EOT Position Update – November 30, 2011

| November 30, 2011

November 30, 2011

Market Snapshot

Stocks are off to the races today.

Advancing shares are outpacing decliners by a stunning 10 to 1 margin.  But that’s just how this year is going… It’s all or nothing.

So far this year, the S&P 500 has logged more than 60 days with an advance/decline ratio of +/– 400.  In other words, more than 400 of the 500 stocks in the index were moving in the same direction.

It’s the most all or nothing days the S&P has logged in any year.  And get this… in 2011 alone, the S&P has had more than twice as many all or nothing days as we had in the entire decade of the 1990s!

Clearly, something has changed.  What could be causing stocks to move in lock-step with one another so often?

Well, we first saw a spike in all or nothing days in 2008.  Right about the time the credit crisis hit and the government started bailing out one company after another.

It seems obvious to me that turmoil in the financial markets and government involve-ment are the primary reasons we have more all or nothing days.

Think about it…

It doesn’t matter how strong one company is in a financial crisis.  If the world economy is broken, they’re going to get pulled down just the same.

As a result, the markets swing from sheer panic when public policy is failing to utter jubilation when lawmakers finally do something right.

Here’s the bottom line… 

Until Europe’s debt crisis and the US budget conflict are solved, investors will be forced to continue weighing public policy over individual stock fundamentals.  This means more all or nothing days to come.

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.

  PLCE January 2012 $50 Puts
PLCE is stuck below a strong level of resistance at $55.  This retail stock isn’t moving up along with the rest of the sector.  And that’s good news for our puts.  PLCE is clearly showing weakness.  This should lead to some big gains for our options if the market falters.  Resistance is at $58 and $60.  Support is at $45 and $40.

   NFX January 2012 $50 Calls
NFX is surging higher.  US onshore oil and gas stocks are set up for a big rally to end the year.  Last week I said NFX’s chart still looked promising.  And aggressive traders who held on through last week’s temporary weakness could get rewarded handsomely. Continue holding… Resistance is at $51 and $56.  The next support is at $35.

  CNH December 2011 $40 Calls
CNH ran into stiff resistance around the 200-day moving average.  And the market- wide selloff isn’t helping either.  On a more positive note, agriculture equipment manufacturers proved their strength once again.  For example, Deere (DE) reported 20% revenue growth and 46% earnings growth over the same period last year.  And I believe the industry’s best days are ahead of it.  Continue holding.  The next resistance is at $42.20.

Category: EOT Update

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