EOT Position Update – March 14, 2012

| March 14, 2012

March 14, 2012

Market Snapshot

Breakout Rally Overpowers China Slowdown…

It seems like the past two Tuesdays have been big percentage trading days in the markets.  Last Tuesday, the Dow was down 200 points, and yesterday, the index rallied up 218!

There’s no doubt the major stock averages have broken to new highs.  And the Dow, S&P 500, and NASDAQ all just keep moving higher and higher.

Tuesday, the Dow traded over 13,000 while the NASDAQ surged above 3,000.That marks the first time ever the two indexes have broken these levels at the same time.

While it’s not at their all time highs, it is the first time since 2007 that the Dow closed this high.  And it’s the first time in 12 years that the NASDAQ closed over 3,000. What’s more, the S&P is trading just a few points below 1,400… a level it hasn’t seen since June of 2008.

Clearly, the markets are poised to continue climbing…

The amazing part is US stock markets have rallied right through the Chinese confession concerning a slowdown of economic growth.  It was the first time in eight years that China cut its annual GDP growth target.  Premier Wen Jiabao announced estimates for GDP growth would be revised down near 7.5%, from the previous estimate of 8%.

Interestingly, the recent string of economic data supports this revision.  Consumer inflation in China increased 3.2% from a year ago in February.  That was a drop from 4.5% reported in January… the lowest reading since June 2010.

Additional economic indicators are pointing to a slowdown as well, including industrial production and power generation… both of which are at their lowest levels in years.

It’s important to note, China is trying to engineer a soft landing for their economy. Therefore, it makes perfect sense that many of the recent policies and actions of the Chinese government support a gentle slowdown.  The alternative is an overheated crash and burn.

The bottom line…

Investors in the US stock markets are starting to ignore global growth issues, both in China and Europe.  This disconnect is a strong sign that investors are starting to believe in the dominance of the US economy once again.

Perhaps we’re witnessing the birth of a belief.  One that says a US economy firing on all cylinders can overcome even the greatest foreign recession.  It might just be possible that the US economy can regain the perception of global dominance and control the direction of its domestic stock market.

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.

  MRO July 2012 $36 Calls
Marathon shares have regained lost ground over the past week.  In fact, shares closed yesterday just under $34.  Oil price have rallied in the past week and now trade just off the $107 level.  With plenty of time left in this trade, look for MRO to rally in the coming weeks.  Remember, we want this stock to move higher.  Resistance is at $42 and again at $50.  Support will be at $30 and $27.50.

  GRPN April 2012 $21 Puts
Groupon shares continue to plummet and now trade near $17 per share.  In fact, GRPN traded as low as $16.25 last week.  Right now our GRPN puts are up by 65%… and even reached $5.00 last week!  Remember, we want this stock to move lower.  Support remains at $15.  Resistance levels will be at $23 and again at $26.

  TGT April 2012 $50 Calls
Target is climbing off the charts… and is closing in fast on our final resistance of $60. The stock closed at $58.48 yesterday.  Our calls reached a high of $8.55 yesterday, giving us an eye popping 463% gain!  While I’d normally recommend taking some profit here, the stock simply won’t stop climbing.  And with retail sales up by 1.1% last month, aggressive traders should keep holding for even more gains! Again, we want this stock to move higher.  Resistance remains at $60.  Support is at $42.50 and $40.

Category: EOT Update

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