EOT Position Update – July 25, 2012

| July 25, 2012

July 25, 2012

Market Snapshot

More worries about Greek debt and disappointing earnings from some big companies sent the markets down over the past week.

This move down was fueled by some mediocre economic and corporate numbers.  And it’s not over yet, we’ll have some economic numbers coming out this week with jobless claims, durable goods orders, and pending home sales Thursday.

However, there was a glimmer of hope at the end of yesterday’s trading session.

It was nice to see a late recovery after a very ugly day, but it felt awfully manipulated when it came 15 minutes before the close on a story in the Wall Street Journal about potential QE3.

Now it begs the question…

Is it just a coincidence that this story happens to come out as the market is stumbling to the worst close in a while?

Simply, that’s anyone’s guess.

So, what’s happening on the fundamental side?

Well we are now right smack in the middle of earnings season.  Turbulent to say the least and a bit disappointing according to the street.

For instance…

Earnings reports are rolling in with Netflix (NFLX), TripAdvisor (TRIP) and Buffalo Wild Wings (BWLD) being hit pretty hard on weak numbers while Panera (PNRA), Altera (ALTR) and Tempur Pedic (TPX) are popping a bit.

Talk about a mixed picture.

Now, we certainly can’t talk about earnings without mega cap company Apple (AAPL).

When Apple numbers hit yesterday, the first reaction was to the downside as earnings per share came in at $7.65 vs. estimates of $10.23.

The AAPL miss was rather stunning given its history of beats, and there’s a little panic in the air as this is very unfamiliar action from AAPL.  This could easily bring down the entire market.

Now, how about on the technical side?

So far we have seen the bears come back in this week as we confirm resistance from 1,375 in the S&P 500.

Technically this pullback from 1,375 was inevitable from a charting stand point.

We didn’t see any hesitation at 1,350 as the market pushed through it with ease.

Now this leaves us the second test of the lower part of our S&P range at 1,325.  We’re hoping to see a bounce off the 50 moving average just above the 1,325 support level.

Bottom line…

With earnings announcements mixed and economic data nothing spectacular, we need to keep a close watch at the S&P technical levels.

Overall, the market was saved by the late news about a Fed move, but you have to wonder if the Fed is going to have much lasting influence this time as it depletes its ammunition.

We’re going to be prepared to see small moves followed by large moves, as reactionary trading continues.

And we’ll be ready to take the necessary precautions in our trading to compensate for these moves.

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.

  SLB August 2012 $67.50 Calls
Schlumberger is still moving higher despite all of the market fluctuations.  And wow!  A 125% gain on our call options.  SLB continues acting exactly as predicted.  It’s benefiting as oil slowly comes off of its multi-year lows.  And if oil continues its upside behavior, SLB will certainly follow suit.  And this will give us an opportunity for large gains.  For now, SLB is a hold.  Remember, we want SLB to move higher.  Resistance is at $70.00 and $72.50, while support is at $62.50 and again at $60.00.

  LAZ September 2012 $25 Calls
LAZ is our newest trade.  And with the market on this crazy rollercoaster ride, our call options are exactly even.  And I must say that’s incredible compared to the market. Let’s remember that LAZ is an investment banking stock and tied to the banking sector.  If the government does step in with QE3, I’d imagine our calls would skyrocket to the upside.  Right now we’re just going to hold on for the ride.  Remember, we want LAZ to move higher.  Resistance is at $27.00 and $29.00, while support is at $22.50 and again at $21.50.

Category: EOT Update

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