This past week the deteriorating condition of Steve Jobs health threw us a curve on our Apple (AAPL) calls---but we still managed to...
SELL 70% OF OUR AAPL CALL POSITION BEFORE EARNINGS FOR A DECENT SIXTEEN PERCENT PROFIT!
AND WE SOLD THE OTHER 30% AFTER EARNING FOR A MORE GENEROUS THIRTY-SEVEN PERCENT PROFIT!
PLUS RATHENON (RTN) ZOOMED HIGHER THIS PAST WEEK PROPELLING OUR FEB 50 CALLS TO AN IMPRESSIVE SIXTY-NINE PERCENT OPEN PROFIT!
Those were some nice gains and I'm glad we made them but the Apple news underscores the risk we take over the weekend. The news about Jobs was released on MLK day--a holiday--but the point is the same--making trading decisions over the weekend exposes us to weekend news risk.
For that reason this will be the last issue of the Pearly Gates to come out on a Sunday. From now on we'll be releasing our updates and new plays early Wednesday evening. This gives us time to see how the weekend news affects the markets and plays out over the next few days.
Our first new issue will be coming out this Wednesday at 6:00pm PT (which is 9:00pm ET) in the form of a 90 minute webinar which you can sign up for right here.
During this webinar we'll explore a method of keeping our losses to a bare minimum while still leaving the door open for unlimited gains.
If you've been trading any length of time you know how important it is to keep your losses low--big losses are extremely difficult to overcome mathematically.
At the beginning of this year I made a promise to post our monthly track record on the public section of the Pearly Gates at the beginning of every month. The idea came that if we are not making people money over the long term then the service should not exist. If we post our track record every month then folks can see for themselves if they want to join--and if the record is bad people will not sign-up and our existing subscribers will quit.
Therefore in order to survive the service needs to be good for the subscribers--just as it should be. This new trading style due to be introduced this Wednesday evening is a big step toward making sure our subscribers are profitable.
We exited two plays this past week besides AAPL--they were KMX and NDAQ. They were directional options trades and we lost on both. This is a situation that I would like to see become increasingly rare over the coming months.
Now let's get down to the business of focusing on some high potential trades this week. To do that let's first take a good look at...
WHICH WAY THIS MARKET IS HEADED
The twomajor indices diverged this past week as 'sell the news' profit taking set in. The SP-500 lost 0.8 percent ending a seven-week winning streak.
The Nasdaq dropped 2.4 percent dragged lower by Google.
Google shares were down 2.4 percent at $611.83 after hitting an intraday high of $641.73 as confidence wavered that its co-founder Larry Page would rejuvenate the company in his new position as chief executive.
Late Thursday, Google reported earnings that beat Wall Street’s expectations.
The action in Google shares is not so much about Google earnings, but a factor of the market itself as traders are 'selling the news' to lock in profits even if the news is good. We might be seeing more of that as more earnings are released this coming week.
Nearly a quarter of the S&P 500 and about half of the 30 Dow stocks report earnings this week, including American Express, McDonald's, Johnson and Johnson, Caterpillar and Boeing.
The Fed meets Tuesday and Wednesday, and there will be reports on housing, durable goods and fourth quarter GDP. President Obama gives his State of the Union address Tuesday.
Plenty of action to drive stocks--one way or the other.
Even though the big trend is still bullish on the charts--the market could be starting to unravel. Stocks that were the most popular are falling the fastest (like APPL and GOOG), and the small caps, as represented by the Russell 2000 are really tanking.
Last week's sell-off could be a beginning response to inflation. Inflation is more visible in China and Europe, but in the months ahead it's going to be more visible here.
Midweek, China added to those concerns when fourth quarter GDP was a surprisingly high 9.8 percent. Commodities and stock markets were hit by concerns China would tighten, cooling global growth. Markets are expecting to see China announce further rate hikes and it's the Chinese market that has been driving commodity demand.
The worst performing Standard and Poor's sector was the commodities-related materials sector, down 3.3 percent, followed by tech, down 1.7 percent.
The reason inflation kills bull markets is it usually comes when the economy is overheating, so the response is monetary tightening. From an stock market perspective, that's a negative scenario. We have an up-tick in inflation in China and it's being met with further tightening and emerging markets in general are having that same problem.
The interesting difference is the U.S., because we don't have any tightening bias, so we're likely to get the full benefit of upside to global growth. Plus as other countries tighten, their currencies rise against the dollar, making U.S. exports cheaper.
The downside of course is as the dollar falls in purchasing power we get inflation--something we've already seen in commodity prices, particularly food and energy.
For now however we have a pretty good base for a continuation of the rally. While the markets are always vulnerable to a correction at this point in the cycle that correction is liable to be bought. The key is the Fed continuing to keep rates artificially low--if rates start rising the market will crash.
The Fed is not expected to take any action at its two-day meeting on Tuesday, but it could comment on the economy and inflation outlook. The main question is whether the tone changes and does anyone dissent on the current QE program.
We'll get a batch of housing reports this week including the S&P Case Shiller home price index on Tuesday; new home sales on Wednesday and pending home sales on Thursday. Nothing is likely to change in housing unless we see a big creation in new jobs--not likely for awhile.
Europe has been a focus for the markets, but sovereign spreads narrowed and the euro continued to rise as the past week came to a close. Apparently the market is believing the efforts to solve the sovereign crisis, including a plan by Spain to shore up its savings banks. The bottom line however is the European Union has an unsolvable problem that will only get worse--it's just a matter of time until the next debt bomb hits--but for now things have quieted down.
President Obama speaks to the nation Tuesday night and many expect him to display the more centrist posture he has taken lately. He may even talk about "spending restraint".
In addition the President may indicate the top corporate tax rate, which is 35 percent, is too high. Right now it's the second highest in the world and if Japan's new Prime Minister has his way the US will have the highest in the world. There's a reason US corporations have been fleeing the country for the past 30 years.
President Obama may even talk about corporate and individual tax reform and possibly even entitlement reform like Social Security.
He probably won't be particularly specific, but he'll likely say a few things that are friendly to business. After making the tax cut deal in December the President may have found a template to get re-elected. If the State of the Union address spins any of the above toward a more business friendly government it should be mildly positive for the markets.
We've got a quarter of the SP-500 reporting this week along with a ton of market moving economic events--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two trades lined up this week with some excellent potential.
The first is on an inverse ETF that looks ready to rocket to the moon. However we can take a very low cost--about a dollar--'both ways' position to protect us on the downside while leaving the door open for some big gains on the upside.
Our second trade is also skewed to the upside on a company with a very bullish chart that has taken a dip. This dip will likely be bought making us some great profits but just like our first trade we'll be protected in both directions.
We've got a turbulent market with two great set-ups to play it so let's get started...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, January 24, 2011
Friday, January 21, 2011
If a stock wants to go in a certain direction it's kind of hard to stop that direction--no matter what the rest of the market is doing...
If a stock wants to go in a certain direction it's kind of hard to stop that direction--no matter what the rest of the market is doing...
Imagine an Advantage so Powerful You Can Make Money on the Downside---in an UP Market!
The trade you see below shows the power of trading 'relative weakness'--even in the face of a very bullish market.
Last Friday (January 14th), X was featured as the "short of the day". Subscribers could have purchased the January $55 puts for $1.25 and today they traded as high as $3.80. That is a 200% profit and in less than a week! You could have turned a $1250 investment into $3800 trading these options. We are finding great opportunities on both sides of the market.
Take advantage of relative strength and relative weakness with the Daily Report. It delivers two new trades each day and a Live Update table ranks all of the stocks in our watchlist so you'll know right where to look for the highest potential candidates. Subscribe now!
http://www.cashflowheaven.com/os/os_daily_report.html
Market Commentary - Yesterday, stocks staged their first meaningful decline since November. Once the downward momentum was established, buyers pulled their bids. Bullish sentiment has been off the charts and we were overdue for a correction.
This looks like nothing more than a little profit-taking. Earnings news has been decent--of the 35 companies that reported after yesterday’s close, only six missed estimates. That means 85% hit estimates or exceeded them. However most companies that reported earnings this week traded lower after their announcements. Evidently expectations are high.
Tech stocks are getting hit particularly hard. There are concerns that semiconductor inventory is building and we saw that again when Xilinx posted its numbers. F5 Networks had good results and the stock is down 25%. The guidance was not robust enough and traders are taking profits. This stock had doubled since July and fantastic news was priced in.
Banks had the potential to fuel this rally since they have lagged the market. Unfortunately, trading profits have been dismal. Financial institutions have been able to meet or beat expectations, but the quality of the earnings is poor. Banks are reducing bad loan reserves and investors are not very satisfied with that source of income.
Parker Hannifin is a cyclical stock and it beat estimates by 6%. The company benefited from a lower tax rate and when considering this adjustment, it actually missed estimates by three cents. The company said sales increased in each segment and it raised Q2 guidance. Even after this good news, the stock is down $4.00. That makes me wonder if cyclical stocks are topping out. This sector has been leading the market higher.
