Posts Tagged ‘economic news’

Pivotal Turn in the Markets

August 16, 2010

The following commentary from ChartAdvisor presents an accurate snapshot of this week’s stock market outlook. (I couldn’t have said it better myself, so I won’t) 

The stock market took a plunge this past week after the Fed minutes revealed renewed concern over economic growth. The markets had been stalling near important resistance levels, and Wednesday’s gap lower left a lot of damage in its wake. This week’s reversal could prove to be a pivotal turn in the markets, as there is potential that a much larger top will form on the weekly charts. The rally that began in March has retraced about two-thirds of the decline that occurred through the financial crisis. With the markets stalling in this area, some are thinking another bear market could be unfolding. While this theory should not be dismissed, it is still much too early to assume anything more than a pullback is occurring. The case can be made for multiple scenarios and traders are probably better served standing aside until the picture becomes clearer.

Have a great week,
Michael

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Traders Celebrate Christmas in July

August 1, 2010

The Dow Jones Industrial Average brought good tidings to traders by gaining over 7% for the month, marking its largest monthly advance in a year. The S&P 500 and NASDAQ gave traders a present of their own, each adding 6.9% for the month and closing above their 10-month trend lines. The earnings parade brought mostly positive surprises for traders to celebrate overshadowing lackluster economic data suggesting a slow recovery. After three straight days of triple-digit gains the bulls took a breather on Tuesday failing to break through well-established resistance near the June highs.

The S&P 500 (SPX) will begin the week just below stiff resistance between 1115 and 1120, a technically significant level that proved difficult to break for several weeks in late 2009. Moreover, 1,117 is the site of the SPX’s June closing high, and 1,115.10 is the site of 2009’s close. Research indicates that the index’s level at the beginning of the year can act as support or resistance for the market. Statistics reveal an average loss of 1% in the month following the respect of such resistance levels. However, a penetration of the 1117 could propel the market higher, catching bears off guard. A failure of last week’s low of 1064 could result in the testing of the July low of 1022.

Though July was a good month for the markets, it wasn’t so kind to our model portfolio which closed at $1,558,075. Our newer account fared much better closing at $2,029,720.

Best Wishes for the second half of the year,

Michael

Rollercoasters Are For Kids

May 31, 2010

There was a time that I loved the anticipation, maybe the pure adrenaline, while sitting in the first car of the rollercoaster climbing that initial hill just before the big drop… click…click…click…click… The old wooden ones always had the soundtrack of clicks all the way to the top, then in an instant, we would be falling at what seemed like the speed of sound, with our arms in the air, screaming at the top of our lungs, winding around turns, climbing shorter hills and dropping again and again and it never lasted long enough. Come to think of it, I still love rollercoasters when I’m at an amusement park. I bet many of you feel the same way and may have even experienced it this past Memorial Day weekend. Those modern coasters are quite a different experience, much wilder than when I was a kid.

The stock market felt a lot like one of those new rollercoasters for the entire month of May. And what a ride it was. We had a “Flash Crash”, followed by a 400-point rally, more than a few highly volatile days, followed by another 300-point rally. Worries from the Euro-zone, sabre rattling by the Koreas, and the biggest oil spill in history each provided major curves in the track, making for one wild ride. We went an entire month without two straight up days. By the close of market on Friday the Dow was down another 122 points , had lost over 1000 points during the month and had turned in its worst May performance since 1940.  I’m sure many traders found the volatility exciting and profitable, while others felt that queezy feeling in their stomachs like they just got off the Big Dipper after eating half a pizza. When all was said and done, the Dow lost 7.9% for the month.

Though market technicals have lost some ground, there is some solace in that the Dow held above the emotional 10,000 level and some analysts see the potential for a bounce. The fact that the major indices held their February lows may be setting up a traditional double bottom. additionally, sentiment readings show the number of bears has risen to levels not seen since last November, just before the Dow climbed 1000 points. Though there are some encouraging signs, the fact remains that the S&P broke below its 160-Day Moving Average in May, which is a bearish signal. It would be wise hedge long positions and keep your eye on the VIX and the dollar for clues as to the what’s next for equities.

Our hedged account has outperformed, as is to be expected, closing May at $1,612,877 vs. $1,539,496 for the unhedged account.

Go to http://optionsprofitzone.com for your FREE report entitled “7 Secrets to Making Money in Bull or Bear Markets”.

Michael

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

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

Stocks Set to Test Resistance

March 7, 2010

U.S. stocks made significant strides last week with all major indices closing substantially above short-term support levels. Responding enthusiastically to increased consumer borrowing and better than expected unemployment numbers the Dow Jones Industrial Average added 122 points on Friday, pushing through 10,500 for the first time since January 20. The S&P 500 added 15 points to close at 1,138, solidly above its 1,100 resistance, and the NASDAQ gained 34 points ,ending just below its 52-week high of 2327.

