trend may continue this week confirming that the 'Santa Claus Rally' really does exist. The question is--will it continue after the markets reopen on January 4th?
To help answer that question let's take a good look at where stocks have been and...
WHICH WAY IS THIS MARKET HEADING
In looking at the charts two things become obvious--the first is that the overall trend of the markets is up. And the second is that even though rising wedges are bearish patterns they can fail like anything else as the Nasdaq broke to the upside this past week.
So the market is celebrating for now but how long that lasts is in question. Fund managers could very well be waiting for the new tax year to lock in profits and even if the overall trend remains higher upside breakouts like on the Nasdaq above almost always sell-off before heading higher.
The SPX will likely have trouble getting above the 1133-1138 resistance zone. The most likely scenario is a small consolidation this coming week and then a final push to a minor new high, possibly into the first day or so of January.
This is another holiday-shortened week and will be a quiet one from a volume standpoint. As for economic reports it's also going to be a quiet week. There are no significant reports on Monday and then Tuesday we'll get updates on housing prices and consumer confidence. The numbers might not be as good as expected which could cause that consolidation starting Tuesday morning.
One of the biggest challenges going into 2010 will be employment and the consumer consumption that goes with it. The adult U.S. population grows by about 2 million a year, which means the economy needs to create about 1.3 million jobs every year to satisfy all those who want to work. The economy needs to grow at a pretty fast clip to create those jobs, because productivity improvements mean that we can produce about 2% more each year with the same level of employment.
It could take years to bring the unemployment rate down to 5% or 6%--where it was in 2007.
Recession battered workers--the credit squeeze--the implosion of the housing bubble--weak demand at home and abroad---and the relentless drive to cut costs and preserve margins have put more than 15 million people on the unemployment lines. The official jobless rate has jumped from 4.4% to over 10%, while millions of Americans have been limited to part-time work even though they want to work full time bringing total unemployment rate closer to 17%.
Economists at Goldman Sachs figure the unemployment rate won't peak until the middle of 2011 and will drop back to 10.5% by the end of 2011. That's at least two more years of remarkably high unemployment--and remarkably reduced consumption.
In the decade that's just ending, the private sector has actually lost about 2.3 million jobs, the first decade with negative employment growth since the 1930s. Output has risen 15% over that period, but pay has been stagnant.
Unfortunately the jobs created earlier in the decade were fueled by the twin housing and credit bubbles so much of those gains were unsustainable. Most of the rally of the past nine months has been based on government liquidity infusions designed to inflate the economy out of its problems with no focus on real or sustainable growth. Essentially the government is lending the banking sector capital in an effort to get them to lend to individuals and corporations already drowning in bad debt.
And some of these efforts are working--at least in the short term. "Rising incomes, diminishing job losses, a continuing stock market rally, and widespread price discounting are bringing some holiday cheer to consumers," wrote Nigel Gault and Brian Bethune, U.S. economists for IHS Global Insight.
Economists are forecasting an increase in the Consumer Confidence index to 54 in December from 49.5 in November--a significant improvement. The index bottomed at 25.3 in February, far below the average level of 100 recorded during the last expansion. The Consumer Confidence index is due to be released on Tuesday and should give traders a little bit of an idea of how the holiday shopping season faired.
In the meantime artificially low Government subsidized interest rates and easy year over year earnings comparisons are keeping the stock market heading higher for now--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got one play lined up for this holiday shortened low-volume week with two positions--it's a 'both ways' strangle. The beauty of this play is that the options are on a highly volatile asset--yet the options are cheap!
We're able to buy all the way out to February on this one with a combined price of less than 1.30--and we can make money in BOTH directions!
This is one of those rare opportunities where most of the risk is out of the play but the potential for big profits is extremely good--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, December 28, 2009
Monday, December 21, 2009
RIMM BLEW AWAY ESTIMATES LAUNCHING OUR JAN 65 CALLS TO A FOUR-DAY SIXTY-TWO PERCENT PROFIT!
This past week proved to be extremely profitable...
RIMM BLEW AWAY ESTIMATES LAUNCHING OUR JAN 65 CALLS TO A FOUR-DAY SIXTY-TWO PERCENT PROFIT!
Plus our other new play for the week--the BGZ--is already in profit territory but if things play out like we think there will be HUGE gains to be made in the New Year.
We've got some new cash to work with and two new outstanding new plays to multiply it with--but before we get to them let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The SP-500 continues to trade sideways with no conviction one way or the other. This looks like fund managers biding their time to sell in the new tax year--and this coming week's holiday low-trading volume won't likely change the sideways trend seen above.
The Nasdaq remains at the top end of its range helped by the same big cap techs that kept the S&P afloat on Friday. RIMM, APPL and CELG were the big Nasdaq stars.
The Nasdaq has moved from a bullish uptrend to a rising wedge pattern and this pattern normally resolves to the downside rather than breaking higher--although the trend above looks up this is actually a bearish pattern.
Unfortunately there is little news over the next two weeks to power techs to a breakout. All the major tech stocks have reported earnings and we are approaching the point before the pre-earnings season where earnings warnings are more likely than guidance upgrades.
The continued failure at resistance on the SP-500 is a sign there is no bullish conviction. Traders are buying the dips but they are also shorting the highs. The charts suggest the level that will fail first is support rather than resistance.
The dollar rally last week was the strongest in eight months. Fueling the rise was the ongoing debt crisis in Dubai and sovereign debt downgrades on Greece, Spain, Italy and Mexico. Analysts believe it will only be a matter of time before the UK loses its AAA rating as well.
Plus other credit issues in Europe are heating up--the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are weak and the threat of an Eastern European collapse is weighing on banks--especially European banks.
Some analysts believe this dollar strength is just profit-taking as traders exit their positions before year-end. The "short the dollar, long commodities" trade is getting old and it appears to be reversing--at least for awhile. Gold is struggling to hold the $1,000 level and we saw what happened to crude oil when the dollar spike began.
If this is just an end of year position adjustment then early January could see another reversal. However, every time we get more news about an improving US economy we get that much closer to a Fed rate hike--and when that happens the dollar will begin a long-term rally just like it did when rates went up back in '80.
The problem now is the US government itself would have a very difficult time paying higher interest rates on its own debt because the amount of debt is so monstrously out of control and there appear to be no intentions for reeling it back in.
Debt in the US is at extreme levels and it spans from the government, to the states, to municipalities, to individuals. Banks borrowed $285 billion in total last year and 75% of them have paid back their TARP funds at the cost of diluted stock holder equity. Unfortunately, Freddie Mac, Fannie Mae, AIG and GMAC require immediate funding and these bailouts could reach $1 trillion. The needs of these 'too-big-to-fail' entities will vastly exceed what has been paid back by the banks, creating a new cash outflow and an even more unsustainable debt.
Personal balance sheets are also weak and in the last few days we learned that credit card defaults are on the rise. Almost 15% of all mortgages are either delinquent or are in foreclosure. And less than half of all baby boomers have even $100,000 saved for retirement. Baby boomers represent a full 25% of the total US population so this workforce moving form tax contributors to tax consumers doesn't bode well for the country's long term economic prospects. Don't take this information as 'gloom and doom'--it's just facts to take into consideration.
Unfortunately the nations--and the worlds--debts won't go away by printing more money. The only real result of that action is deeper debt and less options for the indebted. The majority of the market believes 2010 will close higher than it opens--and it may--it's just a little difficult to understand where all this organic (real) growth is going to come from.
As much as has been said about the faster growing emerging markets they are still dependent on consumption from the developed nations--and there is still too much debt for consumer demand to revive in the foreseeable future. Within the coming year we'll also see the up until now 'infinite' resources of the Federal government reach their limits.
But that's next year--for now the indexes will likely stay in their ranges until year-end. Once into January we could see a sharp but temporary decline--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two excellent looking trades lined up this week and as you may have guessed they are both bearish. The good news about these two is we don't have to wait until some New Year's breakdown to profit because they've both broken support and are heading south right now.
And if the breakdown does come in January it will likely add greatly to the downside momentum of both of these stocks--and with their options relatively inexpensive the profit potential is huge.
We've got two great plays lined up on a market teetering on the edge--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
RIMM BLEW AWAY ESTIMATES LAUNCHING OUR JAN 65 CALLS TO A FOUR-DAY SIXTY-TWO PERCENT PROFIT!
Plus our other new play for the week--the BGZ--is already in profit territory but if things play out like we think there will be HUGE gains to be made in the New Year.
We've got some new cash to work with and two new outstanding new plays to multiply it with--but before we get to them let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The SP-500 continues to trade sideways with no conviction one way or the other. This looks like fund managers biding their time to sell in the new tax year--and this coming week's holiday low-trading volume won't likely change the sideways trend seen above.
The Nasdaq remains at the top end of its range helped by the same big cap techs that kept the S&P afloat on Friday. RIMM, APPL and CELG were the big Nasdaq stars.
The Nasdaq has moved from a bullish uptrend to a rising wedge pattern and this pattern normally resolves to the downside rather than breaking higher--although the trend above looks up this is actually a bearish pattern.
Unfortunately there is little news over the next two weeks to power techs to a breakout. All the major tech stocks have reported earnings and we are approaching the point before the pre-earnings season where earnings warnings are more likely than guidance upgrades.
The continued failure at resistance on the SP-500 is a sign there is no bullish conviction. Traders are buying the dips but they are also shorting the highs. The charts suggest the level that will fail first is support rather than resistance.
The dollar rally last week was the strongest in eight months. Fueling the rise was the ongoing debt crisis in Dubai and sovereign debt downgrades on Greece, Spain, Italy and Mexico. Analysts believe it will only be a matter of time before the UK loses its AAA rating as well.
Plus other credit issues in Europe are heating up--the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are weak and the threat of an Eastern European collapse is weighing on banks--especially European banks.
Some analysts believe this dollar strength is just profit-taking as traders exit their positions before year-end. The "short the dollar, long commodities" trade is getting old and it appears to be reversing--at least for awhile. Gold is struggling to hold the $1,000 level and we saw what happened to crude oil when the dollar spike began.
If this is just an end of year position adjustment then early January could see another reversal. However, every time we get more news about an improving US economy we get that much closer to a Fed rate hike--and when that happens the dollar will begin a long-term rally just like it did when rates went up back in '80.
The problem now is the US government itself would have a very difficult time paying higher interest rates on its own debt because the amount of debt is so monstrously out of control and there appear to be no intentions for reeling it back in.
Debt in the US is at extreme levels and it spans from the government, to the states, to municipalities, to individuals. Banks borrowed $285 billion in total last year and 75% of them have paid back their TARP funds at the cost of diluted stock holder equity. Unfortunately, Freddie Mac, Fannie Mae, AIG and GMAC require immediate funding and these bailouts could reach $1 trillion. The needs of these 'too-big-to-fail' entities will vastly exceed what has been paid back by the banks, creating a new cash outflow and an even more unsustainable debt.
Personal balance sheets are also weak and in the last few days we learned that credit card defaults are on the rise. Almost 15% of all mortgages are either delinquent or are in foreclosure. And less than half of all baby boomers have even $100,000 saved for retirement. Baby boomers represent a full 25% of the total US population so this workforce moving form tax contributors to tax consumers doesn't bode well for the country's long term economic prospects. Don't take this information as 'gloom and doom'--it's just facts to take into consideration.
Unfortunately the nations--and the worlds--debts won't go away by printing more money. The only real result of that action is deeper debt and less options for the indebted. The majority of the market believes 2010 will close higher than it opens--and it may--it's just a little difficult to understand where all this organic (real) growth is going to come from.
As much as has been said about the faster growing emerging markets they are still dependent on consumption from the developed nations--and there is still too much debt for consumer demand to revive in the foreseeable future. Within the coming year we'll also see the up until now 'infinite' resources of the Federal government reach their limits.
But that's next year--for now the indexes will likely stay in their ranges until year-end. Once into January we could see a sharp but temporary decline--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two excellent looking trades lined up this week and as you may have guessed they are both bearish. The good news about these two is we don't have to wait until some New Year's breakdown to profit because they've both broken support and are heading south right now.
And if the breakdown does come in January it will likely add greatly to the downside momentum of both of these stocks--and with their options relatively inexpensive the profit potential is huge.
We've got two great plays lined up on a market teetering on the edge--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, December 14, 2009
This past week the markets bounced around bouncing us out of several positions...
This past week the markets bounced around bouncing us out of several positions...
F5 NETWORKS (FFIV) REVERSED STOPPING US OUT OF OUR CALLS AT A MODEST FIVE PERCENT PROFIT!
PLUS MARIETTA MATERIALS (MLM) DIPPED BELOW OUR PROFIT TRIGGER AND THEN REVERSED GAINING A NINE PERCENT PROFIT ON OUR PUTS!
Those gains are small but we still appreciate them but they were overshadowed by losses on Chicos FAS (CHS) and Pepsi (PEP). When you set exit points on both the upside and downside you never know when a rogue spike will take you out of a play--sometimes it's at a gain, but in the case of Pepsi it was at a loss.
The key is to not let the losses dominate the portfolio--which is why we use stops. The other key is to make your winnings much more plentiful--which is exactly what we are going to work on right now by taking a good look at...
WHICH WAY THIS MARKET IS HEADED
Talk about a range bound market--the S&P-500 dipped to 1085 once again on Wednesday and then returned to 1110 right on cue. The S&P bounced to 1085 four times over the last four weeks and each time rebounded to 1100.
The Nasdaq could not stay positive Friday and finished with a loss of -4 points for the week. The midweek decline totaled -40 points but it recovered nearly all of that loss.
The resistance on the Nasdaq at 2200 has been rock solid since Nov-16th. However, we do have a pattern of higher lows and the Nasdaq is wedging nicely into a breakout pattern. Techs are expected to lead the way in 2010 so investors are continuing to buy the dip and any move higher will show another higher high.
China's factory production hitting 19% in November was a big reason for the market to rally last week. However, that is now old news and there is a Fed meeting in our immediate future. Stocks are not likely to rally much ahead of the Fed for fear of some rate raising language whacking stock prices.
Once past the Fed meeting we will be hitting the holiday vacations and volume will fall off dramatically. While late December has shown some nice rallies in the past there is cause for concern.
Many funds and institutions are sitting on gigantic gains from the rebound since March. The Dow is up +61% from its lows and the S&P +66%. That is a good decade of gains and it came in only nine months. There are many funds, institutions and money managers just counting the days until January so they can close those positions and lock in profits. If they sell them now in 2009 they have to pay taxes almost immediately. If they wait three weeks and sell them in January they can postpone those taxes for a year.
Which means quite a few managers are trying to sit tight for the next couple of weeks and praying that the market doesn't implode. The wildcard here is professional traders trying to front run any potential January dip. Do they sell into any Santa Claus rally or do they tag along for the ride into January? It will be interesting to find out. Meanwhile we need to keep our stops tight.
The economic reports for the last couple weeks have produced some big expectations for Q4 GDP. Whisper numbers are starting to move over 5%---including one analyst from JP Morgan.
That would be a huge number and would create significant ripples in the market and more pointedly at the Fed. It would force a rethinking of GDP estimates for all of 2010 and force the Fed to start thinking about raising rates. The Q4 GDP estimates are going to be the big story over the next month because the first official Q4 release is not until Jan-29th. Expect a lot of talk about the GDP as we near that release because official estimates are only for 2.6% GDP for all of 2010.
The calendar for next week is dominated by the FOMC meeting on Tue/Wed. That will be the sole focus for analysts until after the announcement on Wednesday. We have a pretty good idea nothing is going to change because Bernanke said as much in his testimony last week. However, in light of the recent economic improvements there could be some change in the language other than the "extended period" comment that will show the Fed is setting up for a bias change. This possible change in bias is going to be the overriding worry for the markets this week.
In addition to the Fed will be the Best Buy earnings on Tuesday and the FedEx, ORCL, RIMM and PALM earnings on Thursday. These reports will be key--especially in the case of Best Buy. As the largest electronics retailer--and without Circuit City to undercut their prices this year---BBY earnings should be decent. Of course it won't be the earnings that attract the most attention but the guidance for Q4. With only two weeks left in the shopping season Best Buy should be in a position to call the game for the rest of the year. If they say sales are good then everyone will benefit. If they warn about weaker sales and smaller margins because of the heavy discounting then the whole sector will head south.
After weeks of incredible volatility where every uptick in the dollar produced losses in equities and commodities a strange thing happened on Friday. The dollar broke out to a six-week high and commodities did not tank. Equities rallied as well. There is normally a direct inverse relationship between the dollar and stocks but that changed on Friday.
The reason for the change was the jump in consumer sentiment, retail sales and the first rise in business inventories in 13 months. For analysts that means the U.S. economy is improving faster than expected and that produces a stronger dollar. The best of both worlds is the dollar and equities both rising--and that may be the case right up until the Fed talks about raising rates--at that point stocks will plunge and the dollar will continue heading higher.
Recent economic reports are showing some catalysts suggesting the U.S. economy as well as China's is gaining traction. These reports are putting upward pressure on the dollar and making some investors more comfortable with the outlook for 2010. However, this range bound market is also telling us that the bullish sentiment from the +60% rally from March may be fading.
There are signs that some money managers may be just biding time until January to dump stocks for tax reasons. That could also lead to some additional window dressing into year-end driving stocks higher--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-probability plays lined up for this week--one bullish and the other bearish.
Our bullish trade is on a stock with an excellent chance of gapping higher this week. The reason is its past history--we're coming up on an event that virtually always makes this one explode--and this time it looks like it's heading higher. Fortunately we've got time to buy some great calls that should rocket higher by the end of the week--calls we'll be getting into Monday.
Our next play is on a company that sells a product that is dropping in price--and the stock shows it. This one has a perfect pattern of lower highs and lower lows--and we just hit one of the those lower highs setting us up for the perfect downside play.
We've got two great looking positions and a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
F5 NETWORKS (FFIV) REVERSED STOPPING US OUT OF OUR CALLS AT A MODEST FIVE PERCENT PROFIT!
PLUS MARIETTA MATERIALS (MLM) DIPPED BELOW OUR PROFIT TRIGGER AND THEN REVERSED GAINING A NINE PERCENT PROFIT ON OUR PUTS!
Those gains are small but we still appreciate them but they were overshadowed by losses on Chicos FAS (CHS) and Pepsi (PEP). When you set exit points on both the upside and downside you never know when a rogue spike will take you out of a play--sometimes it's at a gain, but in the case of Pepsi it was at a loss.