The economic news today was good. Initial jobless claims dropped to 404,000 from 441,000 the week before. Seasonal adjustments have run their course and employment conditions are gradually improving. Tomorrow’s LEI and Philly Fed should have little impact on the market. The focus will continue to be earnings and next week’s Durable Goods Orders and GDP should not have a major impact. The FOMC meeting is not likely to produce a move either since the Fed is steadfast in its quantitative easing.
Interest rates in Portugal, Spain and Italy are lower today. Credit concerns in Europe have eased temporarily so that situation is not weighing on the market.
Rising interest rates in Europe or a slowdown in China are the only two events that could cause a sustained market decline. Neither presents an immediate threat and this market pullback is nothing more than profit-taking. Prices should stabilize around SPY 126. If that level fails, we will test major support at SPY 123. I still feel that it is too early for a major meltdown and this pullback will eventually present a nice buying opportunity.
Credit concerns in Europe and state deficits in the US will take months to manifest. The strategy here is to patiently wait for more stocks to announce earnings in the next few days and then sell put spreads on companies that beat earnings estimates and provide robust guidance. Make sure your short strike is below support so you have added protection. For more information on selling put spreads go here: http://www.cashflowheaven.com/ws/own_secret.html
Or watch this video here: http://www.cashflowheaven.com/ws/watchthevideo.html
Better opportunities will present themselves in the next week. It's always smart to trade AFTER earnings are released. In looking through the Live Update table you can see fantastic opportunities on both sides of the market--and that tells us that volatility is about to rise. Given the cross currents, this has the potential to be one of the most exciting years of your trading career.
Trade well,
Pete
Imagine an Advantage so Powerful You Can Make Money on the Downside---in an UP Market!
The trade you see below shows the power of trading 'relative weakness'--even in the face of a very bullish market.
Last Friday (January 14th), X was featured as the "short of the day". Subscribers could have purchased the January $55 puts for $1.25 and today they traded as high as $3.80. That is a 200% profit and in less than a week! You could have turned a $1250 investment into $3800 trading these options. We are finding great opportunities on both sides of the market.
Take advantage of relative strength and relative weakness with the Daily Report. It delivers two new trades each day and a Live Update table ranks all of the stocks in our watchlist so you'll know right where to look for the highest potential candidates. Subscribe now!
http://www.cashflowheaven.com/os/os_daily_report.html
Market Commentary - Yesterday, stocks staged their first meaningful decline since November. Once the downward momentum was established, buyers pulled their bids. Bullish sentiment has been off the charts and we were overdue for a correction.
This looks like nothing more than a little profit-taking. Earnings news has been decent--of the 35 companies that reported after yesterday’s close, only six missed estimates. That means 85% hit estimates or exceeded them. However most companies that reported earnings this week traded lower after their announcements. Evidently expectations are high.
Tech stocks are getting hit particularly hard. There are concerns that semiconductor inventory is building and we saw that again when Xilinx posted its numbers. F5 Networks had good results and the stock is down 25%. The guidance was not robust enough and traders are taking profits. This stock had doubled since July and fantastic news was priced in.
Banks had the potential to fuel this rally since they have lagged the market. Unfortunately, trading profits have been dismal. Financial institutions have been able to meet or beat expectations, but the quality of the earnings is poor. Banks are reducing bad loan reserves and investors are not very satisfied with that source of income.
Parker Hannifin is a cyclical stock and it beat estimates by 6%. The company benefited from a lower tax rate and when considering this adjustment, it actually missed estimates by three cents. The company said sales increased in each segment and it raised Q2 guidance. Even after this good news, the stock is down $4.00. That makes me wonder if cyclical stocks are topping out. This sector has been leading the market higher.
The economic news today was good. Initial jobless claims dropped to 404,000 from 441,000 the week before. Seasonal adjustments have run their course and employment conditions are gradually improving. Tomorrow’s LEI and Philly Fed should have little impact on the market. The focus will continue to be earnings and next week’s Durable Goods Orders and GDP should not have a major impact. The FOMC meeting is not likely to produce a move either since the Fed is steadfast in its quantitative easing.
Interest rates in Portugal, Spain and Italy are lower today. Credit concerns in Europe have eased temporarily so that situation is not weighing on the market.
Rising interest rates in Europe or a slowdown in China are the only two events that could cause a sustained market decline. Neither presents an immediate threat and this market pullback is nothing more than profit-taking. Prices should stabilize around SPY 126. If that level fails, we will test major support at SPY 123. I still feel that it is too early for a major meltdown and this pullback will eventually present a nice buying opportunity.
Credit concerns in Europe and state deficits in the US will take months to manifest. The strategy here is to patiently wait for more stocks to announce earnings in the next few days and then sell put spreads on companies that beat earnings estimates and provide robust guidance. Make sure your short strike is below support so you have added protection. For more information on selling put spreads go here: http://www.cashflowheaven.com/ws/own_secret.html
Or watch this video here: http://www.cashflowheaven.com/ws/watchthevideo.html
Better opportunities will present themselves in the next week. It's always smart to trade AFTER earnings are released. In looking through the Live Update table you can see fantastic opportunities on both sides of the market--and that tells us that volatility is about to rise. Given the cross currents, this has the potential to be one of the most exciting years of your trading career.
Trade well,
Pete
Monday, January 17, 2011
Set Yourself Up to Knock Down a 14% Five Week Return with a over a 91% Probability of Success!
Greetings Fellow Secreteer,
Welcome to expiration week and the last newsletter for our January/February credit spreads. We have two new plays to enter before we close out the January/February playbook and move into the February/March time-frame. Again, as with every expiration week consider closing out any plays that have already earned most of their credit.
And, as mentioned in earlier editions, whenever a credit spread has less than $0.05 remaining, that’s a great time to close out the trade and “Take the Money and Run!”
Of course there’s always the “option” to just let them ride into expiration. If the options expire worthless, you'll be able to keep ALL the credit and pass on any new commissions. With as low as volatility has been that's not such a bad idea right now.
Finally, for our last entries in our February playbook, we’re looking at:
February
• 12.61% - 13.53% Return on Investment, 90.62% - 86.11% Probability of Win.
• 9.89% - 14.42% Return on Investment, 91.07% - 85.64% Probability of Win.
The Markets and How They Affect Us
For the 7th week in a row, the SP-500 has continued to ride the bull marking the longest rally since May 2007. This ride has been fueled by a one-two punch of continued optimism, strong quarterly earnings and European efforts to reign in their debt woes.
The economy is on a bullish trajectory, volatility is at all-time lows and there is an expectation that the world’s largest economy will continue to expand well into 2011. We’re definitely in an environment that lends itself to jumping into the stock market and we're finally seeing inflows to stock funds. It is now estimated that goods and services produced will grow by an additional 3% after rising 1.8% in 2010. This marks the first substantial gain we’ve seen in GDP in the last three years.
The big driver this month is earnings---analysts predict that they should increase by 14% in 2011 and, out of the seven companies in the S&P 500 that have released their results so far, six have already beaten analysts’ estimates.
In spite of all that good news we'll remain cautious; there’s not a lot of justification for further gains and it might not take much to spark a reversal--like maybe the news of a high profile CEO to getting sick. The recovery we’re experiencing is being driven by policy support. - in other words, the extension of the Bush-era tax cuts, renewed emergency jobless benefits, 2011 cut in payroll taxes, QE2 feeding the market a whole lot of cheap dollars, etc. If that support changes in any way this market could be a long ways in the air with no support.
We'll continue to let the market dance while we collect the gate--up, down or sideways, as long as the walls (our sold strikes) don't blow out we'll make money.
What are the Secrets of the Week?
Our 1st play is on an equity that offers a 12.61% - 13.53% return on investment with a 90.62% - 86.11% probability of win. Our 2nd play is also on an equity which offers a 9.89% - 14.42% return on investment with a 91.07% - 85.64% probability of win---so let’s get started...
You can get in on this week's trades along with two new high-probability trades per week by clicking here now: http://www.cashflowheaven.com/ws
God Bless and have an awesome trading week!
Robert
Welcome to expiration week and the last newsletter for our January/February credit spreads. We have two new plays to enter before we close out the January/February playbook and move into the February/March time-frame. Again, as with every expiration week consider closing out any plays that have already earned most of their credit.
And, as mentioned in earlier editions, whenever a credit spread has less than $0.05 remaining, that’s a great time to close out the trade and “Take the Money and Run!”
Of course there’s always the “option” to just let them ride into expiration. If the options expire worthless, you'll be able to keep ALL the credit and pass on any new commissions. With as low as volatility has been that's not such a bad idea right now.
Finally, for our last entries in our February playbook, we’re looking at:
February
• 12.61% - 13.53% Return on Investment, 90.62% - 86.11% Probability of Win.
• 9.89% - 14.42% Return on Investment, 91.07% - 85.64% Probability of Win.
The Markets and How They Affect Us
For the 7th week in a row, the SP-500 has continued to ride the bull marking the longest rally since May 2007. This ride has been fueled by a one-two punch of continued optimism, strong quarterly earnings and European efforts to reign in their debt woes.
