Wednesday, May 23, 2012

Rallying On Decent News, Flat On Bad: Pending Bull Market?

The market had a great day yesterday on the back of strong data out of Europe, China, and some in America. The ISM Index here at home improved MoM, but it did miss expectations as it moved to 54.1. ADP Employment was also released but came in under expectations at 170K. Construction spending was better than expected at 1.5%. Overall, the data was decently positive. Europe and China showed some good manufacturing data, and there was good news out of Greece that they were nearing a debt-swap deal. The market liked this good news and powered higher.

Moving into today, we are getting into a situation now where we are rallying on decent news and flat on bad news. That is a great sign of a bull market. When will it stop? Good question.

Two stocks on our radar are Weight Watchers (WTW) and Monster Beverage (MNST). We like WTW right now as a company that should continue to stay solid into earnings on Feb. 14th and has upside from those earnings as the company is expecting large growth. The options market is pricing in a lot of volatility, and you can still get around 10% in premium selling options as low as 65/62.50 bull put spread, which is over 13% below current price. Additionally, we are watching MNST. The stock has weakened as of late. Earnings are coming in late February, and on any further drops, we would be a buyer. MNST is a strong stock that should be bought on weakness as funds want to own it. It should run up into earnings.

Today we will get some more information about employment with jobless claims and Challenger Job Cuts. Both reports will be more scrutinized moving into non-farm payrolls on Friday. Earnings are also going to be crucial from Chiptole (CMG), Dow Chemical (DOW), Green Mountain Coffee Roasters (GMCR), Kellogg (K), Las Vegas Sands (LVS), Qualcomm (QCOM), and more.

We had a good day yesterday as we got a 2% gain in Ultrashort ProShares DJ-UBS Crude Oil (SCO) that we entered intraday. We got out of a long Cummins (CMI) position we had for a 1% gain. We hit our 0.05 target on sold Blackstone (BX) $14 puts for 26% gain. We also got gains in our Extended Value Portfolio (long-term) in Microsoft (MSFT) as it hit 30.00 for 9.7% gain as well as Vanguard Emerging Markets ETF (VWO) for 10% gain as it hit 43.00.

We have the following positions. In our Short-Term Equity Portfolio we are long Polo Ralph Lauren (RL) and SCO. In our Options Portfolio, we are long Apple (AAPL), Priceline (PCLN), Dollar Tree (DLTR). We are short Deckers Outdoor (DECK) and SPDR S&P500 ETF (SPY). In our Earnings Portfolio, we are long VF Corp. (VFC), CarMax (KMX), Avis Budget (CAR), Vertex Pharma (VRTX), EOG Resources (EOG) and Ashland (ASH). We are short AOL (AOL). We have an iron condor in Amazon (AMZN) as well.

Chart courtesy of finviz.com.

Disclosure: I am long SCO.

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