Posts Tagged ‘Bank of America’

Bulls Take a Breather as Momentum Slows

April 26, 2010

Friday’s 70 point advance pushed the Dow Jones Industrial Average above 11,200 for the first time since September 2008, marking the eighth straight weekly gain, an achievement not executed since 2004. Momentum was slowed today by Citigroup (C), who declined as the U.S. Treasury began to unwind its stake in the bailed-out bank, and Goldman Sachs (GS) which slipped ahead of its testimony before a Senate subcommittee. The Dow was still able to eek out a gain that translated into a new 52-week high, but the weak close left a feeling of lack luster performance.

Only 13 of the 30 Dow stocks closed higher with Caterpillar (CAT) leading the way, while financial  shares including JP Morgan, Citi, and Bank of America (BAC) were among the decliners. The S&P 500 and the NASDAQ both closed slightly lower after setting new 52-week highs on an intra-day basis.

Traders may be on the cautious side due to this week’s Federal Open Market Committee (FOMC) policy announcement. Though the Fed is not expected to raise interest rates, the recent strength of economic data has some committee members calling for a tightening of monetary policy. Changes to the language of its statement may be key in determining the timing of future increases in interest rates.

In other news, ongoing concerns about the Greek debt crisis sent the dollar higher resulting in lower oil prices. Additionally, crude supplies, which are anticipated to increase in this weeks inventory numbers, are pushing prices down to the $80 per barrel level, signaled by OPEC to be desirable. Gold, however, was able to increase by 30 cents, to $1154 per ounce, despite the rise in the dollar.

I never tire of reporting that our model portfolios continue to climb with our hedged portfolio closing Friday at $1,854,360 on its one year anniversary, representing an annual return of 85.43%. More outstanding is our unhedged account which closed at $2,138,713, a gain of over 113% in less that 10 months.

To learn the strategy that has produced these stellar returns, go to http://optionsprofitzone.com and download our e-book “Winning the Race to Financial Independence” or purchase the “Options Profit Zone Home Study Course”. You may also follow the links on the right hand side of this page.

Michael

Advertisements

Dow Penetrates Millennium Marker

April 11, 2010

A late session push by the Bulls nudged the Dow Jones Industrial Average just above the 11,000 level before settling in for a 10,997 close. This was the highest apex for the blue chip index since September 29, 2008. The S&P 500 and NASDAQ Composite followed suit achieving new annual highs to close the week at 1194 and 2454, respectively. Fed comments about an improving economy, bringing into question the possibility of interest rates, threatened to continue the previous week’s pattern of failed attempts to hold above 10,900, but upbeat news on Thursday and Friday brought renewed enthusiasm, leading to an upside penetration of resistence.

A record-setting 9.1% surge in retail sales and a possible merger between United Air and US Airways began the rally on Thursday. Friday’s wholesale sales report and a positive outlook from Chevron continued the pace that led to the Dow’s penetration of the millennium marker. (Note – The Dow first penetrated 11,000 in July 1999) Momentum is clearly on the side of the Bulls driven by institutional buying who can protect long positions with by purchasing put options. Individual investors remain on the sidelines, fearful of the resumption of the Bear market, sustaining a bullish contrarian viewpoint.

The Russell 2000 Index of small cap stocks has been on a tear, more than doubling since its March 2009 low. It closed the week above 700, a level that acted as support in 2007 and 2008. The next level of resistence is 750, a level last reached in 2008. Support for the S&P 500 remains at 1150 with resistence at 1200. If the Dow is able to sustain itself above 10,900, an advance to 11,500 would be expected.

The week ahead brings the official kickoff of first quarter earnings season. It is unclear whether expectations are dangerously high, which could potentially lead to disappointment, or warranted, given the steady stream of positive economic news. Alcoa (AA), traditionally a proxy for the quarter’s results, will report on Monday. CSX Corp. (CSX) and Intel (INTC) are scheduled to report on Tuesday, with JP Morgan (JPM), Bank of America (BAC), General Electric (GE), and Google (GOOG) scheduled for later in the week.

Don’t forget, Tax Day is Thursday, April 15. Data suggests no unusual deviation from current market trends can be attributed to tax day. The good news is, if you owe taxes, you must have had a job in 2009. That’s something to be thankful for in the current economic environment. So Happy Tax Day! (Still seems like an oxymoron?) Hopefully, the rising trend in employment will endure.

There’s more good news for our managed portfolios which continue to produce phenominal returns.The hedged account closed the week of April 9 at $1,725,284, with the un-hedged account ending the week at $2,0260148. 

 

Learn more about the strategy used to produce outstanding results by visiting our website at http://optionsprofitzone.com.

Michael

Stuck in the Middle With You

December 6, 2009

After digesting the news from Dubai and the weekend sales figures the Dow Jones Industrial Average moved into the month of December with a positive bias. But after spending most of the day on Thursday to the upside, due to news that Bank of America would pay back it’s TARP money, the index took a dive and closed down almost 100 points. Employment jitters were soon settled on Friday as the Labor Department reported that non-farm payrolls fell by just 11,000 last month, down dramatically from October and far less than the expected 100,000 number. It was the best showing since December 2007 and caused unemployment to edge down to 10% from the 10.2% reported previously. The Dow reacted by hitting a new yearly high of 10,516 before settling at 10,388 with a solid gain for the week. The S&P 500 also briefly touched a 14- month high and the NASDAQ rallied with an impressive 2.6% gain for the week.