The key is to not let the losses dominate the portfolio--which is why we use stops. The other key is to make your winnings much more plentiful--which is exactly what we are going to work on right now by taking a good look at...
WHICH WAY THIS MARKET IS HEADED
Talk about a range bound market--the S&P-500 dipped to 1085 once again on Wednesday and then returned to 1110 right on cue. The S&P bounced to 1085 four times over the last four weeks and each time rebounded to 1100.
The Nasdaq could not stay positive Friday and finished with a loss of -4 points for the week. The midweek decline totaled -40 points but it recovered nearly all of that loss.
The resistance on the Nasdaq at 2200 has been rock solid since Nov-16th. However, we do have a pattern of higher lows and the Nasdaq is wedging nicely into a breakout pattern. Techs are expected to lead the way in 2010 so investors are continuing to buy the dip and any move higher will show another higher high.
China's factory production hitting 19% in November was a big reason for the market to rally last week. However, that is now old news and there is a Fed meeting in our immediate future. Stocks are not likely to rally much ahead of the Fed for fear of some rate raising language whacking stock prices.
Once past the Fed meeting we will be hitting the holiday vacations and volume will fall off dramatically. While late December has shown some nice rallies in the past there is cause for concern.
Many funds and institutions are sitting on gigantic gains from the rebound since March. The Dow is up +61% from its lows and the S&P +66%. That is a good decade of gains and it came in only nine months. There are many funds, institutions and money managers just counting the days until January so they can close those positions and lock in profits. If they sell them now in 2009 they have to pay taxes almost immediately. If they wait three weeks and sell them in January they can postpone those taxes for a year.
Which means quite a few managers are trying to sit tight for the next couple of weeks and praying that the market doesn't implode. The wildcard here is professional traders trying to front run any potential January dip. Do they sell into any Santa Claus rally or do they tag along for the ride into January? It will be interesting to find out. Meanwhile we need to keep our stops tight.
The economic reports for the last couple weeks have produced some big expectations for Q4 GDP. Whisper numbers are starting to move over 5%---including one analyst from JP Morgan.
That would be a huge number and would create significant ripples in the market and more pointedly at the Fed. It would force a rethinking of GDP estimates for all of 2010 and force the Fed to start thinking about raising rates. The Q4 GDP estimates are going to be the big story over the next month because the first official Q4 release is not until Jan-29th. Expect a lot of talk about the GDP as we near that release because official estimates are only for 2.6% GDP for all of 2010.
The calendar for next week is dominated by the FOMC meeting on Tue/Wed. That will be the sole focus for analysts until after the announcement on Wednesday. We have a pretty good idea nothing is going to change because Bernanke said as much in his testimony last week. However, in light of the recent economic improvements there could be some change in the language other than the "extended period" comment that will show the Fed is setting up for a bias change. This possible change in bias is going to be the overriding worry for the markets this week.
In addition to the Fed will be the Best Buy earnings on Tuesday and the FedEx, ORCL, RIMM and PALM earnings on Thursday. These reports will be key--especially in the case of Best Buy. As the largest electronics retailer--and without Circuit City to undercut their prices this year---BBY earnings should be decent. Of course it won't be the earnings that attract the most attention but the guidance for Q4. With only two weeks left in the shopping season Best Buy should be in a position to call the game for the rest of the year. If they say sales are good then everyone will benefit. If they warn about weaker sales and smaller margins because of the heavy discounting then the whole sector will head south.
After weeks of incredible volatility where every uptick in the dollar produced losses in equities and commodities a strange thing happened on Friday. The dollar broke out to a six-week high and commodities did not tank. Equities rallied as well. There is normally a direct inverse relationship between the dollar and stocks but that changed on Friday.
The reason for the change was the jump in consumer sentiment, retail sales and the first rise in business inventories in 13 months. For analysts that means the U.S. economy is improving faster than expected and that produces a stronger dollar. The best of both worlds is the dollar and equities both rising--and that may be the case right up until the Fed talks about raising rates--at that point stocks will plunge and the dollar will continue heading higher.
Recent economic reports are showing some catalysts suggesting the U.S. economy as well as China's is gaining traction. These reports are putting upward pressure on the dollar and making some investors more comfortable with the outlook for 2010. However, this range bound market is also telling us that the bullish sentiment from the +60% rally from March may be fading.
There are signs that some money managers may be just biding time until January to dump stocks for tax reasons. That could also lead to some additional window dressing into year-end driving stocks higher--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-probability plays lined up for this week--one bullish and the other bearish.
Our bullish trade is on a stock with an excellent chance of gapping higher this week. The reason is its past history--we're coming up on an event that virtually always makes this one explode--and this time it looks like it's heading higher. Fortunately we've got time to buy some great calls that should rocket higher by the end of the week--calls we'll be getting into Monday.
Our next play is on a company that sells a product that is dropping in price--and the stock shows it. This one has a perfect pattern of lower highs and lower lows--and we just hit one of the those lower highs setting us up for the perfect downside play.
We've got two great looking positions and a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, December 7, 2009
THREE HUGE PROFITS!
This past week's volatility bounced us out of several trades with great results...
WELLS FARGO (WFC) PLUNGED BELOW OUR TRAILING TRIGGER THURSDAY FOR A MUCH APPRECIATED TWENTY-FIVE PERCENT PROFIT!
THEN SYNAPICS (SYNA) GAPPED HIGHER FRIDAY MORNING SHOOTING OUR JAN 27.50 CALLS TO A FAST THIRTY-FIVE PERCENT WINNER!
AND THE BEST PLAY OF ALL WAS OUR DEC 14 PUTS ON DELL CLOSED FRIDAY FOR AN OUTRAGEOUS ONE-HUNDRED-FOURTEEN PERCENT GAIN!
It was a great week and by the looks of things there are more profits on the way. MLM reversed sharply lower adding value to our Dec 85 puts, and F5 Networks (FFIV) just traded above our trailing trigger and looks ready to blast higher again on Monday.
We've done great and now it's time to keep the momentum going with two new plays. To find the profits let's start by taking a good look at...
WHICH WAY THIS MARKET IS HEADING
The November Non-Farm Payroll report blew away estimates for 130,000 job losses with only 11,000 jobs actually lost in November. Plus the losses previously reported for September and October were revised lower by 159,000.
The September jobs report originally came in as a loss of 263,000--however the report on Friday adjusted September to only 139,000 jobs lost. That is an improvement of +124,000 jobs over the last 60-days. The October job loss was originally reported as 190,000 and that was revised lower by 79,000 jobs to a loss of only 111,000 jobs.
Add up those two major reversions with only 11,000 jobs lost in November and this was a shockingly strong report.
The unemployment rate dropped to 10.0% from 10.2%--it isn't much but at least it was finally headed in the right direction. Despite the market reaction to the numbers there were some problems not reported in the news.
The unemployment rate dropped because 98,000 workers fell off the survey as their unemployment benefits ended. The labor force participation rate fell to 65% which is a new record low for this recession.
Another reason for the drop in job losses was the sharp increase in temporary seasonal workers. For instance FedEx hired over 35,000 seasonal workers and UPS more than 50,000. After this holiday season most of those workers will likely end up back in the unemployment line.
The nearly positive jobs report caused a giant short squeeze in the dollar as it rebounded to 75.91 on the dollar index. After trading as low as 74.26 on Tuesday this was a monumental rebound. It was pure short squeeze as analysts revised their estimates about when the Fed might raise rates. Any rise in interest rates will strengthen the dollar--and pummel the price of commodities--and that is exactly what we saw on Friday.
We started to see the gleam fade from gold on Thursday as savvy traders sold their gold positions ahead of the jobs report. Gold hit a new high of $1,225 on Wednesday evening and then headed lower resulting in a $20 drop on Thursday followed by a $55 plunge on Friday.
In spite of the better than expected jobs numbers the Fed is not going to raise rates for months to come and the U.S. is still selling record amounts of debt. As long as the Fed is on hold and the government is going deeper into debt the value of the dollar will continue to decline. It may not fall for a few days because there are still shorts that need to cover. That means gold could also decline further--but the dip will be temporary as the US Treasury and Fed continues to degrade the dollar.
For example this week we'll see $135 billion in new debt being auctioned. There is $74.3 billion in 3, 10, 30-year notes/bonds and $61 billion 3 and 6 month bills. The Treasury will sell $40 billion in 3-year notes on Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday. Those 30-year bonds will be the most watched auction of the week.
Plus we've got an Fed FOMC meeting coming up on the 15th--a week from Tuesday. Don't expect the Fed's comments to change much--the Fed understands that this jobs report reflects seasonal hiring and not a big improvement in conditions. They won't change their bias because to do so would crash the markets and the economy. Everyone still expects unemployment to be well over 10% by mid 2010--the Fed can't raise rates in that environment.
The Fed normally begins raising rates 18-20 months after the first uptick in employment. That first uptick would have been last February and "normally" we could expect rate hikes somewhere July-August 2010. However these conditions are not normal as we have just undergone the Great Recession, the worst since the 1930s. The Fed will want to make very sure the rebound has traction before acting.
Another reason rates aren't going to rise is the administration is talking about another stimulus package of some sort and possibly even a payroll tax holiday. The Fed can't raise rates when the government is talking about additional stimulus. The jobs were a fluke and it may take the markets a couple days to return to the past pattern but it will happen.
We'll likely see dollar strength on Monday from additional short covering and then fear of the Fed for the rest of the week. Hopefully investors will realize that the Fed can't act when the administration is proposing additional stimulus. Bernanke has not been confirmed yet so he should be toeing the party line for another week.
The bottom line is we'll likely see a bit more upside in the dollar and a bit more downside in commodities including gold--but after Tuesday the 15th we'll likely be right back to where we were last week with rising stocks, rising commodities and a falling dollar--the question is...
HOW DO WE MAKE MONEY ON IT?
If you don't have a long term position in gold or silver yet this week may be your chance to get one. As far as our plays go we're interested in making as much money in as short a time as possible--and we've got two great plays lined up to do exactly that.
Our first trade is bullish and it's on a company that is seen as recession proof. They do well in good economies and bad and have been doing especially well lately. They're growing earnings in the double digits and this coming year their prospects look especially attractive--and investors know it. The chart has one of the steadiest uptrends you'll ever see and this play should be as easy as jumping on the escalator with the right calls--a move we'll be making first thing Monday morning!
Our next play is bearish and it's on a health care stock that looks scared their profit cart might be upset by health-care reform The stock just broke key support Friday on huge volume and has a long way to fall--a ride we'll be taking with some high-potential puts for more outstanding profits!
We've got two great plays lined up on a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
WELLS FARGO (WFC) PLUNGED BELOW OUR TRAILING TRIGGER THURSDAY FOR A MUCH APPRECIATED TWENTY-FIVE PERCENT PROFIT!
THEN SYNAPICS (SYNA) GAPPED HIGHER FRIDAY MORNING SHOOTING OUR JAN 27.50 CALLS TO A FAST THIRTY-FIVE PERCENT WINNER!
AND THE BEST PLAY OF ALL WAS OUR DEC 14 PUTS ON DELL CLOSED FRIDAY FOR AN OUTRAGEOUS ONE-HUNDRED-FOURTEEN PERCENT GAIN!
It was a great week and by the looks of things there are more profits on the way. MLM reversed sharply lower adding value to our Dec 85 puts, and F5 Networks (FFIV) just traded above our trailing trigger and looks ready to blast higher again on Monday.
We've done great and now it's time to keep the momentum going with two new plays. To find the profits let's start by taking a good look at...
WHICH WAY THIS MARKET IS HEADING
The November Non-Farm Payroll report blew away estimates for 130,000 job losses with only 11,000 jobs actually lost in November. Plus the losses previously reported for September and October were revised lower by 159,000.
The September jobs report originally came in as a loss of 263,000--however the report on Friday adjusted September to only 139,000 jobs lost. That is an improvement of +124,000 jobs over the last 60-days. The October job loss was originally reported as 190,000 and that was revised lower by 79,000 jobs to a loss of only 111,000 jobs.
Add up those two major reversions with only 11,000 jobs lost in November and this was a shockingly strong report.
The unemployment rate dropped to 10.0% from 10.2%--it isn't much but at least it was finally headed in the right direction. Despite the market reaction to the numbers there were some problems not reported in the news.
The unemployment rate dropped because 98,000 workers fell off the survey as their unemployment benefits ended. The labor force participation rate fell to 65% which is a new record low for this recession.
Another reason for the drop in job losses was the sharp increase in temporary seasonal workers. For instance FedEx hired over 35,000 seasonal workers and UPS more than 50,000. After this holiday season most of those workers will likely end up back in the unemployment line.
The nearly positive jobs report caused a giant short squeeze in the dollar as it rebounded to 75.91 on the dollar index. After trading as low as 74.26 on Tuesday this was a monumental rebound. It was pure short squeeze as analysts revised their estimates about when the Fed might raise rates. Any rise in interest rates will strengthen the dollar--and pummel the price of commodities--and that is exactly what we saw on Friday.
We started to see the gleam fade from gold on Thursday as savvy traders sold their gold positions ahead of the jobs report. Gold hit a new high of $1,225 on Wednesday evening and then headed lower resulting in a $20 drop on Thursday followed by a $55 plunge on Friday.
In spite of the better than expected jobs numbers the Fed is not going to raise rates for months to come and the U.S. is still selling record amounts of debt. As long as the Fed is on hold and the government is going deeper into debt the value of the dollar will continue to decline. It may not fall for a few days because there are still shorts that need to cover. That means gold could also decline further--but the dip will be temporary as the US Treasury and Fed continues to degrade the dollar.
For example this week we'll see $135 billion in new debt being auctioned. There is $74.3 billion in 3, 10, 30-year notes/bonds and $61 billion 3 and 6 month bills. The Treasury will sell $40 billion in 3-year notes on Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday. Those 30-year bonds will be the most watched auction of the week.
Plus we've got an Fed FOMC meeting coming up on the 15th--a week from Tuesday. Don't expect the Fed's comments to change much--the Fed understands that this jobs report reflects seasonal hiring and not a big improvement in conditions. They won't change their bias because to do so would crash the markets and the economy. Everyone still expects unemployment to be well over 10% by mid 2010--the Fed can't raise rates in that environment.
The Fed normally begins raising rates 18-20 months after the first uptick in employment. That first uptick would have been last February and "normally" we could expect rate hikes somewhere July-August 2010. However these conditions are not normal as we have just undergone the Great Recession, the worst since the 1930s. The Fed will want to make very sure the rebound has traction before acting.
Another reason rates aren't going to rise is the administration is talking about another stimulus package of some sort and possibly even a payroll tax holiday. The Fed can't raise rates when the government is talking about additional stimulus. The jobs were a fluke and it may take the markets a couple days to return to the past pattern but it will happen.
We'll likely see dollar strength on Monday from additional short covering and then fear of the Fed for the rest of the week. Hopefully investors will realize that the Fed can't act when the administration is proposing additional stimulus. Bernanke has not been confirmed yet so he should be toeing the party line for another week.
The bottom line is we'll likely see a bit more upside in the dollar and a bit more downside in commodities including gold--but after Tuesday the 15th we'll likely be right back to where we were last week with rising stocks, rising commodities and a falling dollar--the question is...
HOW DO WE MAKE MONEY ON IT?
If you don't have a long term position in gold or silver yet this week may be your chance to get one. As far as our plays go we're interested in making as much money in as short a time as possible--and we've got two great plays lined up to do exactly that.
Our first trade is bullish and it's on a company that is seen as recession proof. They do well in good economies and bad and have been doing especially well lately. They're growing earnings in the double digits and this coming year their prospects look especially attractive--and investors know it. The chart has one of the steadiest uptrends you'll ever see and this play should be as easy as jumping on the escalator with the right calls--a move we'll be making first thing Monday morning!
Our next play is bearish and it's on a health care stock that looks scared their profit cart might be upset by health-care reform The stock just broke key support Friday on huge volume and has a long way to fall--a ride we'll be taking with some high-potential puts for more outstanding profits!
We've got two great plays lined up on a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, November 30, 2009
OUR BRAND NEW DELL PUTS JUST SURGED THIRTY-SIX PERCENT LAST WEEK ALONE!
This past Thanksgiving week has given us plenty to be thankful for...
SPECIFICALLY OUR BRAND NEW DELL PUTS JUST SURGED THIRTY-SIX PERCENT LAST WEEK ALONE!
PLUS OUR PUTS ON WELLS FARGO (WFC) JUMPED A RESPECTABLE FOURTEEN PERCENT!
And by the looks of both their charts there is a lot more profit waiting this coming week. We've also got two bullish plays that pulled back a bit but both positions still look promising so it's likely we'll do well on those as well.
We've got some great plays lined up and a market that seems to be teetering on a new direction--but which way will it be? To find out let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
Despite the down-spikes in the charts above the volume on Friday was only 4.5 billon shares across all exchanges. This was the LOWEST daily volume in over a year. It does not invalidate Friday's losses but it does mean we could see a nice rebound this week and not the implosion Friday's action implies.
Monday is month end and typically the last day and the first two days of a month are bullish. There will likely be some reassuring news out of Dubai that will counteract Friday's action. However the Nasdaq and Russell will have to hold their ground for any positive sentiment to be effective--they are both teetering at critical support.
The key is to see if the Dubai debt problem spreads. Deutsche Bank said Dubai borrowed more than $80 billion in a four-year construction boom and that boom has gone bust. Commercial property values are down -50% from their 2008 peak. Over 1,000 projects have been halted and construction terminated. Anyone holding a loan on one of these projects is in serious trouble.
Arnab Das, head of market research and strategy for Roubini Global Economics said, "Central banks around the world may have stabilized the financial system but you can't make all the excesses disappear and Dubai had a lot of excesses." Abu Dhabi Commercial Bank has a large exposure to Dubai World and that is not the first problem they have had in the region. Two Saudi Arabian families defaulted on loans earlier this year totaling more than $610 million.
The fact is the news on Dubai World broke on Wednesday but nobody in the U.S. paid much attention. It was only after Europe and Asia crashed on Thursday that U.S. investors decided locking in gains before the weekend might be a good idea. Europe crashed because the majority of loans to Dubai World and the UAE in general came from European banks. Some of those banks were down more than 10% on Thursday rippling out to other overseas markets on Friday. We'll see this week but there is a good chance the U.S. market decline on Friday was just a knee jerk reaction to the two days of European/Asian action.
