EOT Position Update – December 21, 2011

| December 21, 2011

December 21, 2011

Market Snapshot

Europe’s debt crisis and US economic data are battling for control of the market.

Last week’s EU summit results provided very little new information on a resolution to Europe’s debt crisis.  And the lack of progress could easily lead the region into a deeper recession than originally feared.

What’s more, the rating agencies didn’t help the situation either.  In fact, they added to the anxiety!  They’re threatening to downgrade the credit ratings of several European countries, including AAA rated France.

What’s worse, the ratings agencies used disturbing language about the looming downgrades.  They suggested that a comprehensive solution is technically and politically “beyond reach”.  In other words, the rating agencies see no chance of saving the EU in its current form.

On the domestic front, investors were flooded with economic data this past week.

Unfortunately, better progress in the US was basically ignored.  Good economic data included fewer initial jobless claims, strong manufacturing, and tame inflation data.

Clearly, market sentiment is still low.  And without more visibility in Europe, I believe the stock market will remain in a trading range.

Take a look at this chart of the S&P 500…


Right now, the S&P 500 is in a trading range between 1,200 and 1,260.  I don’t see the market breaking out of this range until we get real progress on resolving the European debt crisis.

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.

  TRV April 2012 $60 Calls
TRV is holding up well in this chaotic market!  In fact, our call options just hit a peak gain of 41%.  Investors are piling into TRV for the same reason we did.  These savvy investors know higher insurance premiums will lead to higher revenue and profits down the road.  Continue holding these calls… more gains are on the way.  Resistance is approaching at $57.50 and $61.  Support is at $54 and $49.

  DNKN March 2012 $22.50 Puts
DNKN plunged to a new 52-week low this week.  The selloff pushed the stock as low as $23.24.  The bears are clearly starting to overwhelm the bulls.  It won’t be long now before DNKN moves down to another new low.  That’s great news for our put options.  Continue holding… resistance is at $27.50 and $29.  Support is at $20 and again at $19.

Category: EOT Update

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