Weekly Market Assessment
Will they or wont they? Next week, if the House and Senate are not able to come to an agreement on a resolution to fund the Federal Government, Congress will contemplate a government shut down. The market seems to be in a waiting pattern. The VIX (volatility index) has been trading at year lows while investors continue to look for safety in the 10 Year Treasury Bond at 2.63%, down from the year highs of ~2.98%. The Bond Market is expressing caution while the other (VIX) seems to show little concern. The S&P 500 snapped a 5 day losing streak on Thursday in what looked like institutional buyers stepping in to keep their positions up before the quarter ends as the market fluctuated between price ranges. The S&P 500 seems to be finding support at its 50 day moving average, while the 20 day moving average has now briefly crossed above it, which is technically a bullish sign. What is interesting to see is the duration of time between the S&P 500 retesting its moving averages has become shorter. The S&P has had a killer run this year with it being up currently 19% and 21% from the all time highs. So again, we are confronted with another obstacle that seems to try and stop this market from pushing higher! Will Congress give us another chance at buying into this market or will they be the catalyst that creates the return to uncertainty?
Through the Looking Glass: My Perspective on Stocks Reactions to Market Conditions
Debt ceiling negotiations, Jobs report and PMI:
If an agreement is not met I will be looking for support levels in the market to pick up financial stocks that will be affected by the sell off and a run to safety into the bond market. Even though this should affect bond yields in a negative way I believe the flee to safety will be to fixed income if an agreement is not met. Jobs report should have little affect on the market as a good or bad report will again bring up that the easy money policies will remain as stated by the Federal Reserve in the past. PMI or purchasing managers index will give a better insight to business inventories, this comes out on Tuesday, we will be looking for a number above 50 which expresses the economy is expanding, below 50 shows contraction. WMT($74.36) said it is cutting orders it places with suppliers this quarter and next to address rising inventory. PMI last month was 51.4.
Builders sentiment and interest rates- BAC down 4% and WFC down 3% since last weeks outlook on the effect of interest rates and builders sentiment. Looking to continue to short the XHB.
From the Trading Floor to the Option Pit: A quick look at what's on the trading desk
E-Mini S&P 500 futures-no trades Apple (AAPL)-Continue to like to trade AAPL options. I sold the weekly $500/505 "CALLS" and sold the $475/$4480 "PUTS". Collected most of the premium for a 26% gain on the Iron Condor. I will be putting on more Iron Condors as it looks like AAPL is in a trading range. Amazon (AMZN)- Sold a Vertical "CALL" spread at $315/320 as AMZN reached all time highs and sold off. Weekly gain of 28%. Netflix (NFLX)- On Monday NFLX opened up at all time highs of 320.39 and sold off huge on more than average volume. It sold off to find support at its 20 day moving average. I sold a $310/315 vertical "CALL" spread to collective a 3 day gain of 14%. JCPenney (JCP)- After announcing a 84 million share sale and diluting the shares outstanding by 38%, JCP sold off to 13 year lows to $8.86 on 12X average volume. I picked up weekly $9 "CALLS" at $0.44. If JCP drops further I will be looking to take a common position or use an option strategy to sell premium to able to pick up shares at a lower price.