This week we've got several big economic reports. There are four ISM reports with the national manufacturing index on Tuesday and we'll get the Fed Beige Book on Wednesday with another economic view of the various Fed regions.
Friday is the big event with the Non-Farm Payroll report for November. The official consensus estimate is for an improvement to a loss of -145,000 jobs from -190,000 jobs in October. However, the latest analyst numbers are becoming more bullish. Morgan Stanley is expecting an improvement to a loss of only -90,000 jobs and a +100,000 revision to October. We saw new Jobless Claims fall to 466,000 last week so Morgan may not be that far off. Claims have been declining since March but appear to have accelerated lower over the last month--a bullish sign.
Another bullish sign is retail sales this holiday season--the National Retail Federation's survey, conducted over the weekend, found that 195 million shoppers visited stores and Web sites, up from 172 million last year, but the average spent was about $343, down from about $373 a year ago. For the weekend, the total spending figure is an estimated $41.2 billion.
Also Black Friday was the second-heaviest day in online spending to date in 2009 with $595 million in online sales, comScore Inc. reported today. That's 11% higher than last year's Friday after Thanksgiving. The actual holiday saw 10% higher e-commerce sales, totaling $318 million, comScore added.
The National Retail Federation also announced today that more Americans will go online to do holiday shopping on the Monday after the Black Friday weekend than they did last year. On Cyber Monday, 96.5 million people plan to shop, up from 85 million a year ago, the retail-trade group said citing a Shop.org survey. Nine in 10 retailers also will have special deals and promotions for Cyber Monday, the survey said.
There is reason to be cautiously bullish this week but the Dubai event is not over. Dubai reminds us that there are still problems in the world and that could prompt money managers to take profits. The markets were making new highs last week before Dubai but with a little 'damage control' out of the region stocks could easily spring higher again--the question is...
HOW DO WE MAKE MONEY ON IT?
When the markets were going straight up picking stocks was relatively easy--but in this up and down market it's more important to focus on what is really moving--and in which direction. Which is why for this week we've got both a bullish pick and a bearish pick.
Our bullish pick is on a stock that is growing business in spite of the downturn and investors love it. In looking at the chart jumping on this stock will be like hopping on an escalator--it just keeps plowing higher no matter what the rest of the market is doing. In fact it went up again on Friday while everything else was falling--a strong sign of relative strength. We'll be taking advantage of this relentless move higher with some well placed calls first thing Monday morning.
Our next play is just the opposite--the stock just broke critical support and now looks like a plunge waiting to happen--and it's not hard to see why. The company just lowered their forecasts going forward and investors are selling--the perfect scenario for some fat and juicy put profits!
We've got two great set-ups on a market ready to move--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
SPECIFICALLY OUR BRAND NEW DELL PUTS JUST SURGED THIRTY-SIX PERCENT LAST WEEK ALONE!
PLUS OUR PUTS ON WELLS FARGO (WFC) JUMPED A RESPECTABLE FOURTEEN PERCENT!
And by the looks of both their charts there is a lot more profit waiting this coming week. We've also got two bullish plays that pulled back a bit but both positions still look promising so it's likely we'll do well on those as well.
We've got some great plays lined up and a market that seems to be teetering on a new direction--but which way will it be? To find out let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
Despite the down-spikes in the charts above the volume on Friday was only 4.5 billon shares across all exchanges. This was the LOWEST daily volume in over a year. It does not invalidate Friday's losses but it does mean we could see a nice rebound this week and not the implosion Friday's action implies.
Monday is month end and typically the last day and the first two days of a month are bullish. There will likely be some reassuring news out of Dubai that will counteract Friday's action. However the Nasdaq and Russell will have to hold their ground for any positive sentiment to be effective--they are both teetering at critical support.
The key is to see if the Dubai debt problem spreads. Deutsche Bank said Dubai borrowed more than $80 billion in a four-year construction boom and that boom has gone bust. Commercial property values are down -50% from their 2008 peak. Over 1,000 projects have been halted and construction terminated. Anyone holding a loan on one of these projects is in serious trouble.
Arnab Das, head of market research and strategy for Roubini Global Economics said, "Central banks around the world may have stabilized the financial system but you can't make all the excesses disappear and Dubai had a lot of excesses." Abu Dhabi Commercial Bank has a large exposure to Dubai World and that is not the first problem they have had in the region. Two Saudi Arabian families defaulted on loans earlier this year totaling more than $610 million.
The fact is the news on Dubai World broke on Wednesday but nobody in the U.S. paid much attention. It was only after Europe and Asia crashed on Thursday that U.S. investors decided locking in gains before the weekend might be a good idea. Europe crashed because the majority of loans to Dubai World and the UAE in general came from European banks. Some of those banks were down more than 10% on Thursday rippling out to other overseas markets on Friday. We'll see this week but there is a good chance the U.S. market decline on Friday was just a knee jerk reaction to the two days of European/Asian action.
This week we've got several big economic reports. There are four ISM reports with the national manufacturing index on Tuesday and we'll get the Fed Beige Book on Wednesday with another economic view of the various Fed regions.
Friday is the big event with the Non-Farm Payroll report for November. The official consensus estimate is for an improvement to a loss of -145,000 jobs from -190,000 jobs in October. However, the latest analyst numbers are becoming more bullish. Morgan Stanley is expecting an improvement to a loss of only -90,000 jobs and a +100,000 revision to October. We saw new Jobless Claims fall to 466,000 last week so Morgan may not be that far off. Claims have been declining since March but appear to have accelerated lower over the last month--a bullish sign.
Another bullish sign is retail sales this holiday season--the National Retail Federation's survey, conducted over the weekend, found that 195 million shoppers visited stores and Web sites, up from 172 million last year, but the average spent was about $343, down from about $373 a year ago. For the weekend, the total spending figure is an estimated $41.2 billion.
Also Black Friday was the second-heaviest day in online spending to date in 2009 with $595 million in online sales, comScore Inc. reported today. That's 11% higher than last year's Friday after Thanksgiving. The actual holiday saw 10% higher e-commerce sales, totaling $318 million, comScore added.
The National Retail Federation also announced today that more Americans will go online to do holiday shopping on the Monday after the Black Friday weekend than they did last year. On Cyber Monday, 96.5 million people plan to shop, up from 85 million a year ago, the retail-trade group said citing a Shop.org survey. Nine in 10 retailers also will have special deals and promotions for Cyber Monday, the survey said.
There is reason to be cautiously bullish this week but the Dubai event is not over. Dubai reminds us that there are still problems in the world and that could prompt money managers to take profits. The markets were making new highs last week before Dubai but with a little 'damage control' out of the region stocks could easily spring higher again--the question is...
HOW DO WE MAKE MONEY ON IT?
When the markets were going straight up picking stocks was relatively easy--but in this up and down market it's more important to focus on what is really moving--and in which direction. Which is why for this week we've got both a bullish pick and a bearish pick.
Our bullish pick is on a stock that is growing business in spite of the downturn and investors love it. In looking at the chart jumping on this stock will be like hopping on an escalator--it just keeps plowing higher no matter what the rest of the market is doing. In fact it went up again on Friday while everything else was falling--a strong sign of relative strength. We'll be taking advantage of this relentless move higher with some well placed calls first thing Monday morning.
Our next play is just the opposite--the stock just broke critical support and now looks like a plunge waiting to happen--and it's not hard to see why. The company just lowered their forecasts going forward and investors are selling--the perfect scenario for some fat and juicy put profits!
We've got two great set-ups on a market ready to move--so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, November 23, 2009
A SPIKE LOWER ON ABC STOPPED US OUT OF OUR DEC 22.50 CALLS AT A VERY NICE ONE-WEEK FORTY-FIVE PERCENT PROFIT!
This past week the markets hit the top and rolled over...
A SPIKE LOWER ON ABC STOPPED US OUT OF OUR DEC 22.50 CALLS AT A VERY NICE ONE-WEEK FORTY-FIVE PERCENT PROFIT!
That was a great win--but we also ran out of time on our Nike (NKE) puts creating a loss. The stock rolled over big this past week but not far enough or fast enough to save our puts on NKE. Fortunately Well Fargo (WFC) has turned our way and if it's current trend continues we'll have some nice profits to report on that one next week.
The markets are looking toppy after this past week's rise and fall--is this the end of the rally or are we stepping back for another great leap forward? To find out let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The S&P rolled over Thursday and Friday after hitting a short term high right at 1110. The breakout essentially failed but without a decline below initial support. This is typical when a critical resistance area is broken for the first time. There are always sellers waiting above any critical level--which is what produces resistance. What the index does next is the key.
In this case the spike to 1110 held for three days without failing and without a further advance. That suggests the buyers and sellers were struggling with equal force. The gap down on Thursday morning was dollar related and helped by the downgrade of the entire chip sector---the stalemate was finally broken by external events.
The Nasdaq did not fail at any specific resistance level--instead it got hit by the Merrill chip downgrade and Dell's earnings disaster turning the index around in mid-air.
It was a tough week with Dell's 54% earnings short-fall following a major downgrade of the chip sector by Merrill Lynch on Thursday. BAC/Merrill downgraded INTC, TXN, MRVL, LSI, MXIM, NSM, POWI and MCHP to 'underperform' from neutral.
Underperform is the same as a sell rating. BAC said inventories have been replenished and inventory levels in the supply chain were approaching a surplus condition. The semiconductor sector was knocked for a loss on Thursday and again on Friday thanks to Dell but the actual damage could have been worse.
Volume on Friday was the lowest since Oct-12th and it is probably not going to get any greater this week---Thanksgiving week is typically one of the lowest volume periods of the year. That means any market-moving event is likely to be exaggerated because it won't take much to move stocks with little competition.
Despite the light volume and nearly flat markets on Friday the A/D line was negative with 3741 decliners to 2741 advancers. Friday was the third day of declines and the major indexes slipped back to initial support--but that support did not break. Considering it was option expiration that is a positive sign.
Some Analysts chalked up the pullback to a cooler view of the prospects for the U.S. consumer after a series of reports highlighting ongoing troubles in housing. Those worries could resurface this week with a fresh slew of reports on new and existing-home sales for October and the S&P/Case-Shiller survey of national home prices.
Existing Home Sales come out on Monday and the Case-Shiller index comes out on Tuesday.
The homebuilder sector was also knocked for a loss on Friday after DR Horton (DHI) reported a 73-cent loss---far worse than analysts expected. The company was forced to take a $192 million charge for impairments and write-downs on land contracts. DHI stock fell -15% for the day and depending on how these housing sector reports go it may fall further this week.
The biggest trade this year has been to short the dollar and go long gold and commodities--but is that about to reverse? The dollar refused to break support at 75 on the dollar index and if a short squeeze comes it's liable to be violent. Currencies and commodities can move exceptionally quickly and those traders who don't pull the trigger at the first sign of trouble could take huge losses. Over the long run the dollar will probably fall further but there could be several big reversals where weak players are ejected by violent short squeezes--and that could be starting right now. Any short squeeze in this trade will crush commodities like oil and gold--which we would view as a great long-term buying opportunity.
Gold hit a new high this week at $1153 an ounce and it could go higher if the dollar does not rebound soon. Rob Lutts of Cabot Management said central banks are mulling further investment into gold reserves. He quoted Mexico, Russia and the Philippines as having bought gold recently as well as the 200 metric tonnes purchased by India over the past week.
With currencies devaluing many countries are looking at gold as a reserve instead of the dollar. Lutts is predicting $1350 gold once the IMF announces the sale of the second half of their hoard. They sold half to India and they are taking bids on another 200 tonnes. The IMF said if no country bids for the entire amount they would sell it on the open market. That event could definitely depress prices temporarily while a single buyer would send prices soaring.
This week is holiday shortened and there are no economic reports on Thursday or Friday. All the normal reports have been moved forward making Tuesday and Wednesday extremely busy. The key reports for the week are the Chicago Fed National Activity Index on Monday, GDP revision, the Richmond Fed Survey and the FOMC minutes on Tuesday. Wednesday has the Kansas Fed Manufacturing Survey. The two most important events for the week are the GDP revision and the FOMC minutes.
The GDP revision is now expected to fall to +2.9% growth in Q3 from the initial estimate of +3.53%. Any material decline worse than 2.9% would be negative for the markets.
The FOMC minutes for the November meeting will be released at 2:PM on Tuesday. These will probably provide the most market volatility of the entire week. This is the inside look at what the Fed was thinking when they met to determine rate policy on Nov-3rd. We've already seen the FOMC statement but this Tuesday we'll see the thinking behind it.
We've got a market that has pulled back, a potentially volatile holiday week and a traditionally bullish year-end--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up this week--one bullish and the other bearish.
Our bullish play is on a stock that just announced earnings and they tore the cover off the ball growing the bottom line a whopping 1300% versus the same quarter last year! And this is at a time when their competition is struggling. The stock took off like a rocket right after the announcement but fortunately for us it's come right back down to where it started--and now that it's filled the gap it's ready to launch again--only this time we'll be along for the ride!
Our next play is bearish and it's almost a mirror image of our bullish trade--this company is LOSING market share against its rivals and just announced earnings so bad it had holders dumping the stock in droves--but make no mistake--this downturn is just beginning and we'll be getting in on what promises to be a VERY profitable put play!
We've got two great low-cost, high-potential trades lined up so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on
www.cashflowheaven.com/pg
A SPIKE LOWER ON ABC STOPPED US OUT OF OUR DEC 22.50 CALLS AT A VERY NICE ONE-WEEK FORTY-FIVE PERCENT PROFIT!
That was a great win--but we also ran out of time on our Nike (NKE) puts creating a loss. The stock rolled over big this past week but not far enough or fast enough to save our puts on NKE. Fortunately Well Fargo (WFC) has turned our way and if it's current trend continues we'll have some nice profits to report on that one next week.
The markets are looking toppy after this past week's rise and fall--is this the end of the rally or are we stepping back for another great leap forward? To find out let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The S&P rolled over Thursday and Friday after hitting a short term high right at 1110. The breakout essentially failed but without a decline below initial support. This is typical when a critical resistance area is broken for the first time. There are always sellers waiting above any critical level--which is what produces resistance. What the index does next is the key.
In this case the spike to 1110 held for three days without failing and without a further advance. That suggests the buyers and sellers were struggling with equal force. The gap down on Thursday morning was dollar related and helped by the downgrade of the entire chip sector---the stalemate was finally broken by external events.
The Nasdaq did not fail at any specific resistance level--instead it got hit by the Merrill chip downgrade and Dell's earnings disaster turning the index around in mid-air.
It was a tough week with Dell's 54% earnings short-fall following a major downgrade of the chip sector by Merrill Lynch on Thursday. BAC/Merrill downgraded INTC, TXN, MRVL, LSI, MXIM, NSM, POWI and MCHP to 'underperform' from neutral.
Underperform is the same as a sell rating. BAC said inventories have been replenished and inventory levels in the supply chain were approaching a surplus condition. The semiconductor sector was knocked for a loss on Thursday and again on Friday thanks to Dell but the actual damage could have been worse.
Volume on Friday was the lowest since Oct-12th and it is probably not going to get any greater this week---Thanksgiving week is typically one of the lowest volume periods of the year. That means any market-moving event is likely to be exaggerated because it won't take much to move stocks with little competition.
Despite the light volume and nearly flat markets on Friday the A/D line was negative with 3741 decliners to 2741 advancers. Friday was the third day of declines and the major indexes slipped back to initial support--but that support did not break. Considering it was option expiration that is a positive sign.
Some Analysts chalked up the pullback to a cooler view of the prospects for the U.S. consumer after a series of reports highlighting ongoing troubles in housing. Those worries could resurface this week with a fresh slew of reports on new and existing-home sales for October and the S&P/Case-Shiller survey of national home prices.
Existing Home Sales come out on Monday and the Case-Shiller index comes out on Tuesday.
The homebuilder sector was also knocked for a loss on Friday after DR Horton (DHI) reported a 73-cent loss---far worse than analysts expected. The company was forced to take a $192 million charge for impairments and write-downs on land contracts. DHI stock fell -15% for the day and depending on how these housing sector reports go it may fall further this week.
The biggest trade this year has been to short the dollar and go long gold and commodities--but is that about to reverse? The dollar refused to break support at 75 on the dollar index and if a short squeeze comes it's liable to be violent. Currencies and commodities can move exceptionally quickly and those traders who don't pull the trigger at the first sign of trouble could take huge losses. Over the long run the dollar will probably fall further but there could be several big reversals where weak players are ejected by violent short squeezes--and that could be starting right now. Any short squeeze in this trade will crush commodities like oil and gold--which we would view as a great long-term buying opportunity.
Gold hit a new high this week at $1153 an ounce and it could go higher if the dollar does not rebound soon. Rob Lutts of Cabot Management said central banks are mulling further investment into gold reserves. He quoted Mexico, Russia and the Philippines as having bought gold recently as well as the 200 metric tonnes purchased by India over the past week.
With currencies devaluing many countries are looking at gold as a reserve instead of the dollar. Lutts is predicting $1350 gold once the IMF announces the sale of the second half of their hoard. They sold half to India and they are taking bids on another 200 tonnes. The IMF said if no country bids for the entire amount they would sell it on the open market. That event could definitely depress prices temporarily while a single buyer would send prices soaring.
This week is holiday shortened and there are no economic reports on Thursday or Friday. All the normal reports have been moved forward making Tuesday and Wednesday extremely busy. The key reports for the week are the Chicago Fed National Activity Index on Monday, GDP revision, the Richmond Fed Survey and the FOMC minutes on Tuesday. Wednesday has the Kansas Fed Manufacturing Survey. The two most important events for the week are the GDP revision and the FOMC minutes.
The GDP revision is now expected to fall to +2.9% growth in Q3 from the initial estimate of +3.53%. Any material decline worse than 2.9% would be negative for the markets.
The FOMC minutes for the November meeting will be released at 2:PM on Tuesday. These will probably provide the most market volatility of the entire week. This is the inside look at what the Fed was thinking when they met to determine rate policy on Nov-3rd. We've already seen the FOMC statement but this Tuesday we'll see the thinking behind it.
