EOT Position Update – June 27, 2012

| June 27, 2012

June 27, 2012

Market Snapshot

The saga continues.  Something out of the Twilight Zone no less.

Today the markets are in the midst of a two day recovery after a pretty large drop on Monday.

In fact, we saw the S&P 500 retest the 1,310 support level on Monday.  The good news is that this level held and today the S&P is back above 1,330.

The question now is, are we coming to resistance again?

Although the S&P has shown signs of recovery over the last two days on signs of decent economic data, is it enough?

Let’s take a look…

Consumer confidence came out a little weaker than expected yesterday.  Consensus was for 63.5, but the actual number came in at a mere 62.0.  This was the lowest read since January.  However, I don’t think many people put much stock into this number since it’s become a lagging indicator.

In addition, the S&P Case-Shiller report came in slightly better than expected.  The expected number called for an increase of 0.4%.  Surprisingly, the number came in at 0.7%.  This was the highest read since August 2010 and the first back-to-back gain since the spring of 2010.

So, where are we at…

A case can be made that these numbers are good or not so good.

Simply put, you can make what you want with the current news out there, but the recent market action is still light on volume and light on conviction.

It actually looks like an area of rest before the next surge hits.

Bottom line…

We are still in an unstable reactionary market.  We must continue to stay diligent in our trades and slow to move into anything new.

I often talk about entering into markets with a balance of trades.  However, these markets are too inconsistent to be heavily exposed in, no matter the balance of exposure.

In other words, smaller size, less positions (regardless of direction) is still better.

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.

  CSCO August 2012 $16 Calls
Cisco Systems has held up very well in this choppy market.  Our call options are up about 17% since our recommendation.  If the market continues its upside behavior, CSCO will certainly follow suit.  And this will give us an opportunity for larger gains.  For now, CSCO is a hold.  Remember, we want CSCO to move higher.  Resistance is at $18 and $20, while support is at $15.50 and again at $14.75.

  SCHW July 2012 $12 Calls
Schwab was a little rocky last week, but is now back on track on an upward trend.  As the JP Morgan (JPM) story comes to a close, the banking story from last week remains intact.  SCHW has held up well in this uncertain environment.  Remember, if the banking sector jumps, SCHW will reap the rewards.  And since our options are still in the money and up approximately 33%, we’re going to hold these options for larger gains.  Remember, we want this stock to rise in value.  Resistance is at $13.20 and $13.60, while support is at $11.70 and again at $11.20.

Category: EOT Update

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