Accordingly, the week saw the S&P 500 Volatility Index plunge. The VIX has dropped from 20.02 on February 20 to its current reading of 17.69, near its January low of 17. Analysts at Schaeffer Research state “The plunge in volatility has come, of course, on a rally in the SPX, setting up a potential retest of the January highs in the 1,150-1,160 region. The 1,150 level marked highs in early 2002 and 2004, while 1,160 is the site of the SPX’s 160-month moving average, which marked the bear market lows in 2002-2003. Should the SPX rally above 1,150-1,160, the 1,200 century mark would be the next major level for the SPX to overcome, as this is the site of the 80-month moving average and a major support level in July 2008. The 80-month moving average acted as a support after the terrorist attacks in September 2001, and a close below this trendline in May 2002 was a major sell signal.”

They go on to say that with “the VIX declining in 17 of the past 18 days, and SPX chart resistance overhead, there is good reason, from a mean-reversion perspective, for the market to take a breather. But, keep in mind that if you are playing the mean-reversion game, there are periods when the market’s momentum can run the shorts over. This can be powerful for the bulls, as a combination of short covering and investors eventually jumping off the sidelines can provide a powerful one-two punch in keeping the momentum intact.”

They conclude that the current environment continues to favor the bulls, noting that the current rally has come without an increase in bullish sentiment, which “represents potential future buying power, a necessary ingredient to push the market above the chart resistance that lingers just above.”

The performance of our managed portfolios reflects the enthusiasm of the market with our hedged account closing at $1,579,912 and the unhedged account continues to shine, ending at 1,797,588.

 

As usual, you can get more information about our trading strategy at http://optionsprofitzone.com.

Good Trading to All,
Michael

Historic Moment Despite Lagging Economy

February 28, 2010

The U.S. Hockey team relinquished gold to Canada today but its silver medal, the 37th medal of the Vancouver Games for the United States, made history by breaking the record for total medals won by one nation at the winter games. This is also the first Winter Olympics in 78 years in which the United States earned more medals than any other participant.

The performance also boosted funding expectations for the U.S. Olympic Commitee who had been facing continued fallout from the lagging U.S. economy. With a minimum of 10 years until another U.S. hosted Olympics, the implications of this year’s surprising medal windfall are significant. The USOC announced the signing of a new sponsor deal during the Games with the global energy company BP, while current sponsors including Visa launched campaigns in response to various athletes’ successes.

The optimism seemed to spill over into the U.S. stock markets as, contrary to historical trends, January’s dismal performance was followed by gold medal execution in February. Considering the backdrop of unsettling economic news including European debt worries, interest rate concerns and discouraging growth indicators, the Dow Jones Industrial’s 307 point gain displayed the resilience of an Olympic champion.

With the Olympic fever behind us, the bulls could certainly use some favorable economic headlines to give traders reason to buy. Though there could be increased volatility in the days to come as the major markets bump against upward resistence levels, the technical indicators suggest more reward than risk at this point. Additionally, historical data reveals that the month of March favors the bulls, producing the third-highest returns in the past five years and the second-highest returns in the last ten years.

Our managed accounts continue to produce gold medal returns with our hedged portfolio closing Friday at $1,526,383 and the unhedged account closing at $1,702,821.

Again, we’d like to congratulate the entire U.S. Olympic team for a record-setting performance and a job well done.

Michael
http://optionsprofitzone.com

U.S. Equity Markets Go For Gold

February 18, 2010

After last weeks test of downside support, U.S. equity markets are keeping pace with our Olympic competitors in Vancouver with strong showings in the first sessions of a shortened holiday week. Stocks shot higher right out of the gate on Tuesday, with the Dow closing with a triple digit gain of 169 points. Wednesday, the S&P made a run at overhead resistance and today has broken through 1,100, its approximate 80-day moving average. Stronger than expected data  from the Philadelphia Fed regarding regional business conditions have overshadowed a weak first quarter outlook from Wal-Mart and the Labor Department’s pre-market report that initial jobless claims rose by 31,000, to 473,000 in the week ended Feb. 13. This was on top of an upwardly revised 442,000, in the prior week. Economists had expected claims to dip to 430,000.

Like Shaun White in the snowboarding half-pipe, the market’s continue to defy gravity, ignoring the reality of a slowing recovery. Though several economic indicators are making a positive showing, business leaders report that the numbers do not reflect what they are seeing on the ground. But, for now, the technical indicators point to gold medal performance for equities, with a target of 10,750 for the Dow. Another reversal below 10,000, however, would mean a test of the 9000 level.

Our managed portfolios continue to reach the podium with our hedged account gaining almost $50,000 with a Feb. 12 close of $1,465,264. The winner continues to be our unhedged account which gained over $112,000 with a close of $1,626,264.

We want to congratulate the U.S. Olympic team for its championship performance so far in the Vancouver games and wish them continued success in the days to come.

Michael
http://optionsprofitzone.com

The Dow Dives Below 10,000

February 8, 2010

It appeared that February was going to buck the downtrend that began in January when the first two days of the month produced impressive gains that left the Dow Jones Industrial Average almost 300 points above the emotional 10,0000 level. But Obama’s vow on Wednesday to crack down on big banks initiated a sell-off that continued into Thursday which culminated in a decline of 268 points, closing at 10,002. New banking proposals including the prohibition of commercial banks from engaging in proprietary trading  combined with weak unemployment numbers and European sovereign debt problems increased the fear of investors leading to a reversal of the weeks early gains. The drubbing spilled over into Friday’s trading sinking more than 165 points before a last-minute rally leaving the Dow up 10 points.

