| December 17, 2014

December 17, 2014

Market Snapshot

Right now there’s only one story that matters… oil.

The massive drop in oil prices over the last six months is casting a long shadow over the entire stock market.  It’s creating uncertainty, volatility, and fear… none of that is good for stocks.

Despite the headwinds, the S&P 500 is only 4% off of the record highs.  So, there’s no reason to believe there has been a seismic shift in the overall uptrend of the market.

In fact, it has been more than three years since the S&P 500 had a 10% pullback. That’s one of the longest periods the large cap index has gone without a 10% correction.

So, any opportunities to profit from downside moves in individual stock prices continue to be fleeting or very expensive.  At the same time, the opportunities to profit from the sustained uptrend continue to be the path of least resistance.

The big news today was the release of the FOMC statement.

In short, the Fed maintained a very dovish tone on inflation and remained non-committal about the timing of the first interest rate hikes since the 2008 financial crisis.

And there’s no reason for the Fed to have a firm timetable for raising interest rates… the global economy is sluggish, there’s still plenty of slack in the job market, and inflation is non-existent.

The current economic conditions require the Fed to be flexible and ‘patient’.  And that’s exactly what they said.  They dropped the ‘considerable time’ phrase and said they can be “patient in beginning to normalize the stance of monetary policy”.

Not surprisingly, the S&P 500 is up nearly 2% today after the Fed delivered good new to the market.  This looks like a good opportunity to initiate a new bullish position…keep an eye on your email for a new trade later this week.

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.

WWWW January 16th 2015 $17.50 Puts
WWWW is poised to make the next leg down.  The downtrend has been a stiff level of resistance for this stock.  And the company hasn’t done anything to reverse the string of disappointing revenue and earnings they have reported over the last year.  It’s only a matter of time until WWWW makes another move lower.  Resistance is at $19.00 and $20.00.  Support is at $15.00 and $14.00.

KATE January 16th 2015 $32 Calls
KATE recently received a nice vote of confidence from one analyst that put a $35 price target on the stock.  Needless to say, I agree.  The stock has held up well despite the pullback in the S&P 500 over the last few weeks.  Continue holding… Resistance is at $33.00 and $36.00.  Support is at $27.50 and $25.00.

GLOG February 20th 2015 $20 Calls
GLOG is up more than 10% today as investors are picking up energy stocks that have been unfairly punished over the last month.  It was also upgraded from ‘Hold’ to ‘Buy’ by an analyst at Stifel.  There’s still plenty of time for GLOG to make a run at our resistance levels before these options expire in February.  Continue holding.  Resistance is at $24.00 and $28.00.  Support is at $14.00 and $13.00.

Category: EOT Update

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