The economy is on a bullish trajectory, volatility is at all-time lows and there is an expectation that the world’s largest economy will continue to expand well into 2011. We’re definitely in an environment that lends itself to jumping into the stock market and we're finally seeing inflows to stock funds. It is now estimated that goods and services produced will grow by an additional 3% after rising 1.8% in 2010. This marks the first substantial gain we’ve seen in GDP in the last three years.
The big driver this month is earnings---analysts predict that they should increase by 14% in 2011 and, out of the seven companies in the S&P 500 that have released their results so far, six have already beaten analysts’ estimates.
In spite of all that good news we'll remain cautious; there’s not a lot of justification for further gains and it might not take much to spark a reversal--like maybe the news of a high profile CEO to getting sick. The recovery we’re experiencing is being driven by policy support. - in other words, the extension of the Bush-era tax cuts, renewed emergency jobless benefits, 2011 cut in payroll taxes, QE2 feeding the market a whole lot of cheap dollars, etc. If that support changes in any way this market could be a long ways in the air with no support.
We'll continue to let the market dance while we collect the gate--up, down or sideways, as long as the walls (our sold strikes) don't blow out we'll make money.
What are the Secrets of the Week?
Our 1st play is on an equity that offers a 12.61% - 13.53% return on investment with a 90.62% - 86.11% probability of win. Our 2nd play is also on an equity which offers a 9.89% - 14.42% return on investment with a 91.07% - 85.64% probability of win---so let’s get started...
You can get in on this week's trades along with two new high-probability trades per week by clicking here now: http://www.cashflowheaven.com/ws
God Bless and have an awesome trading week!
Robert
AAPL CLIMBED HIGHER ALL WEEK DRIVING OUR 340/360 DEBIT SPREAD TO A FIVE-DAY THIRTY-PERCENT OPEN GAIN
This past week the markets continued their incredible climb higher--and our bullish play on Apple out-performed even this torrid market...
AAPL CLIMBED HIGHER ALL WEEK DRIVING OUR 340/360 DEBIT SPREAD TO A FIVE-DAY THIRTY-PERCENT OPEN GAIN!
With earnings on Apple's immediate horizon the stock should continue to drive higher-- and so should our profits.
The market has climbed a whopping 25% since August just five months ago and many are calling for a reversal. But with earnings season really heating up this week we've got the fuel to keep climbing---to get an idea where the profits are now let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The S&P-500 closed up 1.71% for the week stretching its streak to seven weeks---the longest winning streak since May 2007. The markets are looking extremely overbought but with some high-profile earnings coming out this week they could easily climb even higher. Uptrend support has now risen to 1275.
The Nasdaq posted a solid breakout on the strength in the chip sector after Intel's earnings Thursday. Apple and IBM report on Tuesday and are guaranteed to move big. Nothing suggests either company will disappoint and the excitement level is pretty high. If we do see a big spike higher it would not be surprising to see some selling into that strength--like we saw on Intel Friday.
This is a big week for the Q4 earnings cycle with the several of the tech blue chip companies reporting. The market is closed on Monday so there are no major reports but Apple and IBM are the big dogs on Tuesday followed by EBay and Goldman on Wednesday and Google on Thursday. Bank of America and General Electric close out the week on Friday.
The banks will produce some interest from traders but in general we already know they will beat estimates. After the JPM earnings on Friday those expectations are pretty strong. The earnings from Apple and Google will be highlights because of their exploding businesses and the competition between them. Expectations for Apple are off the charts but Google expectations are more subdued. IBM will be a key for the business sector because they are a corporate supplier rather than a consumer company. It should be an interesting week.
Earnings for Q4 for the S&P-500 are now expected to show 32% growth led by triple digit gains in the financial sector. Quite a few of the earnings reports this week are banks. Bank after bank beating estimates should produce some positive market sentiment.
Intel reported great earnings on Thursday and opened higher Friday morning but sellers quickly sold the stock to a loss. Intel did drive the chip equipment sector however with all the big names posting large gains on expectations of big capex spending in 2011. The 100% depreciation bonus in the tax bill is a huge incentive to buy equipment in 2011. KLA-Tencor (KLAC) rose +6%, Altera (ALTR) gained +6.4%, Novellus (NVLS) rallied +12% and Applied Materials (AMAT) jumped +7%.
JP Morgan reported earnings on Friday of $1.12 beating street estimates of one dollar a share. That compares to 74-cents in the year ago quarter. The +47% rise in earnings came on a revival in consumer banking and lower reserves for loan losses--a line we're likely to see repeated many times in the coming week.
This market is extremely bullish right now and this week's earnings could see some nice gains. Negative economic news at the open Friday was barely able to dent the indexes before dip buyers jumped in (on everything except Intel).
Inflation is starting to be seen in the Consumer Price Index jumping +0.5% last month--well over the +0.1% rise in prices for the prior month. This was the biggest jump since early 2009. Energy prices rose +4.6% in December and are now up +7.9% over the same period in 2010.
Food has not really spiked yet in the U.S. but given the rise in grain prices and the impact of grain not only on bread, flour and cereal but also on beef, chicken and other livestock we are going to see prices rise.
However because the core rate remains tame for the time being there is no worry the Fed will change its strategy--interest rates should stay contained for a few more months.
Also roiling the market Friday was a lower than expected Retail Sales number for December. The headline number came in at +0.6% compared to estimates for +0.8%. That was still the biggest rise since July. Sales closed the year at +7.9% over their year-ago level. Unfortunately most of that growth came in sales at service stations where fuel prices have been rising steadily.
So we've got extremely bullish market sentiment, several big earnings announcements this week and a market bumping up against resistance--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-potential trades lined up for this week. The first is on a well--know financial sector stock getting ready to announce earnings soon---and liable to ignite one-way or the other. The beauty of this trade is we can position ourselves 'both ways' buying all the way out to February for just .55 cents COMBINED! Heck if the stock sneezes we'll make a profit!
Our second trade has one of the most beautiful chart set-ups for an explosive move higher you've ever seen--and we can buy some in-the-money calls for less than 1.50 on a stock that trades over fifty dollars and is launching higher for what looks to be some stellar profits!
This is earnings season and we've got some explosive potential--so let's get moving...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
AAPL CLIMBED HIGHER ALL WEEK DRIVING OUR 340/360 DEBIT SPREAD TO A FIVE-DAY THIRTY-PERCENT OPEN GAIN!
With earnings on Apple's immediate horizon the stock should continue to drive higher-- and so should our profits.
The market has climbed a whopping 25% since August just five months ago and many are calling for a reversal. But with earnings season really heating up this week we've got the fuel to keep climbing---to get an idea where the profits are now let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The S&P-500 closed up 1.71% for the week stretching its streak to seven weeks---the longest winning streak since May 2007. The markets are looking extremely overbought but with some high-profile earnings coming out this week they could easily climb even higher. Uptrend support has now risen to 1275.
The Nasdaq posted a solid breakout on the strength in the chip sector after Intel's earnings Thursday. Apple and IBM report on Tuesday and are guaranteed to move big. Nothing suggests either company will disappoint and the excitement level is pretty high. If we do see a big spike higher it would not be surprising to see some selling into that strength--like we saw on Intel Friday.
This is a big week for the Q4 earnings cycle with the several of the tech blue chip companies reporting. The market is closed on Monday so there are no major reports but Apple and IBM are the big dogs on Tuesday followed by EBay and Goldman on Wednesday and Google on Thursday. Bank of America and General Electric close out the week on Friday.
The banks will produce some interest from traders but in general we already know they will beat estimates. After the JPM earnings on Friday those expectations are pretty strong. The earnings from Apple and Google will be highlights because of their exploding businesses and the competition between them. Expectations for Apple are off the charts but Google expectations are more subdued. IBM will be a key for the business sector because they are a corporate supplier rather than a consumer company. It should be an interesting week.
Earnings for Q4 for the S&P-500 are now expected to show 32% growth led by triple digit gains in the financial sector. Quite a few of the earnings reports this week are banks. Bank after bank beating estimates should produce some positive market sentiment.
Intel reported great earnings on Thursday and opened higher Friday morning but sellers quickly sold the stock to a loss. Intel did drive the chip equipment sector however with all the big names posting large gains on expectations of big capex spending in 2011. The 100% depreciation bonus in the tax bill is a huge incentive to buy equipment in 2011. KLA-Tencor (KLAC) rose +6%, Altera (ALTR) gained +6.4%, Novellus (NVLS) rallied +12% and Applied Materials (AMAT) jumped +7%.
JP Morgan reported earnings on Friday of $1.12 beating street estimates of one dollar a share. That compares to 74-cents in the year ago quarter. The +47% rise in earnings came on a revival in consumer banking and lower reserves for loan losses--a line we're likely to see repeated many times in the coming week.
This market is extremely bullish right now and this week's earnings could see some nice gains. Negative economic news at the open Friday was barely able to dent the indexes before dip buyers jumped in (on everything except Intel).
