EOT Position Update – September 3, 2008
September 3, 2008
Market Snapshot
Editors Note: Watch for a new trade alert tomorrow.
The Dow Jones Industrial Average just closed at 11,534. Looking back at a three month chart of the Dow, today marks an important milestone. It’s the first five day period with the market closing and remaining above the 50 day moving average. It’s a solid sign of support for the market.
The big news this week was the weather.
Hurricane Gustav influenced the markets this week. The prospect of another Katrina like catastrophe drove oil prices higher. Oil then promptly continued its downward slide once the storm fears subsided.
Now the resulting storm clouds will be a big benefit to Midwestern farmers. The additional moisture will benefit crops . . . but probably push commodity prices lower.
Freddie Mac and Fannie Mae have survived the last few weeks without government intervention. Is this a sign Treasury Secretary Paulson won’t move to take over the mortgage companies? If he doesn’t act, these price levels may represent the buying opportunity of a decade. Who doesn’t love buying a good lottery ticket?
Now for the trade updates.
Position Updates
JCP January 2009 $30 PUTS (JCPMF)
JCP reported same store sales for August . . . you know, the all important back to school shopping season. Guess what? Sales were down! But the stock continues to move the wrong direction. I’d hold this for a little while longer to see if shareholders get a clue how bad the retail environment is. Support is at $35 and $30. Resistance will be at $45 and $48.
CLHB January 2009 $95 Calls (QPBAS)
CLHB has settled firmly above the $80 level. The stock tried to reach new highs of over $83. We’re still early in this trade. Resistance will be found near $85 and $90. Support will be at $72 and $68.
ROST November 2008 $42.50 Calls (REQKT)
ROST continues its slow climb. The stock reached above $41 for the first time in several weeks. We still have lots of time on these options, hold on tight. Resistance is 45. Support levels are 34 and 31.50.
Parting Shots…
The changing of the seasons . . .
Just this week a colleague of mine started talking about the months of September and October.
He pointed out that on a historical basis September is traditionally the biggest losing month (on a percentage basis) for the S&P, Dow and Nasdaq. Good information to have if you’re trading the markets.
It’s not always true.
But in the last 57 years the Dow has been down in the month of September more than 36 times (about 63% of the time).
October’s not much better. It’s known as the month of fear . . .and it’s not because of Halloween. October witnessed the Market Crashes of 1929 and 1987, as well as huge moves down in 1997, 1978, 1979 and 1989.
The worst October on record posted a loss of greater than 23%.
It’s this kind of knowledge that’ll help make you a better trader.
Category: EOT Update
