| November 12, 2014

November 12, 2014

Market Snapshot

There’s an extreme level of bullishness among investors right now.

According to the American Association of Individual Investors Sentiment Survey, bullish sentiment increased 3.3% to 52.7% last week.  And at the same time, the number of investors that are bearish fell to just 15.1%.

That’s the highest percentage of bulls since December of last year and the lowest percentage of bears since 2005!

It’s not surprising to see investors so bullish… it hasn’t paid to stay bearish on stocks during the last five years.

But nevertheless, this type of extreme bullish sentiment typically doesn’t bode well for stocks in the very short term.  Periods of extreme bullishness or bearishness tend to trigger a reversion to the mean that can send stocks careening in the opposite direction.

One reason for the bullish outlook on stocks is the drop in oil prices.

It’s estimated that the $30 drop in oil prices provides a $1 trillion stimulus to the world economy every year.  That’s money that consumers and businesses have to spend on other things besides energy.

Obviously, that’s also revenue that energy companies won’t realize.  So it’s not a win-win situation.

Here’s the bottom line…

The bulls are in charge, economic data in the US is good but not so great to trigger interest rate hikes, and the drop in oil prices should be tailwind for every sector but energy.

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.

KATE January 16th 2015 $32 Calls
KATE has been drifting lower since we sent this trade alert out last week.  That’s just fine by me… everyone should have a chance to get into this trade at a great price. This is a trade I’m expecting to play out as numbers emerge about the holiday shopping season.  Resistance is at $33.00 and $36.00.  Support is at $27.50 and $25.00.

GLOG February 20th 2015 $20 Calls
GLOG will announce the results from their third quarter on November 20th.  I’m expecting this to be a bullish catalyst for the stock after the period of volatility. Continue holding.  Resistance is at $24.00 and $28.00.  Support is at $14.00 and $13.00.

CVX December 19th 2014 $120 Calls
CVX has enjoyed a nice rally despite oil prices staying low.  I’m still looking at the 200-day moving average for an exit before these options expire in December.  Look to exit this trade around $122.00.

Category: EOT Update

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