Weekly Market Assessment
The markets are setup to hurt the most amount of people when it is least expected! On Wednesday, Janet Yellen spoke for the first time to the press to create a more transparent Federal Reserve, what was expected was the same monetary rhetoric heard from Ben Bernanke. However, the mention of raising rates 6 months after ending quantitative easing, quickly changed the dynamic in the market! Yellen said the "considerable period'' between the end of its quantitative easing program, known as QE, and the first rate increase from the Fed could be 6 months. Whoops! "She certainly moved it up a little bit, and I don't think the market was expecting that at all because she is widely viewed as being more on the dovish side of the aisle than she is on the hawkish side.'' said Peter Kenny, CEO of Clearpool Group.
Yellen may have to learn the hard way when telling the market about when a enormous market moving event will occur. So, how did the market react to this comment? A 150+ point sell-off in the Dow Jones! The interesting thing that happened this time was that bond yields rose - the exact opposite of what usually happens! With this recent unorthodox move in stocks vs. bonds, it could create some uncertainty in the markets, as bond holders were completely caught off guard. It also shows how fragile this market really is with just a few words, the market swings from two extremes. The cat is out of the bag and now we should begin to see how the markets react to not only the Federal Reserve exiting the bond market but also a rate hike as well. The question should be who is going to be buying bonds to replace the Fed?!
Through the Looking Glass: My Perspective on Stocks Reactions to Market Conditions
Not looking at anything next week.
As mentioned last week we were waiting for the Crimea referendum vote on Sunday. As expected, Crimea voted to become part of Russia and at first the market sold off to its 50 day moving average before the "buy the dippers" came in and brought the market back and to rally 100+ points on Monday. Obama imposed extremely weak sanctions and Russia brushed them off as if nothing had happened.
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.
Nuance (NUAN) $16.40- provides voice and language solutions for businesses and consumers worldwide. NUAN has broken above its 10,20 and 50 day moving average on 3X above average volume. Carl Icahn continues to hold a large above 5% position in this and recently NUAN has been traded up on considerable more than average volume. The 200 day moving average is at $17.01, a break above this should provide a catalyst to a change in trend.
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 another weekly vertical "CALL" Spread at 1870/1875. After Yellen spoke we got a sell off however, volatility entered the market and the option price had major fluctuations. I took a very small loss as I saw a chance to get out was worth it before the market turn against me. I have again sold another Vertical "CALL" spread at 1895/1900
Oracle (ORCL)- After reporting earning after the close on Tuesday, ORCL came in below expectations both EPS and earnings. ORCL sold off more than 2% after hours. It opened up the following morning below its 50 day moving average before buyers stepped in and brought this back up to its previous close. Huge move upward! I bought a weekly $38.50 "CALL" and sold it the same day for a 30% option gain.
PlugPower (PLUG)- an alternative energy technology provider, engages in the design, development, commercialization, and manufacture of fuel cell systems for industrial off-road consisting of forklift or material handling applications. Sold out of this position as the rug finally got pulled out beneath it and dropped to $5.83. I held $8 "PUTS" for a 2 week option gain of 83%.