Inflation is starting to be seen in the Consumer Price Index jumping +0.5% last month--well over the +0.1% rise in prices for the prior month. This was the biggest jump since early 2009. Energy prices rose +4.6% in December and are now up +7.9% over the same period in 2010.
Food has not really spiked yet in the U.S. but given the rise in grain prices and the impact of grain not only on bread, flour and cereal but also on beef, chicken and other livestock we are going to see prices rise.
However because the core rate remains tame for the time being there is no worry the Fed will change its strategy--interest rates should stay contained for a few more months.
Also roiling the market Friday was a lower than expected Retail Sales number for December. The headline number came in at +0.6% compared to estimates for +0.8%. That was still the biggest rise since July. Sales closed the year at +7.9% over their year-ago level. Unfortunately most of that growth came in sales at service stations where fuel prices have been rising steadily.
So we've got extremely bullish market sentiment, several big earnings announcements this week and a market bumping up against resistance--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-potential trades lined up for this week. The first is on a well--know financial sector stock getting ready to announce earnings soon---and liable to ignite one-way or the other. The beauty of this trade is we can position ourselves 'both ways' buying all the way out to February for just .55 cents COMBINED! Heck if the stock sneezes we'll make a profit!
Our second trade has one of the most beautiful chart set-ups for an explosive move higher you've ever seen--and we can buy some in-the-money calls for less than 1.50 on a stock that trades over fifty dollars and is launching higher for what looks to be some stellar profits!
This is earnings season and we've got some explosive potential--so let's get moving...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
Monday, January 10, 2011
This Week You Can Set Yourself Up to Knock Down a 13% Six Week Return with over an 88% Probability of Success!
While most pundits are popping champagne corks over the economy the combination of high unemployment and uncertainty confirms our shrewdly conservative market neutral approach. The recession rocking the foundations of the economy is the best WAKE-UP call we could get to take the reins of our own financial future. While the government may be focusing on new ways to accelerate the country’s hiring and growth we'll be focusing on ways to accelerate our own growth.
February
• 7.53% - 13.38% Return on Investment, 87.68% - 91.78% Probability of Win.
• 11.86% - 13.07% Return on Investment, 88.91% - 88.27% Probability of Win.
The Markets and How They Affect Us
It is now projected that the Federal Reserve’s two rounds of asset purchases, totaling $2.3 trillion, will increase private sector payrolls by about 3 million jobs by 2012. The decision to start a 2nd round of purchases is intended to prevent the economic recovery from stumbling into a pot hole – the Fed's stated goal being maximum employment and price stability--but some wonder if they are just trying to pay the governments 'road to hell' bar tab.
Oddly enough, even with an improving economic outlook, the Fed's most recent meetings show that they aren't willing to scale back their plans to purchase $600 billion in Treasuries. Republican lawmakers along with officials in China, Germany and Brazil have criticized these purchases citing that they weaken the dollar and give rise to asset-price bubbles.
The U.S. reported fewer jobs being added in Friday's Non Farm Payroll Report (103,000) than was originally forecasted (150,000) which confirms the Fed Chairman’s opinion that it would take another 4 – 5 more years for the labor market to completely rebound. As GDP growth continues to accelerate, we’re like to see moderate improvements in the labor market; however, it will be a long time before the Fed changes their course and some wonder if they can. With a Federal debt exceeding 12 trillion any sizeable interest rate increase would cripple the government's finances (and you thought your adjustable rate mortgage was a problem!).
So we've got a market that continues to climb propped up by an ever-increasing stream of 'free dollars'--sounds like fun (for awhile). The question is--how do we make money on it?
What are the Secrets of the Week?
We have two new plays for the week –Our 1st play of the week is on an oil company that offers us a sweet 7.53% - 13.38% return on investment with a 87.68% - 91.78% probability of win. Our 2nd play is on a country ETF that offers an outstanding 11.86% - 13.07% return on investment with a 88.91% - 88.27% probability of win.
You can get in on this week's trades along with two new high-probability trades per week by clicking here now.
God Bless and have an awesome trading week!
Robert
February
• 7.53% - 13.38% Return on Investment, 87.68% - 91.78% Probability of Win.
• 11.86% - 13.07% Return on Investment, 88.91% - 88.27% Probability of Win.
The Markets and How They Affect Us
It is now projected that the Federal Reserve’s two rounds of asset purchases, totaling $2.3 trillion, will increase private sector payrolls by about 3 million jobs by 2012. The decision to start a 2nd round of purchases is intended to prevent the economic recovery from stumbling into a pot hole – the Fed's stated goal being maximum employment and price stability--but some wonder if they are just trying to pay the governments 'road to hell' bar tab.
Oddly enough, even with an improving economic outlook, the Fed's most recent meetings show that they aren't willing to scale back their plans to purchase $600 billion in Treasuries. Republican lawmakers along with officials in China, Germany and Brazil have criticized these purchases citing that they weaken the dollar and give rise to asset-price bubbles.
The U.S. reported fewer jobs being added in Friday's Non Farm Payroll Report (103,000) than was originally forecasted (150,000) which confirms the Fed Chairman’s opinion that it would take another 4 – 5 more years for the labor market to completely rebound. As GDP growth continues to accelerate, we’re like to see moderate improvements in the labor market; however, it will be a long time before the Fed changes their course and some wonder if they can. With a Federal debt exceeding 12 trillion any sizeable interest rate increase would cripple the government's finances (and you thought your adjustable rate mortgage was a problem!).
So we've got a market that continues to climb propped up by an ever-increasing stream of 'free dollars'--sounds like fun (for awhile). The question is--how do we make money on it?
What are the Secrets of the Week?
We have two new plays for the week –Our 1st play of the week is on an oil company that offers us a sweet 7.53% - 13.38% return on investment with a 87.68% - 91.78% probability of win. Our 2nd play is on a country ETF that offers an outstanding 11.86% - 13.07% return on investment with a 88.91% - 88.27% probability of win.
You can get in on this week's trades along with two new high-probability trades per week by clicking here now.
God Bless and have an awesome trading week!
Robert
AT MONDAY'S CLOSE SILVER (SLV) BEGAN TO FALL STOPPING US OUT OF OUR JANUARY 28 CALLS AT AN EIGHTEEN PERCENT PROFIT
After Monday's pop higher the markets bounced all week searching for a sustained direction--and that movement bumped us out of several plays...
EXPEDIA (EXPE) PLUNGED MONDAY HITTING THE TRIGGER ON OUR FEB 24 PUTS WITHIN THE FIRST HOUR AND THEN REVERSED STOPPING US OUT AT A FAST FOURTEEN PERCENT GAIN!
THEN AT MONDAY'S CLOSE SILVER (SLV) BEGAN TO FALL STOPPING US OUT OF OUR JANUARY 28 CALLS AT AN EIGHTEEN PERCENT PROFIT!
Those were two nice plays and the profits are appreciated--but we also got stopped out of our DuPont Fabros puts for a loss as the stock blipped above our stop on Tuesday before rolling over once again to the downside. It is very frustrating to be right on overall direction and still get stopped out because a little volatility triggered a stop/loss. This is one of the reasons 'both ways' trades are so appealing--stop losses and being right on direction become a lot less relevant.
The markets had a good first week and could continue--but we may still see a January sell-off. To get a better idea let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
This past week the SP-500 bounced between 1262 and 1277 as traders wait for earnings season to begin this week. The key here is there was no January sell-off--at least not this past week and that's a good sign because there were factors that could have driven the markets lower--like Friday's Non-Farm Payrolls report.
The Nasdaq also looks bullish as every time its uptrend was tested the index bounced higher. Plenty of new gadgets were introduced at the CES show in Vegas last week--that and earnings should keep interest high in the techs for now.
The big surprise last week was employment. When the ADP report came on Wednesday it showed a gain of 297,000 jobs in December---2.5 times estimates. All of a sudden it seemed probable that the Non Farm Payrolls released on Friday would blow away estimates to the upside as well.
Unfortunately those hopes were dashed when the Non-Farm Payroll report showed a gain of only 103,000 jobs. Private payrolls rose +113,000 jobs but government jobs declined by -10,000. However the job gains from the prior two months were revised higher for a total gain of 70,000--enough to keep the market's bullish by the close.
The big driver this week will be earnings. Alcoa kicks off the Q4 cycle on Monday. Also reporting on Monday will be Apollo Group and homebuilder Lennar. Intel will give us some insight into the techs on on Thursday and JP Morgan is our first look at the financials reporting on Friday. The following week begins the real flood but this week should give us an advance peek with these few majors reporting.
According to S&P earnings for the SP-500 are expected to have grown +27% over the fourth quarter of 2009. Thompson Reuters is a little more optimistic with a 32% growth projection. This will be the fifth consecutive quarter of increased earnings after nine straight quarters of declines.
According to S&P the financials will lead with a mind-boggling +250% increase in profits, followed by energy at +118%, materials +70%, discretionary at +63%, information technology +52% and industrials at +26%. The lower performing sectors are healthcare +11%, telecommunications +7%, utilities +7% and consumer staples +6%.
