EOT Position Update – July 21, 2010

| July 21, 2010

July 21, 2010

Market Snapshot

“Economic outlook remains unusually uncertain”…

No it’s not an answer from my “Magic 8 Ball”.  Those were the words Fed Chairman Ben Bernanke uttered in front of Congress today.  The markets promptly nose-dived after he made the comment.

Look, the markets have been telling us there’s a lot of uncertainty for the past three months.  So it shouldn’t come as a surprise the Fed feels the same way.

Forget earnings… It all hinges on job creation.

Better than expected earnings will still drive individual stocks.  But they’re not going to drive the entire market.

Investors don’t care about how companies did last quarter.  At the time, companies were benefiting from the early stages of recovery.  There were three main catalysts driving the recovery.

Government stimulus, inventory restocking, and pent up consumer demand drove the markets higher for more than a year.

Those three catalysts are played out.  Now we’re at a crossroads.  Will the recovery continue to build on the momentum or will it sink back into recession?

It’s the question every investor is asking right now.  And as Bernanke said, “The economic outlook remains unusually uncertain.”

The clearest sign the economic recovery is continuing is job creation.

Job creation means companies are confident their business is stable or growing.  And they need more employees to meet the demand for their goods and services.

Until then, markets are likely to remain choppy and lack direction.

Now for 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.

  SBUX October 2010 $25 Calls
SBUX reported quarterly earnings today after the markets closed.  Revenue came in better than expected.  And earnings met analyst expectations.  They also boosted their full year earnings guidance by a few pennies.  It’s a solid quarter but not good enough to immediately drive the shares higher.  We still have plenty of time before our October call options expire.  Aggressive traders should sit tight for now.  Resistance is at $26.25 and $28.  Support is at $23 and $22.10.

  JNJ October 2010 $62.50 Calls
JNJ’s stock didn’t respond well to the company’s earnings announcement.  The lingering questions about the company’s recall are holding the stock back.  But this should only be temporary.  We’ve got plenty of time for JNJ to shake off this setback.  Hold tight for now.  Resistance is at $62.50 and $65.  Support is at $57.50 and $55.

  ENS September 2010 $22.50 Puts
ENS continues to bump along the resistance line of the downtrend.  The downtrend since the April high remains firmly in place and should lead to another leg down soon. So sit tight for now.  Resistance is at $25.50 and $27.  Support is at $20 and $19.

  ASIA October 2010 $30 Calls
ASIA’s struggling to break through to the upside of the 200-day moving average.  But the emerging uptrend is a good sign ASIA will eventually clear this hurdle.  However, it may not happen until they report earnings next week.  I’m expecting strong earnings and a positive outlook to spur ASIA toward our resistance levels.  Hold tight for the earnings announcement.  Resistance is at $29.50 and $32.  Support is at $18 and $16.

Category: EOT Update

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