Today’s session failed to sustain the bullish rally with the Dow closing below 10,000 for the first time since November 9, 2009 at 9908, a decline of over 100 points. The S&P 500 also turned down with a close at 1056 but held support near 1050. Weekend news that Fed Chairman Bernanke will begin to layout his blueprint for tightening credit heightened the fears of traders adding fuel to the decline. Many analysts agree that if the 1050 support is breached in the next few days, we may be headed substantially lower. The American Association of Individual Investors weekly survey showed that less than 30% of those surveyed describe themselves as bullish on the market. This is the first time since November 2009 that the percentage of bulls fell below 30%. The percentage that describe themselves as bearish rose to 43%, also the highest since November 2009.

Sentiment levels of this nature can often become buying opportunities. This can signal that most of the selling pressure has dissipated. Therefore, it may be too early to sell long positions. However, in this environment, it is prudent to hedge your long positions by selling calls or buying puts. If the S&P penetrates 1040, consider going to cash.

This week’s earnings will include reports from Coca-Cola (KO), Walt Disney (DIS), Pulte Homes (PHM), Auto Nation (AN), Baidu (BIDU), and Pepsi (PEP).

Our managed portfolios have held up well in the face of the dive below 10,000. We are still showing annualized returns of over 50%.

You can learn more about our winning strategy of selling puts and calls by going to http://optionsprofitzone.com.

Drop by and see us,
Michael

Standing at the Crossroads

January 31, 2010

The major stock U.S. stock markets may have reached a crossroads after the Dow Jones Industrial Average posted another 1% decline last week, following its 4.1% downturn the previous week. The 3.5% loss for the month of January was the worst performance for the blue-chip index since February 2009 resulting in downside penetration of its 20-week moving average. My friends at Schaffer’s Investment Research revealed that the technical backdrop has weakened considerably noting that the S&P 500 Index has broken below its 80-day moving average for the first time since the March 2009 bottom. Additionally, “the SPX was pushed back violently after a few attempts to overcome its important 160-month moving average, which is situated in the 1,150 area and acted as support at the 2002-2003 market bottom. At present, the SPX has retreated about 6.5% from the peak highs observed a couple weeks ago. ”

Good news including Ford’s announcement of its first full-year profit since 2005, higher consumer confidence, and Apple’s new Ipad was not enough to offset higher than expected unemployment numbers, concern about slower growth in China and economic woes in Greece. January’s poor showing may not bode well for the rest of the year. Historical data seems to indicate that January sets the tone for the next 12 months. It will be interesting to see if the Dow can hold above the emotional 10,000 support level. If not, we could soon test the primary support at 9,000.

Marc Faber, famed contrarian investment analyst known as Dr. Doom, has recommended pulling your money out of stocks right now, predicting that the S&P 500 could fall as much as 20% to 920. He believes that stocks are expensive due to the absence of a meaningful economic recovery. ” With unemployment staying at a relatively high level and with the revenue being weak, I don’t think corporate profits will be that great in 2010,” Faber said. “Basically, the profits have been boosted by aggressive cost-cutting. The revenue side of corporations is weak.” Faber advised investors to buy U.S. stocks on March 9, 2009 when the S&P reached its lowest level since 1996.

The coming week’s calendar is busy right out of the gate starting with Monday’s economic data, which will include December’s personal income and spending, December’s construction spending and the January Institute for Supply Management manufacturing index. The day will also see earnings releases from Exxon (XOM). January’s auto sales and December’s pending home sales are due on Tuesday, along with earnings from BP plc (BP), United Parcel Services (UPS), Whirlpool (WHR), and News Corp (NWS). Wednesday will bring the January ADP employment report, the ISM services index, and weekly crude inventories. It will also be a big day for earnings with Comcast Corp. (CMCSA), Pfizer Inc. (PFE), Time Warner Inc. (TWX), Broadcom Corp. (BRCM), Cisco Systems Inc. (CSCO), Visa Inc. (V), and YUM! Brands Inc. (YUM) reporting. The fourth-quarter productivity report, and December’s factory orders are scheduled for Thursday with earnings reports from  Burger King Holdings Inc. (BKC), The Clorox Co. (CLX), Kellogg Co. (K), MasterCard Inc. (MA), and Sony Corp. (SNE). We’ll end the week with more corporate earnings and January’s unemployment rate, nonfarm payrolls, and December’s consumer credit report due on Friday.

The numbers for our managed portfolios are still being calculated, though I’m sure in light of the market’s performance we will have lost some ground. I expect that our hedged portfolio fared the best, as it should in the environment we are experiencing. I’ll post them when they are available. In the meantime, keep your eye on the volatility index (VIX) for clues as to the market’s conviction.

To quote Cream’s 1970’s rock standard…”I’m standing at the crossroads, believe I’m sinking down.”

Michael