EOT position update August 13, 2014

| August 13, 2014

August 13, 2014

Market Snapshot

It has been another week filled with uncertainty…

Uncertainty about geopolitical issues and escalating violence in Ukraine, Gaza, and Iraq… Uncertainty about global economic growth… And uncertainty about the strength of the five year old bull market in US stocks.

Some of the uncertainty is justified.  But some of it isn’t.

The uncertainty created by the violence in Ukraine, Gaza, and Iraq is understandable. Beyond the obvious toll these conflicts take on human lives, they also disrupt international trade and divert resources that would otherwise be spent in a much more productive way.

Even the uncertainty about global economic growth is understandable.  The International Monetary Fund recently cut its forecast for global growth this year from 3.7% to 3.4%.

Slower economic growth tends to produce smaller than expected profits and earnings. And weaker than expected earnings is obviously a headwind for stocks.

Here’s the thing…

Economic growth that’s accelerating slower than expected can be a good thing.  The current pace of economic growth hasn’t triggered inflation in developed economies.  So there’s no reason for central banks to raise interest rates.

Keeping interest rates low has been and will continue to be a good thing for stocks.

The one thing I don’t get is the uncertainty about the five year old bull market in US stocks.

There has been so much negativity about US stocks recently.  However, I haven’t seen a good reason yet that leads me to believe US stocks are doomed to suffer a major correction.

It seems that many are predicting the market crash simply because stocks have been moving steadily higher for most of the last five years.  But I’ve never seen a bull market die of old age… and I don’t expect we will now either.

What’s more, the recent pullback in stocks seems to be a lack of buying rather than a cascade of sellers exiting the market.  The bulls will only sit around so long waiting for a good entry point.  When they do come back, we could see the S&P 500 move to new highs quickly.

In fact, the S&P 500 has begun moving higher.  Remember this chart of the S&P 500… this is the most powerful trend in the market today.



Let’s move onto the updates…

Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  I try to focus on the positions that have some significant news or price movement.

ADI September 19th 2014 $50 Calls
ADI has been on the upswing over the last four days.  The stock and the options are currently unchanged from when we recommended buying this option a few weeks ago. We should see a run-up in ADI ahead of their quarterly earnings on August 26th. Continue holding… Resistance is at $53.00 and $55.00.  Support is at $48.00 and $47.00.

TPLM October 2014 $12.50 Calls
TPLM is building some bullish momentum after the big one day surge last week.  It needs to break above the 20-day and 50-day moving averages that have kept a lid on the stock price over the last few days.  If it can recapture these technical levels, it could trigger the uptrend we’ve been waiting for.  Continue holding… Resistance is at $14.00 and $17.50.  Support is at $10.00.

HIMX September 2014 $7 Calls
HIMX delivered solid numbers in its latest quarterly earnings report.  The stock is now at its highest price since May.  And our call options are showing a small profit.  The stock has been consolidating after quickly moving from around $6.00 at the end of July to around $7.70 today.  This stock is clearly building some bullish momentum… continue holding.  Support is at $5.75 and $5.00.  Resistance is at $9.00 and $11.00.

Category: EOT Update

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