EOT Position Update – March 28, 2012

| March 28, 2012

March 28, 2012

Market Snapshot

This Rally Is About To Be Tested!

Over the last seven trading days, the S&P 500 has been split evenly between up days and down days.  It’s a sign that buyer fatigue is starting to set in.

What’s more, the S&P has only seen a three point gain over the same period of time. That’s right… for all the volatility, the index tacked on just 0.2%.

I’d say it’s time to show a little caution.  A market correction is on the horizon.

Here’s why…

Tuesday morning the S&P Case-Shiller home price index showed US home prices fell 0.8% in January and 3.8% annually.  Analysts were expecting a slightly better report.

Reuters expected prices to inch higher by 0.2%, not fall.  In other words, this was quite a big miss.  And it could mean that home prices are still under downward pressure.

This wasn’t the only important economic news out this week…

Yesterday, the Consumer Confidence Index report showed a pullback to a reading of 70.2 in March.  The level was worse than the 70.4 reading analysts were looking for.  Moreover, it was down from last month’s 71.6 report.

This doesn’t come as a surprise.  With gas prices on the rise, it doesn’t matter how far stocks climb.  Consumers’ wallets are affected by what they buy… not by how fat their portfolio gets.

Bottom line…

We need to consider these data points, as well as keep an eye on the upcoming ones. If they continue to flatten out or fall, we may see the correction that’s building as we speak.

We’ll keep our eyes wide open when planning new trades.

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.

  BHI April 2012 $47 Puts
BHI has seen some volatile trading over the past few months.  Congratulations to those aggressive investors who stood by it.  With April expiration just around the corner, let’s go ahead and sell whatever BHI options you’re still holding.  You were certainly rewarded nicely with a 120% gain.

  TGT April 2012 $50 Calls
Since our recommendation on Target back in January, it has moved in a straight line up!  This is exactly what we wanted and it’s certainly paid off.  Now it’s time to say good-bye.  With the market bordering on a correction, there’s no reason to hold onto the TGT calls any longer.  So, let’s go ahead and sell the call options now. Congratulations on your 450% gain!

  GLD June 2012 $154 Puts
GLD is falling!  Our put options are gaining momentum on a solid downtrend.  Metals just can’t gain any traction and it looks like this is going to continue for a while.  So, let’s continue to hold our GLD puts for larger gains.  Remember, we want this stock to fall.  Resistance remains at $170 and $180.  Support is at $150 and $140.

Category: EOT Update

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