That 27% earnings growth sounds great until you compare it to the prior three quarters. Coming out of the recession in 2010-Q1 earnings rose +92%, Q2 +51% and Q3 +37%. It's not that earnings are declining--it's that the comparison quarters are becoming harder to beat so the percentage increases are falling.
The fourth quarter's earnings increase is coming from continued cost cutting, a decent increase in revenues in the low double digits and the increase in stock buybacks. When companies buy back shares there are fewer shares outstanding and that increases the earnings per share even without an increase in actual earnings.
As long as earnings show at least a small beat the rally could continue another week or two--but I would not expect any big leg higher given the market's overbought conditions and the rising debt problems in Europe (and eventually here at home) without a decent dip first.
This week Portugal, Italy and Spain will attempt to auction debt and those auctions will be watched very closely. Portugal sold six-month bills on Wednesday at 3.686% and this higher interest rate is causing some serious worries about what those countries will have to pay when they auction their long dated debt this week.
Spreads on some European debt against the German bund were at or near record levels. This came after the EU suggested senior bond holders might have to share in the losses of distressed banks. This would be done by regulators writing down debt and converting it to equity in order to rescue the institution. For instance, if a bank had sold $500 million in debt and could not make the debt payments the regulators would write down that debt to something like $200 million and convert the $300 million loss into equity in the bank. If the bank recovered the bondholders might escape with a breakeven. This proposal did not set well with investors who just want to be secured lenders not unsecured stockholders.
The problems in Europe pushed the dollar to a +3.6% gain against the euro for the week. That was the biggest move for the dollar since August. The rise in the dollar crushed commodities with silver falling -7% for the week along with gold (-$54), copper and crude falling -3.7% each.
Another problem weighing on commodities is the pending rebalance of commodity index funds. The DJ-UBS Commodity Index and the S&P GSCI Index, with about $200 billion in commodity funds tracking those indexes will be rebalanced between Jan-7th and 13th. Basically the indexes try to maintain a specific ratio of commodities in the index. In a year where a commodity like copper has rallied +50% the indexes have to rebalance to bring copper representation back down to the correct ratio. This means the funds tied to these indexes will have to sell copper, oil, silver, etc in order to match the rebalanced index structure.
According to fund flows 2010 was a year where the perceived safety of bonds was still preferred to stocks--but that is changing. A total of $39 billion flowed out of equity funds in 2010 and an astounding $271 billion flowed into bond funds. Investors were putting new cash into the safety of bonds over worries of a second recessionary dip. However the last two months has seen money begin to flow out of bond funds and back into equities. If it were not for the European debt crisis we would likely be seeing some major money flows back into equities.
By the looks of things S&P earnings are going to be at new record highs this year as all that new money finds its way into the economy. Cost cutting during the recession has made companies leaner and more cost efficient. As spending improves so will their profits. While we know there will be ups and downs in the market in 2011 the prevailing direction will be higher.
Since 1950 there have been 61 first weeks of trading and 38 of those were positive including this past week. When there is a positive first week there is an 87% correlation to a positive gain for the entire year. When there is a decline in the first week there is only a 50% correlation to a decline for the rest of the year. This past week the SP-500 was up 13.86 or 1.1%--a good sign for the year.
So we've got our first major earnings this week, a ton of debt being auctioned in Europe and a market still climbing higher--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up this week--the first is bullish and the second is a 'both ways' trade with a high probability of success.
Our first trade is on a stock with a history of running higher into earnings--and often doing even better after they are announced. We'll be taking a bullish position with a twist that I think you'll love!
Our second play is on a high volatility tech stock with earnings coming up this month. We can buy both puts and calls out until February for less than two dollars giving us a very high likelihood of success--exactly the way we like it!
We've got two trades lined up on a market ready to blast into earnings season so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on
www.cashflowheaven.com/pg
EXPEDIA (EXPE) PLUNGED MONDAY HITTING THE TRIGGER ON OUR FEB 24 PUTS WITHIN THE FIRST HOUR AND THEN REVERSED STOPPING US OUT AT A FAST FOURTEEN PERCENT GAIN!
THEN AT MONDAY'S CLOSE SILVER (SLV) BEGAN TO FALL STOPPING US OUT OF OUR JANUARY 28 CALLS AT AN EIGHTEEN PERCENT PROFIT!
Those were two nice plays and the profits are appreciated--but we also got stopped out of our DuPont Fabros puts for a loss as the stock blipped above our stop on Tuesday before rolling over once again to the downside. It is very frustrating to be right on overall direction and still get stopped out because a little volatility triggered a stop/loss. This is one of the reasons 'both ways' trades are so appealing--stop losses and being right on direction become a lot less relevant.
The markets had a good first week and could continue--but we may still see a January sell-off. To get a better idea let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
This past week the SP-500 bounced between 1262 and 1277 as traders wait for earnings season to begin this week. The key here is there was no January sell-off--at least not this past week and that's a good sign because there were factors that could have driven the markets lower--like Friday's Non-Farm Payrolls report.
The Nasdaq also looks bullish as every time its uptrend was tested the index bounced higher. Plenty of new gadgets were introduced at the CES show in Vegas last week--that and earnings should keep interest high in the techs for now.
The big surprise last week was employment. When the ADP report came on Wednesday it showed a gain of 297,000 jobs in December---2.5 times estimates. All of a sudden it seemed probable that the Non Farm Payrolls released on Friday would blow away estimates to the upside as well.
Unfortunately those hopes were dashed when the Non-Farm Payroll report showed a gain of only 103,000 jobs. Private payrolls rose +113,000 jobs but government jobs declined by -10,000. However the job gains from the prior two months were revised higher for a total gain of 70,000--enough to keep the market's bullish by the close.
The big driver this week will be earnings. Alcoa kicks off the Q4 cycle on Monday. Also reporting on Monday will be Apollo Group and homebuilder Lennar. Intel will give us some insight into the techs on on Thursday and JP Morgan is our first look at the financials reporting on Friday. The following week begins the real flood but this week should give us an advance peek with these few majors reporting.
According to S&P earnings for the SP-500 are expected to have grown +27% over the fourth quarter of 2009. Thompson Reuters is a little more optimistic with a 32% growth projection. This will be the fifth consecutive quarter of increased earnings after nine straight quarters of declines.
According to S&P the financials will lead with a mind-boggling +250% increase in profits, followed by energy at +118%, materials +70%, discretionary at +63%, information technology +52% and industrials at +26%. The lower performing sectors are healthcare +11%, telecommunications +7%, utilities +7% and consumer staples +6%.
That 27% earnings growth sounds great until you compare it to the prior three quarters. Coming out of the recession in 2010-Q1 earnings rose +92%, Q2 +51% and Q3 +37%. It's not that earnings are declining--it's that the comparison quarters are becoming harder to beat so the percentage increases are falling.
The fourth quarter's earnings increase is coming from continued cost cutting, a decent increase in revenues in the low double digits and the increase in stock buybacks. When companies buy back shares there are fewer shares outstanding and that increases the earnings per share even without an increase in actual earnings.
As long as earnings show at least a small beat the rally could continue another week or two--but I would not expect any big leg higher given the market's overbought conditions and the rising debt problems in Europe (and eventually here at home) without a decent dip first.
This week Portugal, Italy and Spain will attempt to auction debt and those auctions will be watched very closely. Portugal sold six-month bills on Wednesday at 3.686% and this higher interest rate is causing some serious worries about what those countries will have to pay when they auction their long dated debt this week.
Spreads on some European debt against the German bund were at or near record levels. This came after the EU suggested senior bond holders might have to share in the losses of distressed banks. This would be done by regulators writing down debt and converting it to equity in order to rescue the institution. For instance, if a bank had sold $500 million in debt and could not make the debt payments the regulators would write down that debt to something like $200 million and convert the $300 million loss into equity in the bank. If the bank recovered the bondholders might escape with a breakeven. This proposal did not set well with investors who just want to be secured lenders not unsecured stockholders.
The problems in Europe pushed the dollar to a +3.6% gain against the euro for the week. That was the biggest move for the dollar since August. The rise in the dollar crushed commodities with silver falling -7% for the week along with gold (-$54), copper and crude falling -3.7% each.
Another problem weighing on commodities is the pending rebalance of commodity index funds. The DJ-UBS Commodity Index and the S&P GSCI Index, with about $200 billion in commodity funds tracking those indexes will be rebalanced between Jan-7th and 13th. Basically the indexes try to maintain a specific ratio of commodities in the index. In a year where a commodity like copper has rallied +50% the indexes have to rebalance to bring copper representation back down to the correct ratio. This means the funds tied to these indexes will have to sell copper, oil, silver, etc in order to match the rebalanced index structure.
According to fund flows 2010 was a year where the perceived safety of bonds was still preferred to stocks--but that is changing. A total of $39 billion flowed out of equity funds in 2010 and an astounding $271 billion flowed into bond funds. Investors were putting new cash into the safety of bonds over worries of a second recessionary dip. However the last two months has seen money begin to flow out of bond funds and back into equities. If it were not for the European debt crisis we would likely be seeing some major money flows back into equities.
