EOT Position Update – September 12, 2012

| September 12, 2012

September 12, 2012

Market Snapshot

Well, news continues to come in, good, bad, or indifferent and the market continues its stair step higher.  Some would say it defies logic, but those same people would say so does life.

Stocks rose again this morning following a key announcement from Germany on the future of the Euro Zone’s rescue fund.

Earlier today, Germany’s Federal Constitutional Court approved the creation of the European Stability Mechanism.  It was a EUR 500 billion permanent bailout fund for the Euro Zone.

This move, along with last week’s announcement that the European Central Bank will implement bond purchases, helps establish further financial resources to assist struggling Euro Zone nations.

This move was also helped by optimism for a financial-stimulus announcement after the Federal Reserve’s policy meeting, which also began this morning.

Now, on the home front…

Stateside, wholesale inventories increased by 0.7% in July from June, beating expectations of a 0.4% increase.

Sales for wholesale distributors declined by 0.1% during the same time last year.  The inventories/sales ratio came in at 1.21, which is near a three-year high and reflects a slowdown in sales.  However, as you can see, the market had no problem shrugging off this news.

Separately, prices for goods imported to the US rose by 0.7% in August, a reversal from July’s 0.7% downward-revised drop.

However, economists were expecting a monthly gain of 1.5%, though the August tally was the first increase in five months.  So again, this first increase in five months trumped the decrease in analysts’ expectations.

Lastly, export prices also increased in August by 0.9%, up from a 0.4% rise in July. And as a result, the market rallied on this increase dramatically.

Bottom line…

It seems no matter what the domestic news is, the market continues its run higher. The only data that seems to affect the market these days is news out of Europe.

I think this is how it is going to be for the foreseeable future and we will trade based on this assumption.

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.

  DRYS September 2012 $2 Calls
DRYS is one of our older trades and time is running out.  Within the next few days, time decay will begin to erode the time premium associated with these options. However, this by no means worked out poorly.  They are even from our recommendation.  My suggestion now is to sell them here and save what we invested for the next trade that will be coming out this week.  The most important thing is that we did not lose money on this trade.

  AXP October 2012 $60 Calls
AXP is off slightly since our recommendation, but it is holding in very nicely.  Even though AXP was down slightly today, it really means nothing.  Time is on our side and we’ll take advantage of that moving forward as we watch this stock continue to outperform and profit from its rising stock price.  So, obviously we’re going to hold these call options for large gains!  Remember, we want this stock to rise in value. Support is at $55.50 and $54.00.  Resistance is at $60.00 and again at $62.00.

Category: EOT Update

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