Weekly Market Assessment
Today, we recieved a satisfactoy jobs report! The 204,000 jobs that were created blew away the estimated 100,000. Of course, this number will be reviewed and looked at with a fine tooth comb which may come out not as great as the headlines have made it out to be. However, the market loved it. With a rally over a 100 points and the S&P 500 again, finding support off the 20 day moving average, only to close down 12 points off the all time high. The market seems to continue to show strength in earning season as investors have now poured $54.2 billion into every equity mutual funds and exchange-traded funds in October, which is the third-largest inflow on record. PIMCO, now the 2nd largest bond holder in the world, ($2.2 trillion under management) saw $4.4 billion in outflows from its total return bond fund. The crowd is heading to the equity market and leaving behind the low yield returns and seeking out alpha in other areas. The market "melt up" is what this move in the market is now being called and of course the word "bubble" is starting to be thrown around where stocks seem to have exceeded their intrinsic value.
The saying goes what goes up, must come down. The momentum stocks that have gains in the triple digits this year have finally seemed to have slowed down from there high speed race to the top. These specific stocks got way to far ahead of the market and are now finally seeing investors take some gains and will wait for the overall market to catch up. Are these market leaders taking a break or are they just the first sign of a market correction? Has the so-called 'smart money" left these stocks for the rest of us to try and figure out there future value or is this just another chance to get these momentum stocks at a discount to their future value?
Through the Looking Glass: My Perspective on Stocks Reactions to Market Conditions
Industrial Production and Empire Manufacturing- With industrial production numbers, ill be looking for this to come in above the 0.2% and will be looking at NUE ($54.62) and X ($27.59). These two stocks have been in an uptrend and have broken out from their most recent resistance levels. Empire Manufacturing should have a broad affect on the overall market, positive data will play on FDML ($20.60).
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk
Facebook (FB) - Sold an Iron Condor option strategy to collect premium. I sold the $50/50.50 "CALLS" and the $48/47.50 "PUTS". FB had been trading in a range and these price levels were chosen as they fall within 1 standard deviation of its trading mean. Collected an option gain for the week of 17%.
Lululemon athletica (LULU)- Together with its subsidiaries, designs, manufactures, and distributes athletic apparel and accessories for women, men, and female youth. LULU has found resistance at its 100 day moving average where it trades up to the average and then sells off only days later to retest this level again at ~$70. I sold a Vertical "CALL" spread to collect the premium for a 12% weekly option gain. LULU finished the week at $69.
Priceline.com Incorporated (PCLN)- PCLN reported its earning after the close on Thursday and had an expected move of -/+ 61 points. I sold an Iron Condor to capture the entire premium, I sold the $975/970 "PUTS" and the $1085/1090 "CALLS". A total option gain of 49%. PCLN closed the day at $1073.