By the looks of things S&P earnings are going to be at new record highs this year as all that new money finds its way into the economy. Cost cutting during the recession has made companies leaner and more cost efficient. As spending improves so will their profits. While we know there will be ups and downs in the market in 2011 the prevailing direction will be higher.
Since 1950 there have been 61 first weeks of trading and 38 of those were positive including this past week. When there is a positive first week there is an 87% correlation to a positive gain for the entire year. When there is a decline in the first week there is only a 50% correlation to a decline for the rest of the year. This past week the SP-500 was up 13.86 or 1.1%--a good sign for the year.
So we've got our first major earnings this week, a ton of debt being auctioned in Europe and a market still climbing higher--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two plays lined up this week--the first is bullish and the second is a 'both ways' trade with a high probability of success.
Our first trade is on a stock with a history of running higher into earnings--and often doing even better after they are announced. We'll be taking a bullish position with a twist that I think you'll love!
Our second play is on a high volatility tech stock with earnings coming up this month. We can buy both puts and calls out until February for less than two dollars giving us a very high likelihood of success--exactly the way we like it!
We've got two trades lined up on a market ready to blast into earnings season so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on
www.cashflowheaven.com/pg
Friday, January 7, 2011
These Relatives Don't Borrow Money--They Pay You Money!
Relative Strength and Relative Weakness are the kind of relatives you want--here's why...
This week's picks from the Daily Report demonstrates the power of trading relative strength and weakness. Take a look at these two stocks subscribers could have jumped on just a few days ago. One pick is up 390% and the other is up 290%!
A few days ago (January 3rd), POT was featured in the Daily Report as the "long of the day". Subscribers could have purchased the Jan $170 calls for $.87. Today, they have traded as high as $4.28. That is a 390% profit to start off the New Year!
Then last Friday (December 31st), ZUMZ was featured as the "short of the day". Subscribers could have purchased the January $25 puts for just $.50. Today, they traded as high as $1.95 producing a 290% profit in a week!
These stocks were just recommended this past week and you could have been in them. Get the 'relative edge' by signing-up for the Daily Report today. You'll get two new trades each day and a Live Update table ranks all of the stocks on a watchlist so you know right where to look for the strongest candidates. Subscribe now! http://www.optionssuccess.com/
Market Commentary - Yesterday, the market staged an impressive rally after ADP reported its strongest private sector job growth – ever. Analysts were expecting 100,000 new jobs and 300,000 were added in December. Private sector employment is the key to a sustained economic recovery.
Analysts scrambled to revise their expectations for Friday’s Unemployment Report. Most have bumped their projections up by 40,000 and anything less than 180,000 will be viewed negatively. Initial jobless claims have been dropping consistently and the four-week moving average is declining. This bodes well for tomorrow’s number. Seasonal adjustments to initial jobless claims made the number look better last week and that was reversed this morning. All told, the number is encouraging and we should see decent job growth tomorrow.
Last week, Chicago PMI jumped dramatically. That pop in manufacturing was supported by a better-than-expected ISM manufacturing number and stronger factory orders this week. Yesterday, ISM services also beat expectations. Retail sales, consumer sentiment, GDP and durable goods orders have all improved and economic activity is rebounding.
The FOMC minutes revealed that the Fed is steadfast in its commitment to quantitative easing. It feels employment conditions are tenuous, housing is poor and inflation is benign. The safety net of lower interest rates is also adding to investor confidence.
The economy will benefit from lower taxation. Republicans and Democrats agreed to extend the Bush tax credits and to lower payroll taxes. With more money in their pockets, Americans will spend. More than two thirds of our economy is dependent on consumption.
Holiday sales have been strong and earnings should be good. We are two weeks away from the beginning of earnings season and stocks typically rally into the announcements.
January is typically a bullish month. This is the third year of a presidential term and that has also been bullish historically.
Last weekend, China released its PMI. It declined slightly to 53.9, but that was anticipated. China has raised bank reserve requirements and it recently bumped interest rates up a quarter-point. These measures have barely slowed their runaway economy.
The credit crisis in Europe is not likely to impact the market for at least a month. The ECB has plenty of money in its coffers to support bond auctions and China said that they will buy Spanish debt. In the absence of a credit crisis, the market will rally.
Stock prices look a little tired, but I do not see them declining much. Money is rotating out of bonds and gold as investors gain confidence. Asset Managers are waiting for a pullback, but I don’t believe we will see one after yesterday’s strong employment number. Stocks should continue to grind higher as long as European interest rates stabilize.
If tomorrow’s Unemployment Report shows strong private sector job growth then buy in the money call options. Positions should still be relatively small. The key is to hit singles on the way up and so you don’t get blindsided by a selloff in Europe. We will be watching those auctions very closely.
We've been finding excellent opportunities on both sides of the market making it easy to carry both long and short positions--in this market it's important to be able to profit in either direction. I recommend a weighting favoring the upside by a margin of 3:1 to take advantage of the trend but still allowing your shorts to provide a nice hedge. In some cases (like ZUMZ), your hedges will make money as the market moves higher.
Trade well,
Pete
Important Note: Options Success provides two high-probability stock 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 (your options account will thank you!) Click on this link to get started http://www.cashflowheaven.com/os
.
This week's picks from the Daily Report demonstrates the power of trading relative strength and weakness. Take a look at these two stocks subscribers could have jumped on just a few days ago. One pick is up 390% and the other is up 290%!
A few days ago (January 3rd), POT was featured in the Daily Report as the "long of the day". Subscribers could have purchased the Jan $170 calls for $.87. Today, they have traded as high as $4.28. That is a 390% profit to start off the New Year!
Then last Friday (December 31st), ZUMZ was featured as the "short of the day". Subscribers could have purchased the January $25 puts for just $.50. Today, they traded as high as $1.95 producing a 290% profit in a week!
These stocks were just recommended this past week and you could have been in them. Get the 'relative edge' by signing-up for the Daily Report today. You'll get two new trades each day and a Live Update table ranks all of the stocks on a watchlist so you know right where to look for the strongest candidates. Subscribe now! http://www.optionssuccess.com/
Market Commentary - Yesterday, the market staged an impressive rally after ADP reported its strongest private sector job growth – ever. Analysts were expecting 100,000 new jobs and 300,000 were added in December. Private sector employment is the key to a sustained economic recovery.
Analysts scrambled to revise their expectations for Friday’s Unemployment Report. Most have bumped their projections up by 40,000 and anything less than 180,000 will be viewed negatively. Initial jobless claims have been dropping consistently and the four-week moving average is declining. This bodes well for tomorrow’s number. Seasonal adjustments to initial jobless claims made the number look better last week and that was reversed this morning. All told, the number is encouraging and we should see decent job growth tomorrow.
Last week, Chicago PMI jumped dramatically. That pop in manufacturing was supported by a better-than-expected ISM manufacturing number and stronger factory orders this week. Yesterday, ISM services also beat expectations. Retail sales, consumer sentiment, GDP and durable goods orders have all improved and economic activity is rebounding.
The FOMC minutes revealed that the Fed is steadfast in its commitment to quantitative easing. It feels employment conditions are tenuous, housing is poor and inflation is benign. The safety net of lower interest rates is also adding to investor confidence.
The economy will benefit from lower taxation. Republicans and Democrats agreed to extend the Bush tax credits and to lower payroll taxes. With more money in their pockets, Americans will spend. More than two thirds of our economy is dependent on consumption.
Holiday sales have been strong and earnings should be good. We are two weeks away from the beginning of earnings season and stocks typically rally into the announcements.
January is typically a bullish month. This is the third year of a presidential term and that has also been bullish historically.
Last weekend, China released its PMI. It declined slightly to 53.9, but that was anticipated. China has raised bank reserve requirements and it recently bumped interest rates up a quarter-point. These measures have barely slowed their runaway economy.
The credit crisis in Europe is not likely to impact the market for at least a month. The ECB has plenty of money in its coffers to support bond auctions and China said that they will buy Spanish debt. In the absence of a credit crisis, the market will rally.
Stock prices look a little tired, but I do not see them declining much. Money is rotating out of bonds and gold as investors gain confidence. Asset Managers are waiting for a pullback, but I don’t believe we will see one after yesterday’s strong employment number. Stocks should continue to grind higher as long as European interest rates stabilize.
If tomorrow’s Unemployment Report shows strong private sector job growth then buy in the money call options. Positions should still be relatively small. The key is to hit singles on the way up and so you don’t get blindsided by a selloff in Europe. We will be watching those auctions very closely.
We've been finding excellent opportunities on both sides of the market making it easy to carry both long and short positions--in this market it's important to be able to profit in either direction. I recommend a weighting favoring the upside by a margin of 3:1 to take advantage of the trend but still allowing your shorts to provide a nice hedge. In some cases (like ZUMZ), your hedges will make money as the market moves higher.
Trade well,
Pete
Important Note: Options Success provides two high-probability stock 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 (your options account will thank you!) Click on this link to get started http://www.cashflowheaven.com/os
.