We've got a market that has pulled back, a potentially volatile holiday week and a traditionally bullish year-end--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up this week--one bullish and the other bearish.
Our bullish play is on a stock that just announced earnings and they tore the cover off the ball growing the bottom line a whopping 1300% versus the same quarter last year! And this is at a time when their competition is struggling. The stock took off like a rocket right after the announcement but fortunately for us it's come right back down to where it started--and now that it's filled the gap it's ready to launch again--only this time we'll be along for the ride!
Our next play is bearish and it's almost a mirror image of our bullish trade--this company is LOSING market share against its rivals and just announced earnings so bad it had holders dumping the stock in droves--but make no mistake--this downturn is just beginning and we'll be getting in on what promises to be a VERY profitable put play!
We've got two great low-cost, high-potential trades lined up so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on
www.cashflowheaven.com/pg
Monday, November 9, 2009
WE WERE STOPPED OUT OF OUR NEW AMAZON (AMZN) PUT PLAY AS THE COMPANY RECEIVED FOUR SEPARATE UPGRADES ON FRIDAY FROM BERNSTEIN, OPPENHEIMER, RBC CAPITA
This past week the markets dipped and then shot higher...
Normally a company retraces somewhat after as big a pop higher as Amazon had but after this many cheerleaders touted the stock it HAD to jump higher.
And that is why we use stop losses. Not we're back to cash with one open play and could use a couple winners this week. Fortunately we've got two extremely promising plays lined up. But before we get to them let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
As you can see both indices made mighty rebounds from what looked like major breaks of their uptrend lines. The SP-500 ended up over 33 points on the week while the Nasdaq launched over 67 points.
This very bullish performance was in spite of some nasty employment numbers on Friday--which gives you an indication of just how bullish sentiment is right now--something we need to pay attention to.
The official unemployment rate jumped to 10.2% with 190,000 jobs lost in October--much worse than expected--and that only counts those recently unemployed and looking for work. The broader U6 unemployment rate rose to 17.5% from 17.0% in September.
The actual number of unemployed workers rose to 30.5 million people. That consists of 15.7 million officially unemployed, 9.2 million working part time or in temporary jobs because full time jobs in their field are not available and another 5.6 million workers no longer looking for jobs but willing to work if jobs were available. In spite of a lot of high hopes it's tough to count on a big economic rebound with more than 30 million people out of work.
The only other report on Friday was Consumer Credit for September. The report showed that credit balances are continuing to shrink at rapid rate with a -$14.8 billion decline in September. Revolving credit like credit cards dropped 12.5% while non-revolving credit like home equity loans fell -3.7%. Balances are expected to continue declining as long as folks stay worried--and that could be awhile.
It's interesting that the individual is tightening the ship in uncertain economic times while the government does just the opposite. This coming week will see another record debt auction by the Treasury with $81 billion being offered which is $6 billion over the last quarterly refunding.
The auction will raise money to pay off $38.5 billion in maturing securities and raise another $42.5 billion in new cash. The Treasury said last Monday that it would need to raise an extra $276 billion before year-end. They also said they could hit the legal debt ceiling as early as mid December. Since the Fed said it had completed its debt purchases this will be the first auction without the Fed as an underlying silent buyer. Without the Fed it would be smart to prepare for higher interest rates--a scenario that the markets won't react to very well.
However the markets have been buoyed by the hope of continuing outperformance in earnings expectations--and that optimism could continue into the end of the year.
With 440 of the S&P-500 already reported 80% of companies beat estimates. Only 14% missed estimates and 6% reported inline. The average surprise was 14.5% over estimates. As of Friday Thomson/Reuters says total S&P earnings for all companies reported came in at a -14.8% decline. At the end of Q3 analysts were expecting a -25% decline. Obviously everyone feared the worst but when the numbers came in better the markets climbed.
For Q4 the expectations are off the charts. The Q4 estimate is so great because most firms lost a ton of money in Q4-2008. If they just break even in Q4-2009 it would be a monster improvement. Every time there is an analyst upgrade to a stock like Amazon, GE or Travelers the S&P estimate for Q4 will change and the atmosphere is starting to look ripe for a year-end rally that makes the fourth quarter traditionally the most bullish. The only two big obstacles could be a very bad Christmas season and a rise in interest rates.
But interest rates may be slow to rise. The markets seem to be ignoring bad economic news. Primarily because bad news means the Fed is going to stay on the sidelines for a long time.
Estimates for a Fed rate hike are now closer to June than January. This means the dollar should continue to deteriorate and with the low interest rates banks can keep piling up the cash from the spread on the loans they do make.
So, if the Fed is on the sidelines indefinitely and stimulus dollars are still flowing then the general consensus suggests the markets should continue higher. Traders believe the worst is behind us and Q4 earnings are going to be in the range of a 150% improvement over 2008 even after they adjust for Q3 guidance--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-potential plays lined up this week and they are both bullish.
The first is on a health care stock that is climbing straight up--and should do even better after the house just passed the Healthcare bill. This is a stock you are going to want to jump on first thing Monday morning for what looks to be a very exciting ride.
Our second play grew earnings a whopping 37% over last year and STILL got whacked lower because expectations were so high. But now the stock looks to be bottoming and when this thing runs higher it can take off like a rocket--a rocket we'll be boarding first thing Monday.
We've got two great plays lined up on a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Normally a company retraces somewhat after as big a pop higher as Amazon had but after this many cheerleaders touted the stock it HAD to jump higher.
And that is why we use stop losses. Not we're back to cash with one open play and could use a couple winners this week. Fortunately we've got two extremely promising plays lined up. But before we get to them let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
As you can see both indices made mighty rebounds from what looked like major breaks of their uptrend lines. The SP-500 ended up over 33 points on the week while the Nasdaq launched over 67 points.
This very bullish performance was in spite of some nasty employment numbers on Friday--which gives you an indication of just how bullish sentiment is right now--something we need to pay attention to.
The official unemployment rate jumped to 10.2% with 190,000 jobs lost in October--much worse than expected--and that only counts those recently unemployed and looking for work. The broader U6 unemployment rate rose to 17.5% from 17.0% in September.
The actual number of unemployed workers rose to 30.5 million people. That consists of 15.7 million officially unemployed, 9.2 million working part time or in temporary jobs because full time jobs in their field are not available and another 5.6 million workers no longer looking for jobs but willing to work if jobs were available. In spite of a lot of high hopes it's tough to count on a big economic rebound with more than 30 million people out of work.
The only other report on Friday was Consumer Credit for September. The report showed that credit balances are continuing to shrink at rapid rate with a -$14.8 billion decline in September. Revolving credit like credit cards dropped 12.5% while non-revolving credit like home equity loans fell -3.7%. Balances are expected to continue declining as long as folks stay worried--and that could be awhile.
It's interesting that the individual is tightening the ship in uncertain economic times while the government does just the opposite. This coming week will see another record debt auction by the Treasury with $81 billion being offered which is $6 billion over the last quarterly refunding.
The auction will raise money to pay off $38.5 billion in maturing securities and raise another $42.5 billion in new cash. The Treasury said last Monday that it would need to raise an extra $276 billion before year-end. They also said they could hit the legal debt ceiling as early as mid December. Since the Fed said it had completed its debt purchases this will be the first auction without the Fed as an underlying silent buyer. Without the Fed it would be smart to prepare for higher interest rates--a scenario that the markets won't react to very well.
However the markets have been buoyed by the hope of continuing outperformance in earnings expectations--and that optimism could continue into the end of the year.
With 440 of the S&P-500 already reported 80% of companies beat estimates. Only 14% missed estimates and 6% reported inline. The average surprise was 14.5% over estimates. As of Friday Thomson/Reuters says total S&P earnings for all companies reported came in at a -14.8% decline. At the end of Q3 analysts were expecting a -25% decline. Obviously everyone feared the worst but when the numbers came in better the markets climbed.
For Q4 the expectations are off the charts. The Q4 estimate is so great because most firms lost a ton of money in Q4-2008. If they just break even in Q4-2009 it would be a monster improvement. Every time there is an analyst upgrade to a stock like Amazon, GE or Travelers the S&P estimate for Q4 will change and the atmosphere is starting to look ripe for a year-end rally that makes the fourth quarter traditionally the most bullish. The only two big obstacles could be a very bad Christmas season and a rise in interest rates.
But interest rates may be slow to rise. The markets seem to be ignoring bad economic news. Primarily because bad news means the Fed is going to stay on the sidelines for a long time.
Estimates for a Fed rate hike are now closer to June than January. This means the dollar should continue to deteriorate and with the low interest rates banks can keep piling up the cash from the spread on the loans they do make.
So, if the Fed is on the sidelines indefinitely and stimulus dollars are still flowing then the general consensus suggests the markets should continue higher. Traders believe the worst is behind us and Q4 earnings are going to be in the range of a 150% improvement over 2008 even after they adjust for Q3 guidance--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-potential plays lined up this week and they are both bullish.
The first is on a health care stock that is climbing straight up--and should do even better after the house just passed the Healthcare bill. This is a stock you are going to want to jump on first thing Monday morning for what looks to be a very exciting ride.
Our second play grew earnings a whopping 37% over last year and STILL got whacked lower because expectations were so high. But now the stock looks to be bottoming and when this thing runs higher it can take off like a rocket--a rocket we'll be boarding first thing Monday.
We've got two great plays lined up on a market ready to move so let's get to it...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, October 26, 2009
NETEASE (NTES) PLUNGED LOWER THURSDAY LAUNCHING OUR NOV 37 PUTS TO A QUICK FOUR-DAY TWENTY-ONE PERCENT PROFIT!
The beauty of option trading is it's never boring--some market ups and downs got us out of several positions this past week...
NETEASE (NTES) PLUNGED LOWER THURSDAY LAUNCHING OUR NOV 37 PUTS TO A QUICK FOUR-DAY TWENTY-ONE PERCENT PROFIT!
We also sold out of our IWM calls for close to a break-even and sold out of the second half of our GS debit spread for a loss after last week's first half gain.
In addition it looks like Harley (HOG) is rolling over and already added some nice value to our put position on Friday--any more downside and this put position will chalk-up another nice profit to the win column.
When Goldman rolls over along with the rest of the financials you have to wonder how much longer this rally can last. To help find out and locate some winners for this week let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The S&P-500 tested upside resistance at 1100 twice last week and then rolled over. The index formed a lower high and Friday's close was a lower low. Decliners were 10:1 over advancers (448:46) on the S&P Friday--a bearish sign.
The Nasdaq gave up 10 points on Friday despite the gains by Microsoft and the big $25 spike higher by Amazon. If the Nasdaq could not remain positive with those heavyweights posting big gains it gives you an idea how much selling was going on everywhere else. Decliners were 4:1 over advancers on the Nasdaq Friday. This index is looking like a big drop could happen anytime--rising wedges are usually very bearish patterns.
Another consideration is the Financials are considered the overall market leaders and that sector dropped -2% for the week in spite of positive comments from Capital One and American Express. Capital One (COF) rallied +7% after posting a surprise 14% increase in Q3 profits. COF did raise loan loss provisions but they were positive on the trend in consumer credit accounts. American Express (AXP) said earnings fell -21% but reported progress in cleaning up their accounts--loan loss provisions actually decreased at AXP.
There are reasons for investors to be concerned about the financial sector with seven more banks closed on Friday bringing the total to 106 for the year. Fortunately the banks closed on Friday were small with the estimated cost to the FDIC fund at a relatively modest $357 million.
The coming week we'll see another $123 billion worth of bond debt being sold at auction. With the interest rate on the 10-year note hovering at a six-week high just under 3.5% the cost of government borrowing is starting to move up. With a $1.5 trillion annual deficit growing to a $2 trillion the cost of money is eventually going to be a very big problem. Once these auctions start seeing a lack of bids it will drive rates higher--and those higher rates will draw a lot of money from the stock market. That may not happen in the next few weeks but it will happen
The next two weeks are filled with critical economic events including another FOMC meeting. The most critical report for next week is the first look at the Q3 GDP on Thursday. Expectations are for a gain of +3.2% compared to a drop of -0.74% in Q2. This higher Q3 expectation is already priced into the markets and a miss on expectations could have a very serious impact.
On Friday the GDP for the U.K. was released and showed a -0.4% drop instead of the 0.2% gain economists had expected. The European markets fell on the news and the British pound fell -1.5% against the dollar in early trading. The problem is the U.K. is basically a mirror of the USA. They have implemented many of the same stimulus programs as the U.S. and they are still in recession. This made analysts question their predictions for the USA and Thursday's Q3 GDP estimates--a big reason for the market weakness on Friday.
This week's economic reports are a build-up to for the next week's climax with the ISM, Fed meeting and Non-Farm Payrolls.
The earnings cycle is in full swing and we'll see the most earnings reports of any week in the next five days. However the quality of the earnings may begin to decline because the majority of the big cap blue chips have already reported.
We'll primarily see small tech and energy with COP, XOM and CVX leading the energy sector and on the tech side we have GLW, ADPT, AKAM, LVLT, FLEX and SYMC to name a few. We also get the inside scoop on the retail brokers Ameritrade and Etrade. After this week we'll be on the tail-end of earnings with all that bullish anticipation behind us.
So far in this earnings cycle 37% of the S&P has reported and 81% of those companies have beaten estimates by an average of 18%. That would be a pretty impressive number except that the majority of it came from additional cost cutting with some companies still announcing layoffs. Earnings for the entire S&P are only expected to be $14.79 per share for the quarter--well below the $23-$24 per share for Q3 in 2006/2007. It is also below the $15.96 actually reported in Q3 2008. Companies are beating estimates but estimates are still so low you could crawl over them.
Volume is starting to look bearish along with the actual price on the charts with the largest volume day in the past three weeks coming on Wednesday's decline at over 10 billion shares. Thursday's rally was decent at 9.2 billion but Friday's decline was also in the 9 billion range and continued the trend of higher volume on down days.
The major indexes are showing the kind of volatility that normally appears at market tops as investors become less committed and more cautious. Everybody wants the market to move higher but the big funds are already fully invested. It's beginning to appear that strong earnings surprises are opportunities for traders to exit rather than buy more. The question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up this week--the first is a both ways play we can get into for practically nothing and the second is a bullish play on an index that rises when the rest of the market falls.
Our first play is a strangle where we can buy both sides for around .50 cents! And get this--earnings are coming out toward the end of this week so we won't have to wait long to collect what should be an excellent payday.
Our next play is really on the overall market and will rocket higher if the market continues to sell off--a very strong possibility as funds move to take their profits as earnings wind down.
We've got two very nice trades lined up on increasingly volatile market--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on http://rs6.net/tn.jsp?et=1102785369313&s=1&e=001Smf5P_-01APrJwd0Bxb-J_xlXBb5G0aJpgzvyZiW8Oh5_sCettybQnNRjjA64XFKIQTlO9OjjJHGsWvEloXlS3LggPAbc45J0EiYa9HWD_VdlvPIFQ5trw==
NETEASE (NTES) PLUNGED LOWER THURSDAY LAUNCHING OUR NOV 37 PUTS TO A QUICK FOUR-DAY TWENTY-ONE PERCENT PROFIT!
We also sold out of our IWM calls for close to a break-even and sold out of the second half of our GS debit spread for a loss after last week's first half gain.
In addition it looks like Harley (HOG) is rolling over and already added some nice value to our put position on Friday--any more downside and this put position will chalk-up another nice profit to the win column.
When Goldman rolls over along with the rest of the financials you have to wonder how much longer this rally can last. To help find out and locate some winners for this week let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The S&P-500 tested upside resistance at 1100 twice last week and then rolled over. The index formed a lower high and Friday's close was a lower low. Decliners were 10:1 over advancers (448:46) on the S&P Friday--a bearish sign.
The Nasdaq gave up 10 points on Friday despite the gains by Microsoft and the big $25 spike higher by Amazon. If the Nasdaq could not remain positive with those heavyweights posting big gains it gives you an idea how much selling was going on everywhere else. Decliners were 4:1 over advancers on the Nasdaq Friday. This index is looking like a big drop could happen anytime--rising wedges are usually very bearish patterns.
Another consideration is the Financials are considered the overall market leaders and that sector dropped -2% for the week in spite of positive comments from Capital One and American Express. Capital One (COF) rallied +7% after posting a surprise 14% increase in Q3 profits. COF did raise loan loss provisions but they were positive on the trend in consumer credit accounts. American Express (AXP) said earnings fell -21% but reported progress in cleaning up their accounts--loan loss provisions actually decreased at AXP.
There are reasons for investors to be concerned about the financial sector with seven more banks closed on Friday bringing the total to 106 for the year. Fortunately the banks closed on Friday were small with the estimated cost to the FDIC fund at a relatively modest $357 million.
The coming week we'll see another $123 billion worth of bond debt being sold at auction. With the interest rate on the 10-year note hovering at a six-week high just under 3.5% the cost of government borrowing is starting to move up. With a $1.5 trillion annual deficit growing to a $2 trillion the cost of money is eventually going to be a very big problem. Once these auctions start seeing a lack of bids it will drive rates higher--and those higher rates will draw a lot of money from the stock market. That may not happen in the next few weeks but it will happen
The next two weeks are filled with critical economic events including another FOMC meeting. The most critical report for next week is the first look at the Q3 GDP on Thursday. Expectations are for a gain of +3.2% compared to a drop of -0.74% in Q2. This higher Q3 expectation is already priced into the markets and a miss on expectations could have a very serious impact.
On Friday the GDP for the U.K. was released and showed a -0.4% drop instead of the 0.2% gain economists had expected. The European markets fell on the news and the British pound fell -1.5% against the dollar in early trading. The problem is the U.K. is basically a mirror of the USA. They have implemented many of the same stimulus programs as the U.S. and they are still in recession. This made analysts question their predictions for the USA and Thursday's Q3 GDP estimates--a big reason for the market weakness on Friday.
This week's economic reports are a build-up to for the next week's climax with the ISM, Fed meeting and Non-Farm Payrolls.
The earnings cycle is in full swing and we'll see the most earnings reports of any week in the next five days. However the quality of the earnings may begin to decline because the majority of the big cap blue chips have already reported.
We'll primarily see small tech and energy with COP, XOM and CVX leading the energy sector and on the tech side we have GLW, ADPT, AKAM, LVLT, FLEX and SYMC to name a few. We also get the inside scoop on the retail brokers Ameritrade and Etrade. After this week we'll be on the tail-end of earnings with all that bullish anticipation behind us.
