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