Monday, January 3, 2011
This Week We're Knocking Down a 16% Return with a 90% Probability of Success!
In a recent radio interview, one of the world’s biggest bond fund managers said that the “old normal” of growth from 6% - 7% per year has gone away for good and the “new normal” is going to be about half of what it once was.
Fortunately we don't have to accept that view.
Today’s technological advances along with the products that exchanges currently offer, make the “old normal” very achievable; not just per year but per month and if the conditions are right – per week. For those subscribers who are determined to become craftsman in the art of spread trading, these types of monthly returns are not only possible – they are our “new normal”.
February
• 10.62% - 16.28% Return on Investment, 90.25% - 90.32% Probability of Win.
• 12.61% - 13.12% Return on Investment, 88.31% - 88.92% Probability of Win.
The Markets and How They Affect Us
With record earnings and an improving global economy, U.S. stocks are defying the new normal of below-average returns. There were several warnings back in 2009 that suggested returns would lag behind historical averages because of government budget deficits and increased regulations. But as investors look back at 2010, they’ve witnessed the S&P 500 gain 13% marking the biggest rally since 1955. For the moment, most investors are beginning to believe that economic growth is sustainable and current sentiment is that it will probably continue well into 2011. The S&P 500 closed at 1,257.64 last week - the largest December rally since 1991 while the Dow Jones Industrial Average closed at 11,577.51 – a yearly increase of about 11%.
At the end of the 3rd quarter, investors were caught off-guard as they watched stocks rally after the Federal Reserve pledged to buy $600 billion in Treasuries to stimulate the economy. But by doing so, many long-term investors switched to bearishness citing that all we’re doing is just kicking the debt can down the road. This is a valid concern - the Fed printing more money is not the way to long term growth and prosperity. It’s not a question of if inflation and interest rates rise but more a matter of how much and how fast. Fortunately, for us options traders, there is an answer to every market direction that allows us to remain profitable even when troubles reverse the current advance.
U.S. GDP grew at 2.8% in 2010 but is forecasted to slow to 2.6% in 2011 and then back up again to 3.2% in 2012. Employers added 140,000 jobs last month; an increase of 39,000 from the previous month. The Labor Department will release it payrolls report this Friday with the expectation that the unemployment rate will drop to 9.7%. Even with this expected drop, there are still some very big questions out there regarding the sustainability of economic growth as housing, lending and, of course, jobs have yet to fully recover.
The combination of an economic recovery coupled with consumer sentiment suggests that even the most economically sensitive or cyclical sectors should perform their best this year. Corporate data is showing an increasingly positive trend. As such, the benchmark measure of using S&P 500 options to hedge losses, the VIX, dropped to 17.75 from 2010’s high of 45.79 back in May.
However, treasuries also rose as the 9.8% unemployment rate, record low inflation and the Euro-nation’s sovereign-debt crisis continues to weigh heavy on investor’s minds. The bond market returned 5.9% in 2010 after losing 3.7% in 2009. Although the recovery didn’t happen as quickly as people had hoped, economic sentiment is now hovering at multi-year highs. Quantitative easing has been effective in stimulating both the economy and inflation--and how that will affect us going forward is still a big unanswered question.
What are the Secrets of the Week?
With the New Year upon us, the majority of traders and volume will return this week and we’ll be joining the fray with two new plays – one on an equity and the other on an ETF---so let’s get started...
You can get in on this week's trades along with two new high-probability trades per week by clicking here now: http://www.cashflowheaven.com/ws
Stack the Deck on Every Trade,
Robert
To all our subscribers, God Bless and have an awesome trading week!
Fortunately we don't have to accept that view.
Today’s technological advances along with the products that exchanges currently offer, make the “old normal” very achievable; not just per year but per month and if the conditions are right – per week. For those subscribers who are determined to become craftsman in the art of spread trading, these types of monthly returns are not only possible – they are our “new normal”.
February
• 10.62% - 16.28% Return on Investment, 90.25% - 90.32% Probability of Win.
• 12.61% - 13.12% Return on Investment, 88.31% - 88.92% Probability of Win.
The Markets and How They Affect Us
With record earnings and an improving global economy, U.S. stocks are defying the new normal of below-average returns. There were several warnings back in 2009 that suggested returns would lag behind historical averages because of government budget deficits and increased regulations. But as investors look back at 2010, they’ve witnessed the S&P 500 gain 13% marking the biggest rally since 1955. For the moment, most investors are beginning to believe that economic growth is sustainable and current sentiment is that it will probably continue well into 2011. The S&P 500 closed at 1,257.64 last week - the largest December rally since 1991 while the Dow Jones Industrial Average closed at 11,577.51 – a yearly increase of about 11%.
At the end of the 3rd quarter, investors were caught off-guard as they watched stocks rally after the Federal Reserve pledged to buy $600 billion in Treasuries to stimulate the economy. But by doing so, many long-term investors switched to bearishness citing that all we’re doing is just kicking the debt can down the road. This is a valid concern - the Fed printing more money is not the way to long term growth and prosperity. It’s not a question of if inflation and interest rates rise but more a matter of how much and how fast. Fortunately, for us options traders, there is an answer to every market direction that allows us to remain profitable even when troubles reverse the current advance.
U.S. GDP grew at 2.8% in 2010 but is forecasted to slow to 2.6% in 2011 and then back up again to 3.2% in 2012. Employers added 140,000 jobs last month; an increase of 39,000 from the previous month. The Labor Department will release it payrolls report this Friday with the expectation that the unemployment rate will drop to 9.7%. Even with this expected drop, there are still some very big questions out there regarding the sustainability of economic growth as housing, lending and, of course, jobs have yet to fully recover.
The combination of an economic recovery coupled with consumer sentiment suggests that even the most economically sensitive or cyclical sectors should perform their best this year. Corporate data is showing an increasingly positive trend. As such, the benchmark measure of using S&P 500 options to hedge losses, the VIX, dropped to 17.75 from 2010’s high of 45.79 back in May.
However, treasuries also rose as the 9.8% unemployment rate, record low inflation and the Euro-nation’s sovereign-debt crisis continues to weigh heavy on investor’s minds. The bond market returned 5.9% in 2010 after losing 3.7% in 2009. Although the recovery didn’t happen as quickly as people had hoped, economic sentiment is now hovering at multi-year highs. Quantitative easing has been effective in stimulating both the economy and inflation--and how that will affect us going forward is still a big unanswered question.
What are the Secrets of the Week?
With the New Year upon us, the majority of traders and volume will return this week and we’ll be joining the fray with two new plays – one on an equity and the other on an ETF---so let’s get started...
You can get in on this week's trades along with two new high-probability trades per week by clicking here now: http://www.cashflowheaven.com/ws
Stack the Deck on Every Trade,
Robert
To all our subscribers, God Bless and have an awesome trading week!
THE SLV SHOT HIGHER BOOSTING OUR 28 CALLS TO AN EIGHTEEN PERCENT OPEN GAIN!
This past week the market's flat-lined as traders took a well deserved break--but our silver play still racked up some nice gains...
THE SLV SHOT HIGHER BOOSTING OUR 28 CALLS TO AN EIGHTEEN PERCENT OPEN GAIN!
That was a nice move but it looks like there is more to come as the SLV finished the week close to its highs--a good sign for more profits this week.
Last week we also got stopped out of Cyprus Semiconductor (CRUS) at a nasty loss as the stock dipped below our stop. Losses are never fun but it was time to get out of this play anyway as the stock has been flat for the past ten days--as options buyers we need stocks that move and this one wasn't.
The question now is where are the stocks moving this week? And in what direction? To help answer those questions let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The major indices stalled going into the end of the year after putting in an outstanding performance over the past few months.
The S&P 500 edged down Friday closing at 1257.64---up 13% for the year. The index climbed 6.5% this month, marking its best December performance in 19 years.
The Nasdaq shed 10.11 to finish at 2,652.87--up 17% from a year ago. Even though the Nasdaq finished its best December since 1999 weakness in the large caps like Apple, Google, Netflix and F5 Networks is a warning for January.
For tech investors this week is going to provide plenty of news to trade off of with a whirlwind of updates from the Consumer Electronics show in Las Vegas. This is the biggest show of the year and the place where everyone will showcase their new products. At last year's show the iPad was just a rumor and a year later the company has sold 14 million units--and that figure could double in 2011. However, the competition in the tablet space is really heating up.
The major vendors will be displaying tablets with 7, 9, 10 and even 12-inch screens. The biggest competition will be the Android powered devices with dozens of offerings in every format imaginable. Motorola is expected to show off a 4G version for Verizon running the Android OS which will probably be the biggest competitor to the iPad.
The big chip companies are in an all out battle for the hearts of these new tech devices. Intel is producing chips for 18 tablets, Nvidia 14, Texas Instruments 6 and Qualcomm 5. The attention from the CES show should create some volatility in the tech sector and if the new products are well received it could negatively impact Apple (AAPL) as the company does not show at this event.