So far in this earnings cycle 37% of the S&P has reported and 81% of those companies have beaten estimates by an average of 18%. That would be a pretty impressive number except that the majority of it came from additional cost cutting with some companies still announcing layoffs. Earnings for the entire S&P are only expected to be $14.79 per share for the quarter--well below the $23-$24 per share for Q3 in 2006/2007. It is also below the $15.96 actually reported in Q3 2008. Companies are beating estimates but estimates are still so low you could crawl over them.
Volume is starting to look bearish along with the actual price on the charts with the largest volume day in the past three weeks coming on Wednesday's decline at over 10 billion shares. Thursday's rally was decent at 9.2 billion but Friday's decline was also in the 9 billion range and continued the trend of higher volume on down days.
The major indexes are showing the kind of volatility that normally appears at market tops as investors become less committed and more cautious. Everybody wants the market to move higher but the big funds are already fully invested. It's beginning to appear that strong earnings surprises are opportunities for traders to exit rather than buy more. The question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up this week--the first is a both ways play we can get into for practically nothing and the second is a bullish play on an index that rises when the rest of the market falls.
Our first play is a strangle where we can buy both sides for around .50 cents! And get this--earnings are coming out toward the end of this week so we won't have to wait long to collect what should be an excellent payday.
Our next play is really on the overall market and will rocket higher if the market continues to sell off--a very strong possibility as funds move to take their profits as earnings wind down.
We've got two very nice trades lined up on increasingly volatile market--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on http://rs6.net/tn.jsp?et=1102785369313&s=1&e=001Smf5P_-01APrJwd0Bxb-J_xlXBb5G0aJpgzvyZiW8Oh5_sCettybQnNRjjA64XFKIQTlO9OjjJHGsWvEloXlS3LggPAbc45J0EiYa9HWD_VdlvPIFQ5trw==
Friday, October 23, 2009
The Fastest Money You Will Ever Make is on the Downside
People are scared of falling markets--but they shouldn't be...
The Fastest Money You Will Ever Make is on the Downside
Stocks fall faster than they rise. This week's bearish pick from the Daily Report produced a 150% winner in 5 days! Each week one of the stock picks is highlighted that subscribers could have jumped on. They could have traded any number of strategies, but for this example an at-the-money option was selected.
A week ago (October 15th), NCR was featured as the "short of the day". Subscribers could have purchased the November $12.50 puts for just $.90. Today, the puts traded as high as $2.30 catapulting a $900 trade into $2,300 in just one week! You'll see stocks drop like this but rarely will they rise like this--the super fast profits are almost always on the downside.
Subscribe to the Daily Report to take advantage of trades like this. To learn more about a trading subscription that gives you two new trade ideas each day--one bullish and the other bearish--and a Package to take advantage of them click here.
Market Commentary -Last week, we talked about taking profits on long positions and the market has dropped. Subscribers are making great money and the action is picking up.
By the end of this week, 35% of the stocks in the S&P 500 will have reported earnings. Results have been good with 78% beating estimates. Unfortunately, that is already priced into the market. Yesterday, the S&P 500 made a new high for 2009 and an intraday reversal pushed it to a new five day low just before the close.
This type of price action tells us that significant resistance is forming. We saw the same type of price action in September and that key reversal resulted in a five-day decline. The most recent dip in September was deeper than the prior two dips and the breakout last week was minimal.
Overhead resistance does not mean that we will see a dramatic decline. There are still many Asset Managers who are under allocated and cash is still flowing into the equity market. This demand for stocks is being met by supply. Traders are taking profits after a 60% rally from the March lows. These two forces will offset each other and the market is likely to fall into a trading range throughout the rest of the year.
The comps from a year ago will be easy to beat, but as time passes, we will be closer to an interest-rate hike by the Fed. Again, these two events will offset each other. The easy money has been made and it is time to shift to a more neutral trading strategy.
Before tomorrow's open, we will hear from Amazon, American Express, Broadcom, Capital One, Western Digital, Honeywell, Ingersoll-Rand, Microsoft, Schlumberger and Whirlpool.
Amazon will post decent numbers, but future margin contraction (Wal-Mart is cutting prices) will weigh on the stock. American Express and Capital One will have increasing consumer default rates and the reaction could be negative. This has been an issue with every major bank that has announced. Microsoft has rallied ahead of the release of Windows 7 and this could be a “sell the news” event. All told, earnings could spark some selling on Friday.
Today, initial jobless claims came in at 531,000 when analysts had expected 515,000. Continuing claims dropped below 6 million. The combination was a wash and the market did not react to the release. There are a number of economic releases due out next week and they include durable goods, consumer confidence, GDP, initial claims, Chicago PMI and consumer sentiment. Analysts are looking for a 3% rise in Q3 GDP and that is likely to be the most important economic number next week.
There are great opportunities on both sides---the market is likely to chop back and forth within a 10% range (+ or – 5%) through year-end.
Bears have been carried out in body bags and for that reason we may not see a huge run-up into the end of the year. They have covered their positions and we will not see short covering rallies. At this point we should be less worried about a breakout than a breakdown. If the SPY breaks below 102, start buying short positions. This probably won't be happening, but we need to be prepared. Get your watch lists ready for stocks poised in both direction by clicking here.
The Fastest Money You Will Ever Make is on the Downside
Stocks fall faster than they rise. This week's bearish pick from the Daily Report produced a 150% winner in 5 days! Each week one of the stock picks is highlighted that subscribers could have jumped on. They could have traded any number of strategies, but for this example an at-the-money option was selected.
A week ago (October 15th), NCR was featured as the "short of the day". Subscribers could have purchased the November $12.50 puts for just $.90. Today, the puts traded as high as $2.30 catapulting a $900 trade into $2,300 in just one week! You'll see stocks drop like this but rarely will they rise like this--the super fast profits are almost always on the downside.
Subscribe to the Daily Report to take advantage of trades like this. To learn more about a trading subscription that gives you two new trade ideas each day--one bullish and the other bearish--and a Package to take advantage of them click here.
Market Commentary -Last week, we talked about taking profits on long positions and the market has dropped. Subscribers are making great money and the action is picking up.
By the end of this week, 35% of the stocks in the S&P 500 will have reported earnings. Results have been good with 78% beating estimates. Unfortunately, that is already priced into the market. Yesterday, the S&P 500 made a new high for 2009 and an intraday reversal pushed it to a new five day low just before the close.
This type of price action tells us that significant resistance is forming. We saw the same type of price action in September and that key reversal resulted in a five-day decline. The most recent dip in September was deeper than the prior two dips and the breakout last week was minimal.
Overhead resistance does not mean that we will see a dramatic decline. There are still many Asset Managers who are under allocated and cash is still flowing into the equity market. This demand for stocks is being met by supply. Traders are taking profits after a 60% rally from the March lows. These two forces will offset each other and the market is likely to fall into a trading range throughout the rest of the year.
The comps from a year ago will be easy to beat, but as time passes, we will be closer to an interest-rate hike by the Fed. Again, these two events will offset each other. The easy money has been made and it is time to shift to a more neutral trading strategy.
Before tomorrow's open, we will hear from Amazon, American Express, Broadcom, Capital One, Western Digital, Honeywell, Ingersoll-Rand, Microsoft, Schlumberger and Whirlpool.
Amazon will post decent numbers, but future margin contraction (Wal-Mart is cutting prices) will weigh on the stock. American Express and Capital One will have increasing consumer default rates and the reaction could be negative. This has been an issue with every major bank that has announced. Microsoft has rallied ahead of the release of Windows 7 and this could be a “sell the news” event. All told, earnings could spark some selling on Friday.
Today, initial jobless claims came in at 531,000 when analysts had expected 515,000. Continuing claims dropped below 6 million. The combination was a wash and the market did not react to the release. There are a number of economic releases due out next week and they include durable goods, consumer confidence, GDP, initial claims, Chicago PMI and consumer sentiment. Analysts are looking for a 3% rise in Q3 GDP and that is likely to be the most important economic number next week.
There are great opportunities on both sides---the market is likely to chop back and forth within a 10% range (+ or – 5%) through year-end.
Bears have been carried out in body bags and for that reason we may not see a huge run-up into the end of the year. They have covered their positions and we will not see short covering rallies. At this point we should be less worried about a breakout than a breakdown. If the SPY breaks below 102, start buying short positions. This probably won't be happening, but we need to be prepared. Get your watch lists ready for stocks poised in both direction by clicking here.
Monday, October 12, 2009
OUR BULLISH PICK FROM LAST WEEK--PERRIGO (PRGO) CLIMBED EVERY SINGLE DAY DRIVING THE NOV 35 CALLS TO A FIVE-DAY DOUBLE!
This past week the markets blasted higher taking just about everything along for the ride...
OUR BULLISH PICK FROM LAST WEEK--PERRIGO (PRGO) CLIMBED EVERY SINGLE DAY DRIVING THE NOV 35 CALLS TO A FIVE-DAY DOUBLE!
The stock never hit our 'official' entry price but judging by the emails we've received quite a few folks did EXTREMELY well on this pick. We also had AMZN reverse and head higher stopping us out of our puts.
The markets are on a tear higher and the big question this week is--will it last? To answer that question and find out where the new profits are hiding let's take a good look at...
WHICH WAY IS THIS MARKET IS HEADED
The SP-500 closed the week at 1071.49--just a few cents away from a new high for the year at 1071.66. Despite the chip rebound the Nasdaq is still about 30 points below its 2009 high of 2167.
The major indexes are still 30% off their highs despite a nearly 50% rebound from the March lows which many pundits take encouragement from--in other words there is still more room to run.
The chip stocks benefited from a broad sector upgrade from Deutsche Bank on Friday pushing the SOX to a +3.3% gain for the day and a 6.5% gain for the week. Tokyo Electron reported that semi equipment orders had risen 94% in Q3 from the levels seen in Q2.
Tokyo Electron is the second largest chip equipment maker behind AMAT. From the rebound in the SOX it is hard to believe that last week the index had broken support and was heading for the basement.
Most of this week's economic reports will be upstaged by the arrival of some major earnings events. Intel will be the headliner on Tuesday and everyone expects their earnings to be strong. Most chip companies have guided higher throughout the month and expectations are bullish. Intel is expected to post 27-cents in earnings.
The financials have a huge influence on the rest of the market and JP Morgan is the first of the big banks to report announcing this Wednesday before the bell--and they are expected to post strong earnings as well. The rumor is they are turning in some strong trading profits in this market. Jamie Dimon offered to loan money to the FDIC two weeks ago in an interview where FDIC head Sheila Bair was on the same panel. This should be a great earnings report.
On Thursday there are several important reports. Goldman Sachs (GS) is estimated to turn in $4.24 per share in earnings--an impressive 2.5 times their earnings for Q3-08. The financial sector in general is expected to post strong results with an average of 57% earnings improvement over 2008.
IBM will report on Thursday and investors will be hoping to see if IBM can beat their estimate of $2.38 on the strength of their services division and overseas contracts. IBM hardware revenue fell -39% in Q2 so hopefully services will make up the difference. IBM's $3.64 gain on Friday was responsible for nearly 50% of the Dow's 78-point rise.
Google will report on Thursday and has been garnering upgrades for the last several weeks on expectations for a good report. Credit Suisse upped their price target on Friday to $600 from $475 with a close at $515. Unfortunately Google has a bad habit of taking a cliff dive the day after their earnings report. Google declined for two weeks after their earnings in July.
Positive, early reports from companies such as Alcoa, on top of a generally positive tone from senior executives making the rounds of investor conferences last month helped drive recent stock gains.
Alcoa's return to profit earlier this week after three straight quarters of losses was one factor behind the S&P 500's 4.5% weekly gain - its best since July.
Analysts currently expect a 24% profit drop among S&P 500 companies from the third quarter compared to a year ago, according to FactSet. That's slightly worse than expectations in late June but is better than the 26% drop in the second quarter.
This month, 64% of all revisions for S&P 500 earnings were for better results, with analysts getting particularly optimistic about consumer staples so expectations for earnings are high.
Earnings for Q3 are expected to be strong followed by an even stronger Q4 despite the lackluster rebound in economic activity. If you look under all the hype you will see that Q3 earnings are still expected to be 25% BELOW the same period in 2008 yet investors are ready to buy ANY sign of improvement.
Much of the market is led by the financials and fortunately banks are expected to show improved earnings in spite of continued loan delinquencies. Commercial real estate loans equate to 26% of all outstanding loans at banks. Despite the rising delinquencies the banks keep rolling forward as many loans as possible. The banks are trying to push the date of accountability farther out into the future to avoid having to take the charge off in the current quarter. All the banks reporting earnings this cycle will be heavily scrutinized for increases in loan loss reserves as a leading indicator of future charge offs.
Quite a few analysts continue to warn that any improvement in earnings will come from aggressive cost cutting not increased sales. This may be a good earnings quarter relatively speaking but it is far from a quarter of good earnings. That fact may not keep the markets down though. Combine improving earnings with a Fed committed to keeping rates low and this rally should keep on going--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two trades lined up this week and they are both bullish. The first is on an index we love to make money on and this time should be no exception.
The second is on one of the financials with the best possibility of a big pop soon--and we've got an innovative way to play it that should both increase your returns AND reduce your risk.
We've got a great week in the markets lined up with plenty of news to keep things jumping--so let's get to it.
For more information on everything you receive with your Pearly Gates subscription click on http://www.cashflowheaven.com/pg/
OUR BULLISH PICK FROM LAST WEEK--PERRIGO (PRGO) CLIMBED EVERY SINGLE DAY DRIVING THE NOV 35 CALLS TO A FIVE-DAY DOUBLE!
The stock never hit our 'official' entry price but judging by the emails we've received quite a few folks did EXTREMELY well on this pick. We also had AMZN reverse and head higher stopping us out of our puts.
The markets are on a tear higher and the big question this week is--will it last? To answer that question and find out where the new profits are hiding let's take a good look at...
WHICH WAY IS THIS MARKET IS HEADED
The SP-500 closed the week at 1071.49--just a few cents away from a new high for the year at 1071.66. Despite the chip rebound the Nasdaq is still about 30 points below its 2009 high of 2167.
The major indexes are still 30% off their highs despite a nearly 50% rebound from the March lows which many pundits take encouragement from--in other words there is still more room to run.
The chip stocks benefited from a broad sector upgrade from Deutsche Bank on Friday pushing the SOX to a +3.3% gain for the day and a 6.5% gain for the week. Tokyo Electron reported that semi equipment orders had risen 94% in Q3 from the levels seen in Q2.
Tokyo Electron is the second largest chip equipment maker behind AMAT. From the rebound in the SOX it is hard to believe that last week the index had broken support and was heading for the basement.
Most of this week's economic reports will be upstaged by the arrival of some major earnings events. Intel will be the headliner on Tuesday and everyone expects their earnings to be strong. Most chip companies have guided higher throughout the month and expectations are bullish. Intel is expected to post 27-cents in earnings.
The financials have a huge influence on the rest of the market and JP Morgan is the first of the big banks to report announcing this Wednesday before the bell--and they are expected to post strong earnings as well. The rumor is they are turning in some strong trading profits in this market. Jamie Dimon offered to loan money to the FDIC two weeks ago in an interview where FDIC head Sheila Bair was on the same panel. This should be a great earnings report.
On Thursday there are several important reports. Goldman Sachs (GS) is estimated to turn in $4.24 per share in earnings--an impressive 2.5 times their earnings for Q3-08. The financial sector in general is expected to post strong results with an average of 57% earnings improvement over 2008.
IBM will report on Thursday and investors will be hoping to see if IBM can beat their estimate of $2.38 on the strength of their services division and overseas contracts. IBM hardware revenue fell -39% in Q2 so hopefully services will make up the difference. IBM's $3.64 gain on Friday was responsible for nearly 50% of the Dow's 78-point rise.
Google will report on Thursday and has been garnering upgrades for the last several weeks on expectations for a good report. Credit Suisse upped their price target on Friday to $600 from $475 with a close at $515. Unfortunately Google has a bad habit of taking a cliff dive the day after their earnings report. Google declined for two weeks after their earnings in July.
Positive, early reports from companies such as Alcoa, on top of a generally positive tone from senior executives making the rounds of investor conferences last month helped drive recent stock gains.
Alcoa's return to profit earlier this week after three straight quarters of losses was one factor behind the S&P 500's 4.5% weekly gain - its best since July.
Analysts currently expect a 24% profit drop among S&P 500 companies from the third quarter compared to a year ago, according to FactSet. That's slightly worse than expectations in late June but is better than the 26% drop in the second quarter.
This month, 64% of all revisions for S&P 500 earnings were for better results, with analysts getting particularly optimistic about consumer staples so expectations for earnings are high.
Earnings for Q3 are expected to be strong followed by an even stronger Q4 despite the lackluster rebound in economic activity. If you look under all the hype you will see that Q3 earnings are still expected to be 25% BELOW the same period in 2008 yet investors are ready to buy ANY sign of improvement.
Much of the market is led by the financials and fortunately banks are expected to show improved earnings in spite of continued loan delinquencies. Commercial real estate loans equate to 26% of all outstanding loans at banks. Despite the rising delinquencies the banks keep rolling forward as many loans as possible. The banks are trying to push the date of accountability farther out into the future to avoid having to take the charge off in the current quarter. All the banks reporting earnings this cycle will be heavily scrutinized for increases in loan loss reserves as a leading indicator of future charge offs.
Quite a few analysts continue to warn that any improvement in earnings will come from aggressive cost cutting not increased sales. This may be a good earnings quarter relatively speaking but it is far from a quarter of good earnings. That fact may not keep the markets down though. Combine improving earnings with a Fed committed to keeping rates low and this rally should keep on going--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two trades lined up this week and they are both bullish. The first is on an index we love to make money on and this time should be no exception.
The second is on one of the financials with the best possibility of a big pop soon--and we've got an innovative way to play it that should both increase your returns AND reduce your risk.
We've got a great week in the markets lined up with plenty of news to keep things jumping--so let's get to it.
For more information on everything you receive with your Pearly Gates subscription click on http://www.cashflowheaven.com/pg/
Monday, September 28, 2009
MOODY'S FELL OFF A CLIFF LAUNCHING OUR NEW PUTS TO A LIGHTNING FAST ONE-DAY THIRTY-ONE PERCENT PROFIT!
