EOT Position Update – December 26, 2012

December 26, 2012

Market Snapshot

Merry Christmas and Happy Holidays!

The markets are re-opening with holiday hangover after being closed for Christmas yesterday.  The S&P 500 has shed 0.5% today on light volume.

Shares of retailers are getting hammered today.

It appears that the amount of money holiday shoppers spent this year increased 0.7%. That’s well short of the 2% increase last year.  It’s a big disappointment for retailers that depend on strong holiday shopping to push them into the black every year.

What’s behind the weak sales?

It’s easy to point to the looming fiscal cliff as a reason many consumers spent less this holiday season.  And for good reason… if taxes go up next year, consumers will have less money in their pocket.  That means less money to spend and less money to repay credit card debt they racked up over the holidays.

But consumers aren’t the only ones feeling the sting of the fiscal cliff.

Investors have little reason to put capital to work before politicians in Washington come to an agreement to avoid the fiscal cliff.  There’s simply too much uncertainty to invest with any conviction at this point.

Obviously, the markets next move hinges on the fiscal cliff.  My gut feeling is that an agreement will be reached at the last minute.  Unfortunately, that’s just how politics operate these days.

One thing’s for sure, the fiscal cliff is just days away.  And one way or another, the market is going to make a big move.  And we’ll be there to profit from it.

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.

   DIS April 2013 $50 Calls
DIS is in a strong uptrend off the recent lows.  But like many stocks, it will have a hard time moving higher until the fiscal cliff is resolved.  However, once an agreement is reached, DIS should make a quick move higher.  Continue holding… Resistance is at $52.50 and $55.00.  Support is at $47.00 and $46.00.

  PHM April 2013 $19 Calls
PHM is dealing with fiscal cliff concerns of its own.  Obviously, going over the cliff would be a big shock to the housing market recovery.  But on the flip side, a resolution to the cliff should spark renewed investor confidence in home builders.  I think an agreement will be reached and PHM will soar higher in the weeks ahead.  Continue holding… Resistance is at $25.00 and $30.00.  Support is at $15.00 and $13.50.

Category: EOT Update