Weekly Market Assessment
Five years ago, we hit a low on the S&P 500 not seen since 1996. On March 6th 2009, the S&P hit 666.59, strange number of course but a date that seems to have been forgotten! A financial crisis ensued that stemmed from a goal of every American, home ownership. Our lending standards weakened, as a dream of owning a home was just a phone call away. Today we sit at new all time highs with a recovery that is constantly questioned as to the legitimacy of the so-called "growth" thats been achieved. Former Chairman, Ben Bernanake provided us with monetary policies never seen in our economic history, and the results so far have worked! We currently sit at the doorsteps of 1900 on the S&P 500, more than 2 1/2 times the lows in 2009. So, have the means justified the ends?
Reading the past Assessments and just following the market, one would wonder where the end/top is? It seems like each week we reach a new high and that much "wanted" correction seems to come and go before there is a chance to act. Lending standards have tightened, home values have increased and U.S. incomes are on the rise! The polar opposite of what was seen just 5 years ago! Has the time arrived to forgot the past and realize that those times have come and gone, never to be seen again? I can only hope that we can continue on this secular bull run and that 5 years from now, hopefully we will be looking back from new highs instead of new lows!
Through the Looking Glass: My Perspective on Stocks Reactions to Market Conditions
Next week we get the earnings from one of our biggest holdings Nuverra Environmental Solutions (NES) $17.96 and Caesars Entertainment (CZR) $25.76. Over the past few months natural gas prices have spiked to over $6 from around $4, this should have sparked a reopening of closed wells and the drilling of more wells in the Bakken where NES does a majority of its business. They are also selling off a segment of their business and I'll be looking to see where they are in this process. With CZR, consumer spending and income is up, this should affect CZR earnings and revenues. CZR is currently near a previous resistance level. Ill be looking for a beat on both companies.
As mentioned last week about the Jobs Report and NuSkin earnings (NUS). The jobs report came in above expectations but never reached my option strike prices at 1890/1895. I was not expecting a good report however the S&P 500 did rally and come close to hitting my strike price. With NUS, its earnings outlook came in below expectations and NUS sold off as much as 11%. The companies CFO had this to say on the China events. "We are early in the process of understanding the impact of recent events in China on our business, so it is difficult to project how reflective anticipated first quarter results will be of results for the remainder of the year"
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price, and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
Transocean (RIG) $42.07- There was a large purchase of MAY $41 "PUTS". This means that someone is betting that the stock will drop below $41 by this May. I think this is a hedge as volume has increased in RIG shares and is also approaching its 10 years lows. RIG now yields a dividend return of over 5%.
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk
S&P 500 (SPX)- As mentioned last week I sold a weekly Vertical "CALL" Spread at 1890/1895 going into the jobs report on Friday. The jobs report finally came in above expectations however never reached my spread! A one week option gain of 25%. I am again selling another weekly Vertical "CALL" spread at 1890/1895. The S&P is currently at 1878.
Volatility Index (VIX)- I have purchased a MAR $15 straight "CALL" option, as a protection against any selloff in the S&P 500, as we again have reached a new high and the VIX is again near its lows.
NuSkin (NUS)- I sold MAR $95/100 and $70/65 Iron Condor. The 100 day moving average is at $101 and should act as resistance and $70 is right above its 52 week low. This range along with a spike in volatility going into earning should create plenty of option premium that will disappear once the earnings are released. This came within $2 of my lower strike price but finished the week at ~$76, making the Iron Condor expire and create a one week option gain of 22%.