Sideways action turned to down action this past week driving some big profits on our latest position...
MOODY'S FELL OFF A CLIFF LAUNCHING OUR NEW PUTS TO A LIGHTNING FAST ONE-DAY THIRTY-ONE PERCENT PROFIT!
Of course our official position had a pretty tight trailing stop getting us out quickly--for those of you who hung on however open profits on those MCO Oct 23 puts are currently hovering around 200%--a strong testament to the momentum on this play.
We also got stopped out of our Caremark (CVS) calls Monday and never did get filled at our target price on BMC Software (BMC) so we are now all back to cash.
To find out where to put that cash for maximum profit let's take a good look at...
WHERE THIS MARKET IS HEADED
The SP-500 peaked at 1080 on Wednesday but the sellers were waiting to take profits immediately driving the index lower. Initial support at 1060 was quickly broken and Friday's intraday low of 1041 came very close to the next support level at 1035. With the index sitting right at support any move lower confirms a new downtrend--a confirmation we are liable to get on Monday.
The Nasdaq slammed into horizontal resistance at 2160 on Wednesday that dates back to March and July of 2008. The Nasdaq spent over a month in a range between 1950-2015 and that range could be where this index is headed. The SOX has declined to support at 320 which doesn't bode well for the Nasdaq. Dragging the SOX down is Intel, which is resting on support at 19.25. If Intel fails the SOX will fail pulling the Nasdaq deeper into the channel you see above.
The market slide extended to three days with a slightly negative close on Friday. Part of the problem was a drop in the sales of existing homes to 5.1 million from 5.24 million. That is an annualized rate and pretty normal as sales always decline as the summer ends. Home prices improved to only a -12.5% year over year decline and inventory fell to 8.5 months--the lowest level since April 2007. The 12-month average of existing inventory is 9.7 months. Sales declined for the month but were actually up +3.4% over the same period in 2008--an encouraging sign but it's all dependent on interest rates.
On Wednesday the Fed was upbeat suggesting the economy was moving out of the recession. They retained the comments about keeping rates under .25% for an extended period and also extended the time period over which they will buy Fannie and Freddie mortgage backed debt--all bullish for the markets.
However on Friday Fed Governor Kevin Warsh warned the Federal Reserve's need to raise interest will come before it becomes obvious and will need to be faster and stronger than "customary". Warsh said the Fed needs to be as aggressive on the way up as they were on the way down. He warned that the risk of a policy mistake remained high.
Warsh is an influential member of the Fed and his hawkish speech on Friday roiled the markets. The problem is the minute the Fed officially hints at raising rates the market trajectory will resemble that of an elevator with a freshly snapped cable.
Greenspan was widely criticized for removing the post 9/11 stimulus too slowly and allowing the economy to overheat producing the housing bubble--and subsequent burst we're all suffering from now. It took Greenspan two years to raise rates +4%. Warsh is suggesting the Fed not repeat that mistake and act aggressively once they start.
How long the Fed will be able to keep rates low though is a question--because the Treasury still apparently needs to sell a lot of debt to keep the Federal Government humming.
The government auctioned $112 billion in notes of various terms last week and half the debt was purchased by foreign central banks. U.S. primary dealers are buying less and less but so far the foreign banks have picked up the slack.
The bottom line is our fate in the hands of overseas debt buyers. If we make them mad with a sudden surge of dangerous moves they can and will stop. Famous money manager Julian Robertson said last week we were facing Armageddon because of our massively growing debt--and it's hard to disagree. There are some that predict interest rates could go back to double digits over the next several years if something is not done promptly. For those of you who remember the early '80s qualifying for a home loan at 14% was a bit of a challenge.
Next week is going to be a major week for economic reports and the markets should see some big movement. On Monday we get the last look at the Q2 GDP and it is expected to decline to -1.1% from the -1.01% in the last revision. This should not be a problem for the markets unless there is a major deviation from expectations.
On Wednesday the Chicago ISM is expected to rise slightly to 51.1 from 50.0 and will be a preview of the national ISM due out on Thursday. The national ISM for September is expected to rise to 54.0 from 52.9 in August. Again, this should not be a significant market event unless the numbers are a big surprise.
The biggest report for the week is the Non-Farm Payrolls on Friday. The consensus is for a loss of -188,000 jobs and less than the -216,000 jobs lost in August. Morgan Stanley believes the losses will be under 150,0000. It looks like most analysts have finally accepted the inevitable that the recovery may be jobless until early 2010.
This jobs report could easily ignite the market one way or the other. The Fed won't likely move off their "extended period" statement until we start adding jobs again. When we get a month of positive job growth the real worry over the Fed rate changes will begin so a lower jobless number won't always be seen as positive for the markets.
Initial Jobless Claims fell by 21,000 to 530,000 last week. That was the third consecutive weekly drop. This compares to a peak of 674,000 in March--so the rate of new job losses is definitely improving.
So we've got a market rolling over, a Fed Governor hawkish on rates, the jobs report coming up on Friday and a sixty percent gain since March that fund manager would really like to lock in before the end of the quarter on Wednesday--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up this week and they are both bearish.
The first is on a company in the housing sector that has been whistling through the graveyard loudly proclaiming 'everything is all right'--up until they had to hold a fire sale this week to try and clear out their inventory. Investors smell a rat and have been dumping the stock but there's still a long way to go--a situation we'll be taking advantage of with the right puts first thing Monday morning.
Our next play is on an index that just rolled over and is now pointing due south. Fortunately this one won't have to move much to rack up some huge gains on the right puts.
We've got a market with a strong inclination toward profit taking and two excellent plays lined up to take advantage of it--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
MOODY'S FELL OFF A CLIFF LAUNCHING OUR NEW PUTS TO A LIGHTNING FAST ONE-DAY THIRTY-ONE PERCENT PROFIT!
Of course our official position had a pretty tight trailing stop getting us out quickly--for those of you who hung on however open profits on those MCO Oct 23 puts are currently hovering around 200%--a strong testament to the momentum on this play.
We also got stopped out of our Caremark (CVS) calls Monday and never did get filled at our target price on BMC Software (BMC) so we are now all back to cash.
To find out where to put that cash for maximum profit let's take a good look at...
WHERE THIS MARKET IS HEADED
The SP-500 peaked at 1080 on Wednesday but the sellers were waiting to take profits immediately driving the index lower. Initial support at 1060 was quickly broken and Friday's intraday low of 1041 came very close to the next support level at 1035. With the index sitting right at support any move lower confirms a new downtrend--a confirmation we are liable to get on Monday.
The Nasdaq slammed into horizontal resistance at 2160 on Wednesday that dates back to March and July of 2008. The Nasdaq spent over a month in a range between 1950-2015 and that range could be where this index is headed. The SOX has declined to support at 320 which doesn't bode well for the Nasdaq. Dragging the SOX down is Intel, which is resting on support at 19.25. If Intel fails the SOX will fail pulling the Nasdaq deeper into the channel you see above.
The market slide extended to three days with a slightly negative close on Friday. Part of the problem was a drop in the sales of existing homes to 5.1 million from 5.24 million. That is an annualized rate and pretty normal as sales always decline as the summer ends. Home prices improved to only a -12.5% year over year decline and inventory fell to 8.5 months--the lowest level since April 2007. The 12-month average of existing inventory is 9.7 months. Sales declined for the month but were actually up +3.4% over the same period in 2008--an encouraging sign but it's all dependent on interest rates.
On Wednesday the Fed was upbeat suggesting the economy was moving out of the recession. They retained the comments about keeping rates under .25% for an extended period and also extended the time period over which they will buy Fannie and Freddie mortgage backed debt--all bullish for the markets.
However on Friday Fed Governor Kevin Warsh warned the Federal Reserve's need to raise interest will come before it becomes obvious and will need to be faster and stronger than "customary". Warsh said the Fed needs to be as aggressive on the way up as they were on the way down. He warned that the risk of a policy mistake remained high.
Warsh is an influential member of the Fed and his hawkish speech on Friday roiled the markets. The problem is the minute the Fed officially hints at raising rates the market trajectory will resemble that of an elevator with a freshly snapped cable.
Greenspan was widely criticized for removing the post 9/11 stimulus too slowly and allowing the economy to overheat producing the housing bubble--and subsequent burst we're all suffering from now. It took Greenspan two years to raise rates +4%. Warsh is suggesting the Fed not repeat that mistake and act aggressively once they start.
How long the Fed will be able to keep rates low though is a question--because the Treasury still apparently needs to sell a lot of debt to keep the Federal Government humming.
The government auctioned $112 billion in notes of various terms last week and half the debt was purchased by foreign central banks. U.S. primary dealers are buying less and less but so far the foreign banks have picked up the slack.
The bottom line is our fate in the hands of overseas debt buyers. If we make them mad with a sudden surge of dangerous moves they can and will stop. Famous money manager Julian Robertson said last week we were facing Armageddon because of our massively growing debt--and it's hard to disagree. There are some that predict interest rates could go back to double digits over the next several years if something is not done promptly. For those of you who remember the early '80s qualifying for a home loan at 14% was a bit of a challenge.
Next week is going to be a major week for economic reports and the markets should see some big movement. On Monday we get the last look at the Q2 GDP and it is expected to decline to -1.1% from the -1.01% in the last revision. This should not be a problem for the markets unless there is a major deviation from expectations.
On Wednesday the Chicago ISM is expected to rise slightly to 51.1 from 50.0 and will be a preview of the national ISM due out on Thursday. The national ISM for September is expected to rise to 54.0 from 52.9 in August. Again, this should not be a significant market event unless the numbers are a big surprise.
The biggest report for the week is the Non-Farm Payrolls on Friday. The consensus is for a loss of -188,000 jobs and less than the -216,000 jobs lost in August. Morgan Stanley believes the losses will be under 150,0000. It looks like most analysts have finally accepted the inevitable that the recovery may be jobless until early 2010.
This jobs report could easily ignite the market one way or the other. The Fed won't likely move off their "extended period" statement until we start adding jobs again. When we get a month of positive job growth the real worry over the Fed rate changes will begin so a lower jobless number won't always be seen as positive for the markets.
Initial Jobless Claims fell by 21,000 to 530,000 last week. That was the third consecutive weekly drop. This compares to a peak of 674,000 in March--so the rate of new job losses is definitely improving.
So we've got a market rolling over, a Fed Governor hawkish on rates, the jobs report coming up on Friday and a sixty percent gain since March that fund manager would really like to lock in before the end of the quarter on Wednesday--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up this week and they are both bearish.
The first is on a company in the housing sector that has been whistling through the graveyard loudly proclaiming 'everything is all right'--up until they had to hold a fire sale this week to try and clear out their inventory. Investors smell a rat and have been dumping the stock but there's still a long way to go--a situation we'll be taking advantage of with the right puts first thing Monday morning.
Our next play is on an index that just rolled over and is now pointing due south. Fortunately this one won't have to move much to rack up some huge gains on the right puts.
We've got a market with a strong inclination toward profit taking and two excellent plays lined up to take advantage of it--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Friday, September 25, 2009
Relative Strength Forces a Stock Higher--Even in a Flat Market!
When trading straight puts or calls you HAVE to consider relative strength or weakness...
Relative Strength Forces a Stock Higher--Even in a Flat Market!
Two weeks ago on September 8th, we featured PCP as the "long of the day" because the stock was trading higher while the SP-500 continued to move sideways--a classic sign of relative strength. Subscribers could have purchased the October $105.00 calls for $.80---yesterday, the calls traded as high as $2.70 launching an $800 trade into an eye-popping $2700. That's a 238% return in less than 2 weeks!
Finding a stock that continues to surge higher even when the rest of the market is flat is the kind of relative strength you should look for. Ditto for relative weakness on puts.
Subscribe to the Daily Report to take advantage of moves on both sides of the market and then use the automatic orders from the Trading Package to create your own personal money machine. To learn more about a research report that gives you a new long and a new short each day and the Package to trade them with click this link now.
Market Commentary - Yesterday, the market rallied after the FOMC maintained their current policy. They will continue to support low interest rates and they did not outline an exit strategy. This is good news for businesses and consumers. Unfortunately, bulls ran out of gas and by the close, the market staged a key reversal. Technicians watch this price action very closely and that set us up for weakness today.
Before the open, initial jobless claims fell 21,000 to a seasonally adjusted 530,000. That was better than analysts had expected and the four-week moving average dropped to 553,000, the lowest since January 24th. This shows gradual improvement in the unemployment scene and it sparked a small rally. Shortly after the open, the market erased those gains and it moved to the downside with ease.
The selling pressure had already shown itself but then existing home sales were released at 10:00 am ET. Home sales dropped 2.7% last month but analysts were expecting a much better number given that sales had increased the prior 3 months. The market decline gained momentum after the release and it looks like we are setting up for a big round of profit-taking.
Apart from profit taking, there really isn't much of a reason for the decline so don't read too much into it. The market has rallied dramatically in the last two months and it needs to take a breather. Last week, the quadruple witching rally felt fabricated (expiration buy programs) and it's not surprising to see those gains taken back.
Next week, consumer confidence, the ADP employment index, Q2 GDP, Chicago PMI, personal income, initial jobless claims, construction spending, ISM manufacturing, auto sales, factory orders and the Unemployment Report are scheduled. These are major economic releases and they will drive the market.
We'll likely see nervousness throughout this week, but the market should find support at SPY 100. The “less bad” theme will remain intact and this dip will set up a buying opportunity. After next week, Q3 earnings season will be upon us. This recession is more than a year old and the comps should be easy to beat. That means we will actually see earnings growth and by comparison, revenues will start to improve. Interest rates are low, economic conditions are improving and earnings will exceed expectations. These factors will drive a year-end rally and there will be plenty of money to be made.
However the market won't rally in a straight line. The easy money has been made and we can expect dips like this along the way. The pullbacks we saw in August and September were sharp and brief. Each led to a higher low and a new relative high. As long as SPY 100 holds, this same pattern is likely to repeat itself.
Asset Managers are fearful that they will miss a year-end rally and they are eager to put money to work. This low volume decline is nothing more than profit-taking and we are likely to see the big money bid up stocks before support is tested.
In this market, you have to buy the dips and sell the rips.
It would be smart to take profits on long positions now and go to cash. Wait for support to establish itself next week and buy stocks with relative strength. This rally is in the 7th inning and there is still more upside to come and we've got some incredible picks to profit from it--click here for full access to our new buy list.
Trade well,
Pete
Important Note: Options Success provides two high-probability stocks set-ups every day the market is open but DOES NOT provide specific buy or sell recommendations relating to the options on those stocks--the specific option, strike price, month of expiration and other decisions are made by each trader individually based on the strategies they've selected---customer feedback shows the most successful subscribers use the strategy guidelines suggested in our Options Success Trading Package.
If you have not already purchased the Options Success trading package and signed up for our daily stock picks we highly recommend you do so now (your options account will thank you!) Click on this link to get started
Relative Strength Forces a Stock Higher--Even in a Flat Market!
Two weeks ago on September 8th, we featured PCP as the "long of the day" because the stock was trading higher while the SP-500 continued to move sideways--a classic sign of relative strength. Subscribers could have purchased the October $105.00 calls for $.80---yesterday, the calls traded as high as $2.70 launching an $800 trade into an eye-popping $2700. That's a 238% return in less than 2 weeks!
Finding a stock that continues to surge higher even when the rest of the market is flat is the kind of relative strength you should look for. Ditto for relative weakness on puts.
Subscribe to the Daily Report to take advantage of moves on both sides of the market and then use the automatic orders from the Trading Package to create your own personal money machine. To learn more about a research report that gives you a new long and a new short each day and the Package to trade them with click this link now.
Market Commentary - Yesterday, the market rallied after the FOMC maintained their current policy. They will continue to support low interest rates and they did not outline an exit strategy. This is good news for businesses and consumers. Unfortunately, bulls ran out of gas and by the close, the market staged a key reversal. Technicians watch this price action very closely and that set us up for weakness today.
Before the open, initial jobless claims fell 21,000 to a seasonally adjusted 530,000. That was better than analysts had expected and the four-week moving average dropped to 553,000, the lowest since January 24th. This shows gradual improvement in the unemployment scene and it sparked a small rally. Shortly after the open, the market erased those gains and it moved to the downside with ease.
The selling pressure had already shown itself but then existing home sales were released at 10:00 am ET. Home sales dropped 2.7% last month but analysts were expecting a much better number given that sales had increased the prior 3 months. The market decline gained momentum after the release and it looks like we are setting up for a big round of profit-taking.
Apart from profit taking, there really isn't much of a reason for the decline so don't read too much into it. The market has rallied dramatically in the last two months and it needs to take a breather. Last week, the quadruple witching rally felt fabricated (expiration buy programs) and it's not surprising to see those gains taken back.
Next week, consumer confidence, the ADP employment index, Q2 GDP, Chicago PMI, personal income, initial jobless claims, construction spending, ISM manufacturing, auto sales, factory orders and the Unemployment Report are scheduled. These are major economic releases and they will drive the market.
We'll likely see nervousness throughout this week, but the market should find support at SPY 100. The “less bad” theme will remain intact and this dip will set up a buying opportunity. After next week, Q3 earnings season will be upon us. This recession is more than a year old and the comps should be easy to beat. That means we will actually see earnings growth and by comparison, revenues will start to improve. Interest rates are low, economic conditions are improving and earnings will exceed expectations. These factors will drive a year-end rally and there will be plenty of money to be made.
However the market won't rally in a straight line. The easy money has been made and we can expect dips like this along the way. The pullbacks we saw in August and September were sharp and brief. Each led to a higher low and a new relative high. As long as SPY 100 holds, this same pattern is likely to repeat itself.
Asset Managers are fearful that they will miss a year-end rally and they are eager to put money to work. This low volume decline is nothing more than profit-taking and we are likely to see the big money bid up stocks before support is tested.
In this market, you have to buy the dips and sell the rips.
It would be smart to take profits on long positions now and go to cash. Wait for support to establish itself next week and buy stocks with relative strength. This rally is in the 7th inning and there is still more upside to come and we've got some incredible picks to profit from it--click here for full access to our new buy list.
Trade well,
Pete
Important Note: Options Success provides two high-probability stocks set-ups every day the market is open but DOES NOT provide specific buy or sell recommendations relating to the options on those stocks--the specific option, strike price, month of expiration and other decisions are made by each trader individually based on the strategies they've selected---customer feedback shows the most successful subscribers use the strategy guidelines suggested in our Options Success Trading Package.