For the first week of 2011 we have quite a bit of economic news. The first is the national ISM Manufacturing Index on Monday. The regional indexes have been posting some pretty strong gains but the consensus estimates for the national report is only for a minor improvement. If the ISM surprises to the upside it could give a boost to the market during the early January institutional fund flows.
The second event is the FOMC minutes for the December meeting which will be released on Tuesday. Considering how divided the FOMC members have been recently it will be interesting to see how the conversations went in that meeting. If the divisions are becoming wider will that impact the fate of the QE2 program? Does the Fed see the economy improving or inflation starting to rise? Traders will be reading the minutes closely but chances are good there will be very little market driving news and QE2 will remain intact.
The big event is the Non-Farm Payrolls for December on Friday. The consensus estimate is for a gain of 125,000 compared to the disappointing gain of only 39,000 in November. Some analysts are expecting a much higher number. Morgan Stanley is expecting a gain of +160,000. These higher estimates may have inflated expectations and anything even in the consensus range could be a disappointment.
There will be an abundance of year-end retirement contributions hitting the tape early in the week but there is also some big economic events and a lot of after tax profit taking waiting to occur. The timing of the profit taking is going to be the key. In some years the fund managers wait for the year end fund flows to dry up before they pull the exit trigger. Sometimes they wait for the first couple weeks of the earnings cycle in hopes of getting one more bounce before they exit. In years with big Q4 moves they tend to exit earlier in order to protect those gains--and that's what we've got this year.
Chances are extremely good we'll get a dip in the next two weeks and that dip should make us some excellent profits on the right puts and set us up for the next move higher by buying calls on the dip.
Any dip should provide a good buying opportunity as the economic recovery is accelerating--a trend demonstrated in nearly every economic report over the last couple months. The October pause is behind us and all the regional Fed reports are rebounding strongly.
Nearly all analysts expect the profits on the S&P to be a record in 2011. With any kind of PE expansion for a recovering economy the S&P could be 1450 or higher by year-end. The Morgan Stanley target is 1425 with highs above that but a cooling by year-end.
The financial sector is recovering. Bank lending has suddenly taken a sharp turn higher and analysts expect strong M&A activity in 2011 because of the new financial regulations. This will be positive for the market.
Home sales, to the surprise of many, are actually holding up in the late fourth quarter. Buying activity is increasing despite a rise in mortgage rates. The foreclosure cloud will remain over the market in 2011 but a very low inventory of new homes will help push prices higher. Many are beginning to feel the bottom is behind us and now there is pressure to buy something before rates move much higher.
The energy market will continue to strengthen. Crude prices will rise and fall but energy stocks should continue higher. There will be a flurry of M&A as smaller companies are gobbled up. It is getting easier to buy reserves than find them. As the global economic recovery accelerates the demand for oil will rise along with prices.
The longer term outlook is bullish as the Fed continues to create fresh money that finds a home in stocks--however the short-term outlook is a January dip--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-potential plays lined up and they are both bearish. We'll likely see some upside this week but it won't last as any spikes higher will be met with profit taking. Over the past ten years the market has declined in January with an average 139 points lost between the January highs and the February lows on the SP-500. With the gains as high as they have been over the past three months the January sell-off is liable to come a little early this year.
The amazing thing about both our new positions is they have bearish charts already--even in the face of a very bullish market. Traders are selling these stocks now and that selling should accelerate with any market decline--an event that will really rack up the gains on the right puts!
After a week of calm we've not got a market ready to move--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
THE SLV SHOT HIGHER BOOSTING OUR 28 CALLS TO AN EIGHTEEN PERCENT OPEN GAIN!
That was a nice move but it looks like there is more to come as the SLV finished the week close to its highs--a good sign for more profits this week.
Last week we also got stopped out of Cyprus Semiconductor (CRUS) at a nasty loss as the stock dipped below our stop. Losses are never fun but it was time to get out of this play anyway as the stock has been flat for the past ten days--as options buyers we need stocks that move and this one wasn't.
The question now is where are the stocks moving this week? And in what direction? To help answer those questions let's take a good look at...
WHICH WAY THIS MARKET IS HEADED
The major indices stalled going into the end of the year after putting in an outstanding performance over the past few months.
The S&P 500 edged down Friday closing at 1257.64---up 13% for the year. The index climbed 6.5% this month, marking its best December performance in 19 years.
The Nasdaq shed 10.11 to finish at 2,652.87--up 17% from a year ago. Even though the Nasdaq finished its best December since 1999 weakness in the large caps like Apple, Google, Netflix and F5 Networks is a warning for January.
For tech investors this week is going to provide plenty of news to trade off of with a whirlwind of updates from the Consumer Electronics show in Las Vegas. This is the biggest show of the year and the place where everyone will showcase their new products. At last year's show the iPad was just a rumor and a year later the company has sold 14 million units--and that figure could double in 2011. However, the competition in the tablet space is really heating up.
The major vendors will be displaying tablets with 7, 9, 10 and even 12-inch screens. The biggest competition will be the Android powered devices with dozens of offerings in every format imaginable. Motorola is expected to show off a 4G version for Verizon running the Android OS which will probably be the biggest competitor to the iPad.
The big chip companies are in an all out battle for the hearts of these new tech devices. Intel is producing chips for 18 tablets, Nvidia 14, Texas Instruments 6 and Qualcomm 5. The attention from the CES show should create some volatility in the tech sector and if the new products are well received it could negatively impact Apple (AAPL) as the company does not show at this event.
For the first week of 2011 we have quite a bit of economic news. The first is the national ISM Manufacturing Index on Monday. The regional indexes have been posting some pretty strong gains but the consensus estimates for the national report is only for a minor improvement. If the ISM surprises to the upside it could give a boost to the market during the early January institutional fund flows.
The second event is the FOMC minutes for the December meeting which will be released on Tuesday. Considering how divided the FOMC members have been recently it will be interesting to see how the conversations went in that meeting. If the divisions are becoming wider will that impact the fate of the QE2 program? Does the Fed see the economy improving or inflation starting to rise? Traders will be reading the minutes closely but chances are good there will be very little market driving news and QE2 will remain intact.
The big event is the Non-Farm Payrolls for December on Friday. The consensus estimate is for a gain of 125,000 compared to the disappointing gain of only 39,000 in November. Some analysts are expecting a much higher number. Morgan Stanley is expecting a gain of +160,000. These higher estimates may have inflated expectations and anything even in the consensus range could be a disappointment.
There will be an abundance of year-end retirement contributions hitting the tape early in the week but there is also some big economic events and a lot of after tax profit taking waiting to occur. The timing of the profit taking is going to be the key. In some years the fund managers wait for the year end fund flows to dry up before they pull the exit trigger. Sometimes they wait for the first couple weeks of the earnings cycle in hopes of getting one more bounce before they exit. In years with big Q4 moves they tend to exit earlier in order to protect those gains--and that's what we've got this year.
Chances are extremely good we'll get a dip in the next two weeks and that dip should make us some excellent profits on the right puts and set us up for the next move higher by buying calls on the dip.
Any dip should provide a good buying opportunity as the economic recovery is accelerating--a trend demonstrated in nearly every economic report over the last couple months. The October pause is behind us and all the regional Fed reports are rebounding strongly.
Nearly all analysts expect the profits on the S&P to be a record in 2011. With any kind of PE expansion for a recovering economy the S&P could be 1450 or higher by year-end. The Morgan Stanley target is 1425 with highs above that but a cooling by year-end.
The financial sector is recovering. Bank lending has suddenly taken a sharp turn higher and analysts expect strong M&A activity in 2011 because of the new financial regulations. This will be positive for the market.
Home sales, to the surprise of many, are actually holding up in the late fourth quarter. Buying activity is increasing despite a rise in mortgage rates. The foreclosure cloud will remain over the market in 2011 but a very low inventory of new homes will help push prices higher. Many are beginning to feel the bottom is behind us and now there is pressure to buy something before rates move much higher.
The energy market will continue to strengthen. Crude prices will rise and fall but energy stocks should continue higher. There will be a flurry of M&A as smaller companies are gobbled up. It is getting easier to buy reserves than find them. As the global economic recovery accelerates the demand for oil will rise along with prices.
The longer term outlook is bullish as the Fed continues to create fresh money that finds a home in stocks--however the short-term outlook is a January dip--the question is...
HOW DO WE MAKE MONEY ON IT?
We've got two high-potential plays lined up and they are both bearish. We'll likely see some upside this week but it won't last as any spikes higher will be met with profit taking. Over the past ten years the market has declined in January with an average 139 points lost between the January highs and the February lows on the SP-500. With the gains as high as they have been over the past three months the January sell-off is liable to come a little early this year.
The amazing thing about both our new positions is they have bearish charts already--even in the face of a very bullish market. Traders are selling these stocks now and that selling should accelerate with any market decline--an event that will really rack up the gains on the right puts!
After a week of calm we've not got a market ready to move--so let's get going...
For more information on everything you receive with your Pearly Gates subscription click on www.cashflowheaven.com/pg
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