The bad news is that resistance for the S&P lies at about 1120 and could be a challenge to higher movement in the coming weeks. This level also represents a 50% retracement from the March lows, a technical measure that has proven to be trouble from a historical perspective. According to Todd Salamone of Schaffer Investment Research, the 50% retracement level acted as major resistance for months in 2004. Moreover, he states, “the behavior of the iShares Russell 2000 Index Fund (IWM) in recent months may be indicative of the significance of the SPX’s 50% retracement. Since the IWM first touched 60.00 in September, it has gone into a three-month sideways pattern around this level.”

It also appears that portfolio managers are weary of accumulating positions at this level, which could cause the markets to become stuck in a small trading range for several weeks, thus my thesis, “Stuck in the Middle With You” (borrowed from the 1973 Stealers Wheel release, which doesn’t show my age at all).  Any sharp pull backs, however, could bring portfolio managers back into the spirit, as bargain hunters prepare for gift giving. The dollar may also get into the action, as an improving economy brings talk of rising interest rates and gives strength to the dollar. A stronger dollar has recently brought weakness to stocks and commodities. We witnessed the stronger dollar’s effect as gold pulled back last week.

Earnings reported in the week ahead will include reports from Pep Boys, AutoZone, Kroger, Costco, Dollar General Stores and National Semi Conductor. Economic reports will include consumer credit and U.S trade deficit for October, wholesale and business inventories, November retail Sales and the University of Michigan Consumer Sentiment Index for December.

Now, back to my thesis: I don’t think Gerry Rafferty (lead singer for Stealers Wheel) was singing about portfolio managers when he sang “Clowns to the left of me, Jokers to the right, here I am, Stuck in the middle with you.” But the guys on Capitol Hill could easily be the subject (read in- Healthcare Legislation and unreasonable taxation). But I digress.

The good news is that our managed portfolios are stuck in the middle of tremendous performance. The hedged account closed Friday at $1,405,841, over $40,000 higher than last week. But our newest, and unhedged, account continues to reign with a gain of almost $100,000 this week, closing at $1,510,351. Is that stuck, really? I think not.

 

 

Happy Holidays,
Michael
http://optionsprofitzone.com

Dow 10,000 One Year Later

October 18, 2009

upmarketIt was just over one year ago that the Dow Jones Industrial Average broke below 10,000 on its way to a March low of 6626. Last week, seven months later, the Dow returned to the emotional 10,000 level, holding it for two days before disappointing earnings and economic news led to profit taking that left the Dow at 9995 by the close on Friday. Though closing on a negative note, the major indices remained in positive territory for the week. Earnings from Intel and JP Morgan were among the bright spots of the week, but a downgrade of Goldman Sachs and Bank of America’s failure to satisfy expectations led to concern that the market’s climb could be nearing its apex.

Though 10,000 is a nice round number for investors to key on, technical resistence appears to be closer to 10,500 on the Dow and 1121 for the S&P. With resistence in sight, more bad news on the earnings front could test the bull’s resolve in the coming week. Monday also begins a new five-week option expiration cycle. Historically, the first week of a long expiration cycle has been bearish due to hedging activity from market makers. There have been recent exceptions, however, so any positive earnings announcements may boost the markets to new highs.

Earnings from Apple and Texas Instruments start the week off Monday with numbers from Caterpillar, Dupont, UAL, Yahoo and Coca-cola due on Tuesday, along with September home starts and PPI reports. Other companies reporting later in the week include Boeing, Amgen, Merk, 3M, Microsoft and Wells Fargo. Jobless claims and leading economic indicators are due Thursday with existing home sales reported on Friday.

Our model portfolios continue to climb with our hedged variety coming in at $1,315,274 and the unhedged account topping $1,372,500.

OPZ Running Total copy

 

Good Trading,
Michael

 

 

 

Houston, We Have a Catalyst

October 11, 2009

sts-001-liftoff-desk1Monday’s ISM data wasn’t the only news for the week after all. The bulls found their catalyst with Australia’s 25 basis point interest rate hike, which helped to drive the U.S. dollar lower, in turn, lifting the Dow Jones into orbit with a new year-to-date high. The S&P 500 and the NASDAQ each posted 4.5% gains for the week. There was some concern early Friday as Fed Chairman Bernanke vowed to raise key interest rates and reduce stimulus efforts when the recovery in the U.S. economy becomes more pronounced. However, unexpected earnings  from Alcoa (AA) and the Commerce Departments report showing  narrowed trade defecit gave the market a late push adding to the weeks gains.

The week ahead brings another option expiration Friday. These weeks have had a positive bias in the past but often get started on a down beat. Be prepared for weakness on Monday but a rally during the week if we get better than expected earnings news. However, some are calling for the possibility of disappointing earnings when compared to the second quarter, which was buoyed by cost cutting efforts that may not be in place for the third quarter. Look for earnings from Johnson & Johnson, Intel and CSX on Tuesday, with J P Morgan, and Abbott Labs reporting on Wednesday. Citi, Goldman Sachs, Google and IBM will follow on Thursday with earnings from Bank of America, GE, and Halliburton due on Friday. Key economic reports including CPI and initial jobless claims will be released on Thursday followed by industrial production and capacity utilization on Friday.

Historically, good news from Alcoa, like we saw last week is followed up with more good news in the next few weeks. A break above the S&P resistence of 1080 could lead us to the 1120 range. Improving economic recovery has led to a rise in energy prices, in anticipation of rising demand. Still, I wouldn’t rest easy until after October is behind us.

Our model portfolios continue to soar with our hedged account closing at $1,311,790 and our newest portfolio coming at an astounding $1,361,408 a gain of almost $65,000.

OPZ Running Total copy

Good Luck and Happy Trading,

Michael