If you have not already purchased the Options Success trading package and signed up for our daily stock picks we highly recommend you do so now (your options account will thank you!) Click on this link to get started
Monday, September 21, 2009
IN SPITE OF A BULLISH MARKET TOYOTA (TM) DIPPED WEDNESDAY DELIVERING A FOURTEEN PERCENT PROFIT ON OUR PUTS!
We had another good week in the markets with the indices continuing their seemingly never-ending climb higher...
IN SPITE OF A BULLISH MARKET TOYOTA (TM) DIPPED WEDNESDAY DELIVERING A FOURTEEN PERCENT PROFIT ON OUR PUTS!
PLUS CTRP JUMPED HIGHER LAUNCHING OUR NEW CALLS TO A QUICK TWO-DAY FORTY-TWO PERCENT PROFIT!
Those were some nice gains but we also got stopped out of Baxter (BAX) plus LMT and HOG expired on Friday.
The market continued to climb skyward but it's beginning to look ready for a pullback. To find out what we might be in store for and how to make money on it let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
As you can both indices hit their uptrend resistance lines Friday and even though this bull run probably has more fuel over the next few weeks it wouldn't be surprising to see a pullback in the next few days--in fact it would be healthy.
Helped by consumer staples, the S&P finished Friday up 2.81 at 1068.30 tacking on 25.57 for the week.
The Nasdaq Composite gained 6.11 points to close at 2132.86 on Friday up 51.96 for the week.
The Nasdaq has been on a tear jumping higher eight out of the past 10 weeks.
There was some positive news this past week and that helped. Building Permits rose 2.7 percent with a seasonally adjusted 579,000 permits marking the highest number since last November.
But the big news was the Philly Fed Manufacturing report's jump to 14.1 that launched the markets to new relative highs on Thursday morning. The 14.1 increase beat expectations of 8% and produced the first two-month consecutive gains since the end of 2007. Inventories continued slipping, pointing to a need to gear up to replenish inventory.
Also Thursday morning the initial unemployment claims report dropped to 454,000, but the Department of Labor revised the previous week's numbers higher, to 557,000. The insured unemployment rate also inched higher to 4.7 percent from the previous 4.6 percent. Continuing unemployed rose by 129,000.
So even though the employment report was mixed the markets rallied Thursday morning on more 'less bad' news--then they pulled back and then jumped again on Friday.
Unfortunately an awful lot of this rally is on the assumption that the US Treasury will be able to sell its ever-increasing amounts of debt.
Wednesday's TIC Long-Term Purchases for July was a major disappointment, at $15.3 billion versus the expected $65.3 billion. In the past, this was a little-watched indicator but it's becoming increasingly important. This indicator measures the international demand for long-term U.S. financial assets. The net foreign buying of long-term securities for the prior month had been $90.2 billion. The report indicates that foreigners sold a net $97.5 billion of long-term and short-term securities. This is a huge turning point as foreigners have turned from buyers to sellers of US debt.
China and Russia have been threatening a boycott of US debt as the dollar continues to suffer under massive dilution. And now this TIC report indicates they are serious. On Friday, Russia's Prime Minister Vladimir Putin again called for other currencies besides the U.S. dollar to be added as global reserves, concerned about the U.S. "uncontrolled issue of dollars".
Dollar futures broke-down below the 77 level back on September 11, then produced a number of potential reversal signals before slipping lower again earlier in the week. On Thursday afternoon, dollar futures began a climb that approached the 77 level again before pulling back into a consolidation zone just below that level.
If the US can't sell its debt interest rates will have to rise and when they do it will be time to get short in a big way. The problem of course is debt--and the government has determined that the solution to too much debt is more debt--but it's piling it on top of a system already collapsing.
FDIC Chairman Sheila Bair admitted Friday that the increase in bank failures had significantly drained the agency's funds. Although in the past Bair had thought it unlikely that the agency would ever have to tap into its line of credit with the Treasury Department, she said when the agency met at the end of the month, that option would be explored as a means to rebuild the depleted funds.
Chairman Bair went beyond replenishing FDIC funds--she also said that she didn't believe that mark-to-market accounting for bank loans should be further extended or that large financial entities should be led to expect further government assistance if they experience problems.
Friday evening's closure of Irwin Union Bank, F.S.B., Louisville, KY and Irwin Union Bank and Trust Company, Columbus, IN added two more financial institutions to the previous 92 banks closed so far in 2009 bringing the total this year to 94--compared to 25 in all of 2008.
A year ago, the FDIC's insurance fund had $45 billion available, but that's now been diminished to $10.4 billion minus the $850 million blow the FDIC estimates that Friday's closures will cost the Deposit Insurance Fund. That fund can't stand too many more Fridays at this rate.
The point of all this is even though the markets continue to rally--and we should bet that trend--there are serious underlying problems that haven't gone away. If the Fed can't keep interest rates low traders will have to kiss the rally--and any economic recovery-- goodbye. But for right now the markets looks strong although bumping up against resistance--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two stocks lined up this week--one bullish and the other bearish.
Our bullish pick is on a stock whose earnings and chart are both rising in tandem as traders flock to the few winners in an otherwise hard-hit economy. We'll use any dip on Monday to jump aboard this climber for what looks to be some very nice upside profits.
Our next play is on a financial stock that has really taken a beating lately. In spite of a rising market this stock just keeps tracing lower highs and lower lows--the classic definition of a downtrend. Now the stock looks ready for another spike lower and we'll be there to catch it with some well-placed puts.
We've got two great set-ups this week so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on http://cashflowheaven.com/pg
IN SPITE OF A BULLISH MARKET TOYOTA (TM) DIPPED WEDNESDAY DELIVERING A FOURTEEN PERCENT PROFIT ON OUR PUTS!
PLUS CTRP JUMPED HIGHER LAUNCHING OUR NEW CALLS TO A QUICK TWO-DAY FORTY-TWO PERCENT PROFIT!
Those were some nice gains but we also got stopped out of Baxter (BAX) plus LMT and HOG expired on Friday.
The market continued to climb skyward but it's beginning to look ready for a pullback. To find out what we might be in store for and how to make money on it let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
As you can both indices hit their uptrend resistance lines Friday and even though this bull run probably has more fuel over the next few weeks it wouldn't be surprising to see a pullback in the next few days--in fact it would be healthy.
Helped by consumer staples, the S&P finished Friday up 2.81 at 1068.30 tacking on 25.57 for the week.
The Nasdaq Composite gained 6.11 points to close at 2132.86 on Friday up 51.96 for the week.
The Nasdaq has been on a tear jumping higher eight out of the past 10 weeks.
There was some positive news this past week and that helped. Building Permits rose 2.7 percent with a seasonally adjusted 579,000 permits marking the highest number since last November.
But the big news was the Philly Fed Manufacturing report's jump to 14.1 that launched the markets to new relative highs on Thursday morning. The 14.1 increase beat expectations of 8% and produced the first two-month consecutive gains since the end of 2007. Inventories continued slipping, pointing to a need to gear up to replenish inventory.
Also Thursday morning the initial unemployment claims report dropped to 454,000, but the Department of Labor revised the previous week's numbers higher, to 557,000. The insured unemployment rate also inched higher to 4.7 percent from the previous 4.6 percent. Continuing unemployed rose by 129,000.
So even though the employment report was mixed the markets rallied Thursday morning on more 'less bad' news--then they pulled back and then jumped again on Friday.
Unfortunately an awful lot of this rally is on the assumption that the US Treasury will be able to sell its ever-increasing amounts of debt.
Wednesday's TIC Long-Term Purchases for July was a major disappointment, at $15.3 billion versus the expected $65.3 billion. In the past, this was a little-watched indicator but it's becoming increasingly important. This indicator measures the international demand for long-term U.S. financial assets. The net foreign buying of long-term securities for the prior month had been $90.2 billion. The report indicates that foreigners sold a net $97.5 billion of long-term and short-term securities. This is a huge turning point as foreigners have turned from buyers to sellers of US debt.
China and Russia have been threatening a boycott of US debt as the dollar continues to suffer under massive dilution. And now this TIC report indicates they are serious. On Friday, Russia's Prime Minister Vladimir Putin again called for other currencies besides the U.S. dollar to be added as global reserves, concerned about the U.S. "uncontrolled issue of dollars".
Dollar futures broke-down below the 77 level back on September 11, then produced a number of potential reversal signals before slipping lower again earlier in the week. On Thursday afternoon, dollar futures began a climb that approached the 77 level again before pulling back into a consolidation zone just below that level.
If the US can't sell its debt interest rates will have to rise and when they do it will be time to get short in a big way. The problem of course is debt--and the government has determined that the solution to too much debt is more debt--but it's piling it on top of a system already collapsing.
FDIC Chairman Sheila Bair admitted Friday that the increase in bank failures had significantly drained the agency's funds. Although in the past Bair had thought it unlikely that the agency would ever have to tap into its line of credit with the Treasury Department, she said when the agency met at the end of the month, that option would be explored as a means to rebuild the depleted funds.
Chairman Bair went beyond replenishing FDIC funds--she also said that she didn't believe that mark-to-market accounting for bank loans should be further extended or that large financial entities should be led to expect further government assistance if they experience problems.
Friday evening's closure of Irwin Union Bank, F.S.B., Louisville, KY and Irwin Union Bank and Trust Company, Columbus, IN added two more financial institutions to the previous 92 banks closed so far in 2009 bringing the total this year to 94--compared to 25 in all of 2008.
A year ago, the FDIC's insurance fund had $45 billion available, but that's now been diminished to $10.4 billion minus the $850 million blow the FDIC estimates that Friday's closures will cost the Deposit Insurance Fund. That fund can't stand too many more Fridays at this rate.
The point of all this is even though the markets continue to rally--and we should bet that trend--there are serious underlying problems that haven't gone away. If the Fed can't keep interest rates low traders will have to kiss the rally--and any economic recovery-- goodbye. But for right now the markets looks strong although bumping up against resistance--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two stocks lined up this week--one bullish and the other bearish.
Our bullish pick is on a stock whose earnings and chart are both rising in tandem as traders flock to the few winners in an otherwise hard-hit economy. We'll use any dip on Monday to jump aboard this climber for what looks to be some very nice upside profits.
Our next play is on a financial stock that has really taken a beating lately. In spite of a rising market this stock just keeps tracing lower highs and lower lows--the classic definition of a downtrend. Now the stock looks ready for another spike lower and we'll be there to catch it with some well-placed puts.
We've got two great set-ups this week so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on http://cashflowheaven.com/pg
Friday, September 18, 2009
1000% Profit in One Week--Relative Strength is Like Money in the Bank...
Combine a bull market with relative strength and the options profits can be huge...
1000% Profit in One Week--Relative Strength is Like Money in the Bank...
Last Thursday we featured Anadarko Petroleum (APC) as the "long of the day" for one reason--relative strength. Back then we wrote: "...natural gas jumped and that has this stock moving. It is strong relative to oil and it is breaking out to a new 52-week high. The dollar is also getting crushed and that is helping oil move higher."
Plus the chart looked great. Subscribers could have purchased the September $60.00 calls for just $.55 cents. Today those calls traded as high as $6.10. You could have had your own gusher by launching a $550 trade into a whopping $6,100 in just one week!
Subscribers are making a killing as the bullish stocks on our Watch List are absolutely rocketing higher---APC is just one example.
Subscribe to the Daily Report to take advantage of this amazing rally and get the Trading Package for maximum 'hands-free' profitability. To access an entire list of the kind of potential you see below Click Here Now.
Market Commentary - Last week we suspected that quadruple witching could play an important role this week. Once the upward momentum established itself, option expiration fueled the rally. The market convincingly made a new high for the year and prices closed right on their high of the day Wednesday. Option volume was very heavy and there is a speculative feel to the price action.
Many traders have been looking for seasonal weakness in September and they have been left behind. Likewise, Asset Managers who are under allocated have been scrambling to place money. They are getting more and more aggressive and that is why the two small dips in the last two months have been shallow and brief.
The market has all the ammunition it needs to move higher. Earnings beat expectations by a large margin last quarter and we are likely to see earnings growth in Q3 due to easy comparisons from a year ago. This alone could fuel a year-end rally if the market does not get ahead of itself. Interest rates have been drifting lower and the massive bond auctions have gone well. The Fed is also committed to keeping rates low. Inflation is not putting upward pressure on yields and this week the CPI and PPI were tame. Economic statistics continue to show gradual improvement and the numbers are “less bad”.
This morning, initial jobless claims were 545,000 and that was better than expected. The week-to-week numbers fluctuate and most analysts follow the four-week moving average. That average fell by 8700 this week and it now stands at 563,000. Housing starts rose 1.5% and building permits climbed 2.7%. The deep trough in the housing cycle may have hit bottom.
The economic releases next week include LEI, initial jobless claims, durable goods, existing home sales and consumer sentiment. All have shown gradual improvement in recent months. Durable goods orders should increase because of cash for clunkers, but traders will see through that temporary spike. The FOMC will also meet next week. Their comments have not changed much in the last few months and their policy should remain bullish as they are likely to keep rates low.
The option expiration rally this week is starting to feel a bit frothy. Prices are likely to move higher right into the close on Friday. However, if we rally another 30 S&P 500 points, we are likely to hit resistance and we could see a pullback early next week. This market has tremendous upside momentum and it would be wise to avoid trying to pick a top. If you have bullish positions, set targets and scale out on strength. Be patient and wait for a pullback to reenter. This strategy has worked very well since May.
Expect choppy trading with a bullish bias the rest of the week. The momentum is strong and the volume is returning. This will be an exciting fall season!
Trade well,
Pete
1000% Profit in One Week--Relative Strength is Like Money in the Bank...
Last Thursday we featured Anadarko Petroleum (APC) as the "long of the day" for one reason--relative strength. Back then we wrote: "...natural gas jumped and that has this stock moving. It is strong relative to oil and it is breaking out to a new 52-week high. The dollar is also getting crushed and that is helping oil move higher."
Plus the chart looked great. Subscribers could have purchased the September $60.00 calls for just $.55 cents. Today those calls traded as high as $6.10. You could have had your own gusher by launching a $550 trade into a whopping $6,100 in just one week!
Subscribers are making a killing as the bullish stocks on our Watch List are absolutely rocketing higher---APC is just one example.
Subscribe to the Daily Report to take advantage of this amazing rally and get the Trading Package for maximum 'hands-free' profitability. To access an entire list of the kind of potential you see below Click Here Now.
Market Commentary - Last week we suspected that quadruple witching could play an important role this week. Once the upward momentum established itself, option expiration fueled the rally. The market convincingly made a new high for the year and prices closed right on their high of the day Wednesday. Option volume was very heavy and there is a speculative feel to the price action.
Many traders have been looking for seasonal weakness in September and they have been left behind. Likewise, Asset Managers who are under allocated have been scrambling to place money. They are getting more and more aggressive and that is why the two small dips in the last two months have been shallow and brief.
The market has all the ammunition it needs to move higher. Earnings beat expectations by a large margin last quarter and we are likely to see earnings growth in Q3 due to easy comparisons from a year ago. This alone could fuel a year-end rally if the market does not get ahead of itself. Interest rates have been drifting lower and the massive bond auctions have gone well. The Fed is also committed to keeping rates low. Inflation is not putting upward pressure on yields and this week the CPI and PPI were tame. Economic statistics continue to show gradual improvement and the numbers are “less bad”.
This morning, initial jobless claims were 545,000 and that was better than expected. The week-to-week numbers fluctuate and most analysts follow the four-week moving average. That average fell by 8700 this week and it now stands at 563,000. Housing starts rose 1.5% and building permits climbed 2.7%. The deep trough in the housing cycle may have hit bottom.
The economic releases next week include LEI, initial jobless claims, durable goods, existing home sales and consumer sentiment. All have shown gradual improvement in recent months. Durable goods orders should increase because of cash for clunkers, but traders will see through that temporary spike. The FOMC will also meet next week. Their comments have not changed much in the last few months and their policy should remain bullish as they are likely to keep rates low.
The option expiration rally this week is starting to feel a bit frothy. Prices are likely to move higher right into the close on Friday. However, if we rally another 30 S&P 500 points, we are likely to hit resistance and we could see a pullback early next week. This market has tremendous upside momentum and it would be wise to avoid trying to pick a top. If you have bullish positions, set targets and scale out on strength. Be patient and wait for a pullback to reenter. This strategy has worked very well since May.
Expect choppy trading with a bullish bias the rest of the week. The momentum is strong and the volume is returning. This will be an exciting fall season!
Trade well,
Pete
Monday, September 7, 2009
SHANDA INTERACTIVE (SNDA) CLIMBED ALL THE WAY TO EARNINGS BAGGING US A SWEET FOUR DAY SEVENTY-PERCENT PROFIT!
Greetings Options Winners, Trade Spinners and Profit Getters,
This past Tuesday the markets fell out of bed but managed to climb most of the way back by the end of the week. All that volatility added up to some great profits...
SHANDA INTERACTIVE (SNDA) CLIMBED ALL THE WAY TO EARNINGS BAGGING US A SWEET FOUR DAY SEVENTY-PERCENT PROFIT!
We took half our position off the table the day before the announcement and the other half off the next morning for some excellent over-all profits. The stock reversed its initial spike higher Friday morning but with a 61% earnings increase SNDA is likely to keep climbing.
Meanwhile our two older put plays continue to trade sideways as the market swings both ways looking for direction. To try and determine the course over the next week let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The SPX is still trending higher and dip buyers showed up exactly where you would have expected on the uptrend line at 992. That gives us a clear exit point for longs if that 992 level breaks. Resistance is at 1040--a failure there would trace an ominous 'double top' and of course a break higher is bullish. If the SPX can't break through resistance this week the incentive increases for funds to lock in profits. It is not impossible to have a bullish September but it's extremely rare.
The Nasdaq dipped to support on Wednesday before bouncing higher back into its uptrending channel. With chip stocks upgrading guidance almost daily you would expect the Nasdaq to start showing a trend higher but the month-long move has been sideways.
The big news last week was the Non-Farm Payrolls for August showing a loss of 216,000 jobs---slightly better than the -225,000 consensus estimate. However the two prior months were revised lower to show a loss of an additional 49,000 jobs which makes you wonder what the revised number for August will eventually be.
