Monday, December 28, 2009

Weekly Watchlist 12/28

Another short low volume week is ahead and it should be interesting to see if the SPX keeps grinding up on this low volume trade. I think it will. A positive close to last week should give us continued momo into the 1135-1140 area short term.

Last week the Nasdaq and tech related names rallied and led the way. If tech continues to move higher that is a positive sign into the new year as the market has been searching for a leader to ignite the next leg up if it is to come. Energy and banks have lagged this month but last week energy started to show some life and perhaps maybe financials are next?

Buy the dips>> PDE, VFC, TSL, ABV, TRLG

Sunday, December 20, 2009

Weekly Watchlist 12/21

Going into a holiday shortened week we have a trading range still in place in the SPX. I think we stay in this range thru the rest of the year and find some direction once 2010 arrives. For now support remains at 1085 and resistance up at 1115.While banks and commodities have sold off, the tech sector has held up nicely along with transports. Until we get some kind of broad based move in all sectors then they will keep taking turns each week and the indices overall will consolidate further. Overall this has been a stock picking market with premium selling strategies doing best.

The dollar/stock inverse relationship has almost completely broken down and I think it is a positive long term sign to see stocks holding up and perhaps even starting to rally with the USD. Perhaps growth isn't that bad after all huh?

Buy the dips>> MSFT, VMC, SPG, NTRI

Sell the rips>> FCX

Thursday, December 17, 2009

RIMM Call Spread

RIMM reports earnings after the close today and tomorrow is options expiration so that sets up a potentially explosive long gamma trade. Delta's of options will be either 1 or 0 at expy on friday's close and that means that stocks which have big moves this week can see the delta's of their options explode.

Usually I'm not a fan of buying spreads or options into earnings but for a gamble lottery ticket type of play with a great risk/reward this trade could pay off huge.

Buy the Dec 70/75 call spread for 50 cents.

By buying the 70 call and selling the 75 call you mitigate some of the risk of paying a premium into the number and you are only paying 10% of the potential $5 the spread can be worth on friday if RIMM goes to 75. That kind of move is entirely possible from a volatile stock like RIMM.

Of course if it does not clear about 70.50 then you lose money under that and you should be prepared to lose the entire 50 cents if RIMM does not get over that 70 mark tomorrow. But for the potential 10 bagger kind of trade I think this is worth taking with small size.

Sunday, December 13, 2009

Weekly Watchlist 12/14

Stocks have held their own as the dollar rallied the past two weeks and commodities sold off fairly hard. The market seems to have leadership from transports and semi's along with some other tech. It has to be encouraging to see the market hang in this neutral range as the euro sells off the past few weeks. Maybe this is just the start of the dollar rallying with equities?

With the year end so close I find it hard to believe we sell off into a seasonal bullish time for stocks. FOMC meeting is this week along with quad witching expiration on Friday. There is plenty of open interest at the round number 1100 strike in the SPX options so it would not surprise me to see another rather flat week overall. At this point I would be more willing to be bullishly neutral. Which I guess means expecting a break of the highs but respecting the range.

The euro does look likely to test the 1.45 mark this week and gold has room down to 1080 which is the next major support level. The last month has seen different sectors lead at different times. One week tech leads and commodities lag, then the next week banks lag and transports lead. Until we can get a broad based rally then this rangebound trading may hold into year end. One thing for certain is that we have longer term resistance doing what it should do at these levels on the weekly charts. 1125 SPX is going to give us a hard time until it doesn't.

Buy the dips>> GD, M, TIE, ICE, HD, GVA, IYR, SLM

Sell the rips>> RIG, FXE

Monday, December 7, 2009

Weekly Watchlist 12/7

The reaction to bad jobs data 9 months ago rallied stocks but now are we seeing the stock market starting to sell off on good data? If so, this could be the first signs of the market leading the fundamentals. Regardless, Friday the dollar ended strong and stocks sold off before regaining some steam late in the day to still close over 1100. While I think this could be the start of another 5-8% correction the markets, you also gotta remember it is unlikely to see a sustained pullback before year end because of the "Santa Claus" effect in the markets and traders wanting to secure their bonuses that they receive. The "bonus" put in December they call it.

So we need to watch the potential for support to be broken on the SPX under 1085 to see a fast retrace back to 1070 where there is still an unfilled gap. But if we friday's lows near 1095 then I think we have yet another shot at retesting the highs of the brutal trading range we have seen for the last 4 weeks. We need to see the SPX close above 1120 for any kind of continuation higher.

I like the way small caps are setting up to run into year end and REIT's and Semis look strong as well. Some of the dollar sensitive names like oils and materials are vulnerable to further pullbacks at this point and I also would lean towards shorting pops in banks until they confirmed leadership. It looks like there is a nice rotation taking place into more defensive sectors into year end.

The dollar bounce does have the chance at being the start a viscious unwind but it's still a bit early to tell. Losing 1.48 level on the Euro would be a nice confirmation of a further move up in the dollar this week. There is not much econ data on the schedule so perhaps the currencies settle into a range for a few days to absorb the large movements seen friday after the jobs report.


Shorts>> WFT, ACI