EOT Position Update – May 27, 2009

| May 27, 2009

May 27, 2009

Market Snapshot

The stock market started the long holiday weekend a little early last week.  How do I know?  It’s a little secret called volume.  The number of shares trading hands on Friday was down considerably from earlier in the week.  A sign investors had already checked out!

The markets got off to a rocky start when trading resumed on Tuesday.  News of North Korea’s nuclear test and declining home prices sent the markets spiraling down.

Then something strange happened…

Surprise, surprise… a better than expected consumer confidence report sent the Dow rallying.

It kind of feels like we’re on a rollercoaster – up one minute, down the next.  Right now, the markets are really trading on the economy.  As weird as it sounds, that’s not always the case.  But right now the entire market moves with the latest economic data.

We’re working on another trade right now… look for it in the next few days.

Now for the trade 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.

  FWRD July 2009 $20 PUTS (FQXSD)
After an initial move down, FWRD rallied with the rest of the market yesterday.  I’m expecting this stock to move lower in the next few weeks.  Any market pullback should help our cause.  Resistance at $21 and $22.50.  Support is at $17.25 and $16.50.

  INTC October 2009 $16 CALLS (NQJQ)
Consumer confidence is a great predictor of future spending.  And right now, it’s at the best levels since last September.  I’m expecting to see consumer spending continue to move higher, which is great news for Intel.  Give this one some time to develop. Resistance at $16.80 and $19.  Support is at $14 and $12.75.

  JPM June 2009 $37.50 CALLS (JPMFU)
JPM continues to lead the market when we rally.  Unfortunately, commercial real estate woes took back all the hard earned gains.  Any good news for banks should re-energize this stock.  Resistance will be at $37.50 and $42.  Support is at $28 and $25.

  SPLS June 2009 $20 PUTS (PLQRD)
The good news on consumer confidence was bad news for our puts.  All the bad sentiment towards office suppliers hasn’t been able to push the stock price below support of the 200-day MA.  It might be time to start looking to exit to conserve capital.  Resistance is $24 and $26.  Support is at $16 and $14.

  LZ June 2009 $45 CALLS (LZFI)
We’re seeing continued strength from LZ as it moves higher.  It keeps bouncing off the 20-day MA… which is in an uptrend.  This trend higher should continue.  Hold on for another move up.  Resistance is $45 and $50.  Support is at $37.50 and $32.75.

Parting Shots…

3 – 6 – 3

There’s an old banking adage that could save our failing banking system.  It goes something like this.  Borrow money at 3%, lend it at 6%, and you’re on the golf course by 3.  Enough time to get in a quick nine and still be home in time for dinner.

It speaks to the simplistic nature of the business.  But banking has strayed from its path.  They’ve been lead astray by a desire to turn ever bigger profits.

And the end result is a financial mess!

Now we have banks that aren’t really banks.  They’re huge financial conglomerates… too big to fail.  Dipping their fingers anyplace they can to make a quick buck.  And it’s turned these institutions into risky business.

It’s time to separate commercial and investment banking again, just like they did 80 years ago after the Great Depression.

Leave market speculation and cutting edge investment ideas to the hedge funds and the investment bankers.  Commercial banking needs to be simple once again. 

Category: EOT Update

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