Even though the markets celebrated the number as being 'less bad' the report still has some worrisome undertones. All sectors lost jobs except for education and healthcare. Last month's losses jumped the unemployment rate from 9.4% in July to 9.7%--the highest unemployment rate since 1983.
Nearly 7 million people have lost their jobs since the start of 2008. A total of 15 million are officially unemployed. Temp agencies, usually the first to hire when recovery begins, cut 6,500 jobs.
After shrinking two months in a row, the number of "underemployed workers" rose 278,000, to 9.1 million. 'Underemployed' is what the government calls people forced into part-time work because they can't find a full-time job.
Then there are "marginally attached workers" - the unemployed who have given up looking for work but still want a job--that number now exceeds 2.3 million.
Put the officially unemployed, the "underemployed" and the "marginally attached" together and you get what the government calls the U6 measure of unemployment. That number jumped a whole half a percentage point in August, to 16.8% which many consider to be the real unemployment rate.
It's hard to imagine the economy staging the recovery the stock market is envisioning with that level of unemployment and a consumer saving every penny they can--which makes one wonder how long this current rally can last.
The economic calendar for this week is light with almost nothing of importance in the normal reports. The Fed Beige Book is the only event that may be of interest to the market. Everything else is either a weekly report where surprises are negligible or a lagging report for July. That makes the Treasury auctions for $128 billion in bills, notes and bonds a likely focal point. The auctions will start on Tuesday and go for three days.
For the entire week there will be $38 billion in three-year notes, $20 billion in ten-year notes, $12B in thirty-year bonds, $29B in 13-week bills and $29B in 26-week bills. Almost every auction week we are seeing a new record in new debt and it's surprising rates haven't increased. Talk of a double dip recession is growing and that is keeping auction interest high and yields low. Plus with the Fed continuing to take up any excess by buying the Treasuries bonds, rates will continue to be suppressed. How long rates can stay low however remains in question.
Just a few days ago, the U.S. Treasury Department revealed that China actually reduced its note and bond holdings by $25 billion in June. Although China did not sell shorter-term Treasury bills - and isn't expected to - it's still the largest amount of Treasuries China has ever sold in a single month. This news was ignored in the media but it's a huge development.
In 2006, China and Hong Kong accounted for more than 50 percent of the increase in the amount of Treasury debt sold to the public. Then in 2008 China's share fell to 22 percent as the U.S. government increased its public debt by a record $1.2 trillion.
Then in the first half of this year, China and Hong Kong acquired only 9 percent of the more than $800 billion worth of new Treasury bonds that were sold - and now in June, China became a net seller of U.S. Treasury notes and bonds.
This is a really big deal because Washington's most dependable source of loans to finance our out-of-control deficits is drying up, which means demand for longer-term Treasuries is softening--a fact you can see in the bump higher in the TBT last week.
Which means we can count on much higher interest rates in 2010 and beyond. The problem is rising interest rates make borrowing more expensive curtailing both business financing and retail consumption--in fact higher rates will crush any chance of a vigorous recovery. Rising rates will also reverse rapidly rising stock prices the instant the market becomes aware of them.
For now however traders are pretty content with what is perceived as bullish economic indicators and market uptrends are still intact--just not quite as powerfully as they have been--the question is...
HOW DO WE MAKE MONEY ON IT?
The key to making money in a market like this one is to trade relative strength and weakness--in other words go long on the strongest stocks and short the weakest. It's also wise to maintain tight stops in case of any sudden reversals.
Fortunately we've got two plays this week--one bullish and the other bearish--with VERY attractive charts and fundamentals pointing in their respective directions.
Our first play is bullish and it's on a company that sells products people HAVE to have--and they do it better than anyone else in their sector. Instead of besting super low estimates like many other companies--when this company reported they actually turned in a profit increase over last year--enough to get investors flocking to the stock. The chart looks great on this one and so do the facts for what look to be some outstanding upside profits!
Our next play is bearish and it's on a stock in an industry that is absolutely floundering. Fortunately for us the stock bumped higher last week providing a great entry point in what looks to be a fabulous put play!
We've got two great set-ups on a market ready to move so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on http://rs6.net/tn.jsp?et=1102695591280&s=19347&e=001oO2n45LvpFQfVblv1SebD_FlDwHQY6q32VScTa2QN0VjNWUNMgMXOLGhMgh9g1FAC6l0oTZmoSMFTvaA96B0sHuGKBFwV-7_GepMOyDlAYf1xOQszxKUvBA0Qf0VvrEF
This past Tuesday the markets fell out of bed but managed to climb most of the way back by the end of the week. All that volatility added up to some great profits...
SHANDA INTERACTIVE (SNDA) CLIMBED ALL THE WAY TO EARNINGS BAGGING US A SWEET FOUR DAY SEVENTY-PERCENT PROFIT!
We took half our position off the table the day before the announcement and the other half off the next morning for some excellent over-all profits. The stock reversed its initial spike higher Friday morning but with a 61% earnings increase SNDA is likely to keep climbing.
Meanwhile our two older put plays continue to trade sideways as the market swings both ways looking for direction. To try and determine the course over the next week let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The SPX is still trending higher and dip buyers showed up exactly where you would have expected on the uptrend line at 992. That gives us a clear exit point for longs if that 992 level breaks. Resistance is at 1040--a failure there would trace an ominous 'double top' and of course a break higher is bullish. If the SPX can't break through resistance this week the incentive increases for funds to lock in profits. It is not impossible to have a bullish September but it's extremely rare.
The Nasdaq dipped to support on Wednesday before bouncing higher back into its uptrending channel. With chip stocks upgrading guidance almost daily you would expect the Nasdaq to start showing a trend higher but the month-long move has been sideways.
The big news last week was the Non-Farm Payrolls for August showing a loss of 216,000 jobs---slightly better than the -225,000 consensus estimate. However the two prior months were revised lower to show a loss of an additional 49,000 jobs which makes you wonder what the revised number for August will eventually be.
Even though the markets celebrated the number as being 'less bad' the report still has some worrisome undertones. All sectors lost jobs except for education and healthcare. Last month's losses jumped the unemployment rate from 9.4% in July to 9.7%--the highest unemployment rate since 1983.
Nearly 7 million people have lost their jobs since the start of 2008. A total of 15 million are officially unemployed. Temp agencies, usually the first to hire when recovery begins, cut 6,500 jobs.
After shrinking two months in a row, the number of "underemployed workers" rose 278,000, to 9.1 million. 'Underemployed' is what the government calls people forced into part-time work because they can't find a full-time job.
Then there are "marginally attached workers" - the unemployed who have given up looking for work but still want a job--that number now exceeds 2.3 million.
Put the officially unemployed, the "underemployed" and the "marginally attached" together and you get what the government calls the U6 measure of unemployment. That number jumped a whole half a percentage point in August, to 16.8% which many consider to be the real unemployment rate.
It's hard to imagine the economy staging the recovery the stock market is envisioning with that level of unemployment and a consumer saving every penny they can--which makes one wonder how long this current rally can last.
The economic calendar for this week is light with almost nothing of importance in the normal reports. The Fed Beige Book is the only event that may be of interest to the market. Everything else is either a weekly report where surprises are negligible or a lagging report for July. That makes the Treasury auctions for $128 billion in bills, notes and bonds a likely focal point. The auctions will start on Tuesday and go for three days.
For the entire week there will be $38 billion in three-year notes, $20 billion in ten-year notes, $12B in thirty-year bonds, $29B in 13-week bills and $29B in 26-week bills. Almost every auction week we are seeing a new record in new debt and it's surprising rates haven't increased. Talk of a double dip recession is growing and that is keeping auction interest high and yields low. Plus with the Fed continuing to take up any excess by buying the Treasuries bonds, rates will continue to be suppressed. How long rates can stay low however remains in question.
Just a few days ago, the U.S. Treasury Department revealed that China actually reduced its note and bond holdings by $25 billion in June. Although China did not sell shorter-term Treasury bills - and isn't expected to - it's still the largest amount of Treasuries China has ever sold in a single month. This news was ignored in the media but it's a huge development.
In 2006, China and Hong Kong accounted for more than 50 percent of the increase in the amount of Treasury debt sold to the public. Then in 2008 China's share fell to 22 percent as the U.S. government increased its public debt by a record $1.2 trillion.
Then in the first half of this year, China and Hong Kong acquired only 9 percent of the more than $800 billion worth of new Treasury bonds that were sold - and now in June, China became a net seller of U.S. Treasury notes and bonds.
This is a really big deal because Washington's most dependable source of loans to finance our out-of-control deficits is drying up, which means demand for longer-term Treasuries is softening--a fact you can see in the bump higher in the TBT last week.
Which means we can count on much higher interest rates in 2010 and beyond. The problem is rising interest rates make borrowing more expensive curtailing both business financing and retail consumption--in fact higher rates will crush any chance of a vigorous recovery. Rising rates will also reverse rapidly rising stock prices the instant the market becomes aware of them.
For now however traders are pretty content with what is perceived as bullish economic indicators and market uptrends are still intact--just not quite as powerfully as they have been--the question is...
HOW DO WE MAKE MONEY ON IT?
The key to making money in a market like this one is to trade relative strength and weakness--in other words go long on the strongest stocks and short the weakest. It's also wise to maintain tight stops in case of any sudden reversals.
Fortunately we've got two plays this week--one bullish and the other bearish--with VERY attractive charts and fundamentals pointing in their respective directions.
Our first play is bullish and it's on a company that sells products people HAVE to have--and they do it better than anyone else in their sector. Instead of besting super low estimates like many other companies--when this company reported they actually turned in a profit increase over last year--enough to get investors flocking to the stock. The chart looks great on this one and so do the facts for what look to be some outstanding upside profits!
Our next play is bearish and it's on a stock in an industry that is absolutely floundering. Fortunately for us the stock bumped higher last week providing a great entry point in what looks to be a fabulous put play!
We've got two great set-ups on a market ready to move so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on http://rs6.net/tn.jsp?et=1102695591280&s=19347&e=001oO2n45LvpFQfVblv1SebD_FlDwHQY6q32VScTa2QN0VjNWUNMgMXOLGhMgh9g1FAC6l0oTZmoSMFTvaA96B0sHuGKBFwV-7_GepMOyDlAYf1xOQszxKUvBA0Qf0VvrEF
Friday, September 4, 2009
This Regional Bank's Stock Could Drop to Zero...
Everyone is clinking champagne glasses that 'the worst is behind us'--but all those folks could be in for a rude surprise as the next wave of bank failures hits...
This Regional Bank's Stock Could Drop to Zero...
Last Friday three more regional banks went bankrupt--and if you were holding puts on those banks you made a fortune. Last Friday we zeroed in on another bank that might not make it and even in this bull market the thing has been trading straight down. When we featured the trade subscribers could have purchased the September $35.00 puts for $1.75. Yesterday, those puts traded as high as $4.60 catapulting a $1,750 trade into $4,600 in just 4 days!
The thing is--by the looks of the chart this stock could go to zero turning even a modest investment into a fortune on the right puts.
After the kind of profits we've seen in just the past four days we'd normally give out the name of this stock so you could check it out for yourself--but the potential profits on this one are just too big and it would be a disservice to you to not encourage you to get ALL of our picks. If you got into this stock last Friday you could have made an easy $2,850--an amount that could have paid for your subscription for over three years if you got the Options Success Trading Package with your subscription.
Current banking analyst estimates are for 200 to 300 regional banks to fail within the next 12 months and when they do put buyers are going to rack up some outrageous gains--and you can start right here with the stock you see below. Heck the thing even popped higher today giving you a chance to get in for a song if you get in right away. Subscribe to the Daily Report, get the Package and get started shorting this bank teetering on a major meltdown. And the really inspiring news is--there are plenty more trades with this kind of potential where this one came from.
Market Commentary - The market feels like it’s running out of steam and we saw signs of that last week. Ben Bernanke was reappointed as the Fed Chairman and that should have provided a big boost to the market. Durable goods orders rose 2.4% (much better than expected) and Q2 GDP came in at -1% (better than expected). Dell posted better-than-expected earnings and Intel substantially raised guidance. With all of the positive news, the market was barely able to tread water.
Tuesday, ISM manufacturing increased more than expected to 52.9. That indicates economic expansion. Construction spending came in below estimates, but residential building was better-than-expected. Pending home sales rose 3.2% and that was also ahead of estimates. After an initial rally, the market quickly reversed. The market slipped into a nasty decline and by the close the S&P 500 futures were down 25 points. In the process, we fell below the breakout at SPY 101.
Unemployment is the focal point this week and nervousness ahead of tomorrow’s number sparked profit-taking on Tuesday. Initial jobless claims have been struggling the last four weeks and there is a chance that tomorrow’s number will disappoint. Today, jobless claims came in at 570,000 (560,000 were expected). The four-week average is a good indicator for the unemployment trend and 4000 jobs were shed from that calculation this week. Continuing claims rose 90,000 and it stands at 6.23 million. Yesterday, the ADP employment index showed that 298,000 jobs were lost in August. While that is a big improvement from the 360,000 jobs that were lost in July, analysts were looking for a much better number. I suspect that the unemployment rate will rise tomorrow and the number will be worse than expected. However, after Tuesday’s decline, much of the bad news might already be factored in.
This morning, retailers reported mixed results. Deep discounters fared the best as consumers continue to hunt for bargains. Overall, same-store sales dropped 2.9% in August.
ISM services came in at 48.4 today and that was better than expected. A number above 50 indicates economic expansion and we are close to seeing that. Almost 80% of our workforce is tied to services and this is a very important number. The market has had a decent reaction and stock prices are stable.
Overnight, the ECB said that it is seeing signs of an economic recovery. Their overall activity only dropped .1% in Q2. Next year, they project a .2% growth rate.
Light holiday trading has set in and we can expect that to continue into next week. Initial claims and consumer sentiment are the primary economic releases next week and they are not major market movers. The Treasury will hold 3-year, 10-year and 30-year bond auctions next week. Interest rates have been declining and the demand should be good. All in all, we are setting up for quiet trading.
September is the weakest month of the year and we saw some profit-taking this week. The news has generally been good and there is no other explanation for the decline. The path of least resistance is up and I suspect that we will see a pullback and a very sharp snap back rally. As long as SPY 96 holds maintain a bullish bias. We just posted two brand new trades designed to take advantage of this market choose your Package and Subscription term here.
Trade well,
Pete
This Regional Bank's Stock Could Drop to Zero...
Last Friday three more regional banks went bankrupt--and if you were holding puts on those banks you made a fortune. Last Friday we zeroed in on another bank that might not make it and even in this bull market the thing has been trading straight down. When we featured the trade subscribers could have purchased the September $35.00 puts for $1.75. Yesterday, those puts traded as high as $4.60 catapulting a $1,750 trade into $4,600 in just 4 days!
The thing is--by the looks of the chart this stock could go to zero turning even a modest investment into a fortune on the right puts.
After the kind of profits we've seen in just the past four days we'd normally give out the name of this stock so you could check it out for yourself--but the potential profits on this one are just too big and it would be a disservice to you to not encourage you to get ALL of our picks. If you got into this stock last Friday you could have made an easy $2,850--an amount that could have paid for your subscription for over three years if you got the Options Success Trading Package with your subscription.
Current banking analyst estimates are for 200 to 300 regional banks to fail within the next 12 months and when they do put buyers are going to rack up some outrageous gains--and you can start right here with the stock you see below. Heck the thing even popped higher today giving you a chance to get in for a song if you get in right away. Subscribe to the Daily Report, get the Package and get started shorting this bank teetering on a major meltdown. And the really inspiring news is--there are plenty more trades with this kind of potential where this one came from.
Market Commentary - The market feels like it’s running out of steam and we saw signs of that last week. Ben Bernanke was reappointed as the Fed Chairman and that should have provided a big boost to the market. Durable goods orders rose 2.4% (much better than expected) and Q2 GDP came in at -1% (better than expected). Dell posted better-than-expected earnings and Intel substantially raised guidance. With all of the positive news, the market was barely able to tread water.
Tuesday, ISM manufacturing increased more than expected to 52.9. That indicates economic expansion. Construction spending came in below estimates, but residential building was better-than-expected. Pending home sales rose 3.2% and that was also ahead of estimates. After an initial rally, the market quickly reversed. The market slipped into a nasty decline and by the close the S&P 500 futures were down 25 points. In the process, we fell below the breakout at SPY 101.
Unemployment is the focal point this week and nervousness ahead of tomorrow’s number sparked profit-taking on Tuesday. Initial jobless claims have been struggling the last four weeks and there is a chance that tomorrow’s number will disappoint. Today, jobless claims came in at 570,000 (560,000 were expected). The four-week average is a good indicator for the unemployment trend and 4000 jobs were shed from that calculation this week. Continuing claims rose 90,000 and it stands at 6.23 million. Yesterday, the ADP employment index showed that 298,000 jobs were lost in August. While that is a big improvement from the 360,000 jobs that were lost in July, analysts were looking for a much better number. I suspect that the unemployment rate will rise tomorrow and the number will be worse than expected. However, after Tuesday’s decline, much of the bad news might already be factored in.
This morning, retailers reported mixed results. Deep discounters fared the best as consumers continue to hunt for bargains. Overall, same-store sales dropped 2.9% in August.
ISM services came in at 48.4 today and that was better than expected. A number above 50 indicates economic expansion and we are close to seeing that. Almost 80% of our workforce is tied to services and this is a very important number. The market has had a decent reaction and stock prices are stable.
Overnight, the ECB said that it is seeing signs of an economic recovery. Their overall activity only dropped .1% in Q2. Next year, they project a .2% growth rate.
Light holiday trading has set in and we can expect that to continue into next week. Initial claims and consumer sentiment are the primary economic releases next week and they are not major market movers. The Treasury will hold 3-year, 10-year and 30-year bond auctions next week. Interest rates have been declining and the demand should be good. All in all, we are setting up for quiet trading.
September is the weakest month of the year and we saw some profit-taking this week. The news has generally been good and there is no other explanation for the decline. The path of least resistance is up and I suspect that we will see a pullback and a very sharp snap back rally. As long as SPY 96 holds maintain a bullish bias. We just posted two brand new trades designed to take advantage of this market choose your Package and Subscription term here.
Trade well,
Pete
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