EOT Position Update – January 21, 2015
Market Snapshot
Stocks are off to a slow start this year thanks to an increase in uncertainty.
The uncertainty stems from a breakdown of a few foundational beliefs. These are beliefs that businesses have been built on and investments have made because of.
For instance, the expansion of US oil production was built on the belief that Saudi Arabia wouldn’t let oil prices fall below $100 per barrel.
For years, the Saudis would restrict supply whenever supply exceeded demand. This kept oil prices high. This knowledge gave US oil producers the incentive to ramp up oil production. They believed oil prices wouldn’t fall because the Saudis wouldn’t allow them to.
That belief has been shattered.
Now Saudi Arabia and the rest of OPEC are willing to let oil prices fall in order to protect market share. As a result, oil prices are expected to hold between $20 and $50 per barrel for years to come.
Any businesses built on or investments made on the belief that oil could be sold for $100 per barrel are in big trouble right now.
Another belief many investors and businesses held was that the Swiss franc would be pegged to the euro.
Last week the Swiss National Bank sent shockwaves through financial markets when they removed the EUR/CHF 1.20 floor. In short, the move by the SNB will allow the Swiss franc to trade freely against the euro.
As a result, the franc rallied about 30% versus the euro.
Needless to say, businesses built on and investments made on the belief that the Swiss franc would continue to be pegged to the euro are suffering right now.
These two explosive events alone are creating lots of uncertainty. But they’re not the only things creating uncertainty…
The International Monetary Fund recently made the steepest cut to its global-growth outlook in three years. They’re now expecting the world economy to grow 3.5% in 2015. That’s down from their 3.8% projection in October.
According to the IMF, the US is expected to be the best market. But it’s hard to believe that the US economy is immune from slowing growth in the rest of the world.
So there you have it… slowing global economic growth, a major disruption in the currency markets, and oil prices coming unhinged due to Saudi Arabia refusing to cut production to support oil prices.
With so much uncertainty, it’s no surprise that the S&P 500 has stumbled to a 1.7% loss out of the gates in 2015.
Let’s move onto the updates…
Position Updates
Just a quick note: Remember, we won’t update every open position every week. We try to focus on the positions that have some significant news or price movement.
FAST February 20th 2015 $48.00 Calls
FAST has logged three up days in row since reporting earnings last Thursday. And for good reason… Sales are up 14% and earnings per share are up 21% from the same time last year. That’s solid growth any way you slice it. Aggressive traders should continue holding. Resistance levels are at $48.00 and $50.00.
GLOG February 20st 2015 $20.00 Calls
GLOG is having its best day in weeks… it’s up more than 4% today. The stock held at support and now it’s breaking out above the short term downtrend. This is typically an indication of a bullish reversal. Continue holding. Resistance is at the 200-day moving average – currently $23.43. Support is at $15.00.
Category: EOT Update
