Weekly Market Assessment
A great April jobs report but little positive affect shown in the market, why? The expectation was for 205,000 jobs created however 285,000 is what came in. This should have been the catalyst to push the S&P 500 into new all time highs. However, this move higher was met by a major resistance level, that has been holding back the bulls from making this run. The 10 year Treasury Bond now trades below a major support level of 2.6%, while gold has moved above a psychological point of $1300, where its 200 day moving average also sits. We are seeing another move into these safe havens as tensions in Ukraine have heighten. Again, our markets are being held back by geopolitical events that occur at pivotal points in our market. Is the bond market telling us that its now time to return to bonds, as the equity markets have again failed to break into new highs?
Why did this jobs report have no impact on our market compared to previous disappointments or surprises? Have we reached a top in the market? How many times has that been said, only to see the market continue on its run up to 1900! We have seen the NASDAQ correct more than 10%, to its 200 day moving average, only to bounce off it, while other markets have remained vigilant near their highs. Will there be a "straw" that breaks this market, and if so, where does it come from? The Federal Reserve has continued to slowly reduce its bond purchases and keep rates low, so where will this catalyst come from and when? If we don't break out of this range we should be able to look back and answer the question as to why the market acted so weak to a strong jobs report!
Through the Looking Glass: My Perspective on Stocks Reactions to Market Conditions
Next week we get earnings from TransOcean (RIG) and Priceline (PCLN). PCLN has recently bounced off its 200 day moving average with decent volume. I will be looking to sell a MAY Iron Condor below its 200 day average at $1,115.85 and above its 50 day average at $1,250. Volatility should expand running up to its release and this is where options premium will expand. With RIG, I am looking at buying a straight MAY "CALL" at $43 or $44, as the price of oil has jumped over 10% since its last earnings report.
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.
Coach (COH) $43.88- sold off on Tuesday, as it recently disappointed on its Q1 earnings release where it saw its U.S. same store sales come in below analyst expectations. It is trading below all its major moving averages. It trades at an extreme discount to its peers with a P/E ratio of 12, on EPS of $3.42 compared to Michale Kors that has a P/E ratio of 32 and an EPS of $2.93.
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk
S&P 500 (SPX)- I sold a Vertical "Call" spread at the 1895/1900 as this level continues to be a major resistance point. Even after a good jobs report the level was approached then sold off. I am waiting to see how the market acts next week to closing at these levels and may look to sell another vertical "CALL" spread at 1900/1905.
Netflix (NFLX)- After breaking down below its 200 day moving average I purchased a weekly $320 "CALL". I wish I had held onto this alot longer as it broke right through its 20 day average and onto its 200 day at $342 on Thursday. Had a 61% option gain.
Coach (COH)- After disappointing on its Q1 earnings, COH sold off huge, down 14%. I have purchased MAY $44 straight calls.
Volatility Index (VIX)- Near the lows of the year where we usually get a bounce from these levels, I am buying CALLS in the VIX to hedge against any short term downside in the equity market and with the events in Ukraine. Its a cheap way to buy protection from any negative news.