Weekly Market Assessment
Straight from the horses mouth! Janet Yellen speaking in front of the Joint Economic Committee on Wednesday said, "Stock prices have risen pretty robustly,” she told lawmakers Thursday. But looking at several valuation measures — she specifically cited equity-risk premiums — she said: “you would not see stock prices in territory that suggest…bubble-like conditions.” So there it is, the green light to buy equities! The markets reaction to these comments, 110+ points were added to the Dow Jones, as investors were again, reassured that the Federal Reserve is going to remain very accommodative. However, determining the location to pile in again remains the question as we are at all time highs. The buy on the dip has been the tried and tested plan however common buying levels in specific markets have failed in this tested strategy as of late.
So why not a huge rally from here? "I think the bond market is what's confusing people and stopping them from putting more money on the line in the equity market", said Scott Redler of T3Live. The 10 Year Treasury Bond has been hovering around 2.60%. The outright statement from the Fed, should have pushed rates alot higher, as investors leave the bond market and into more risker assets in search for yield. PIMCO, the largest fixed income managers in the world saw its 12th straight month of withdrawals with $3.1 billion leaving. However yields still remain at levels that flash caution. Who has it right? Should we take the Chairwoman's advice or look to the bond market for direction, either way, confusion seems to be the current state of mind in the market.
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.
Priceline PCLN $1135- Currently trading back above its 200 day moving average. It trades at a P/E of 30 compared to its competitors of 50. This has been caught up in the momentum stock trades as this thing can move +/- 40 points a day. Has strong earnings and consistent growth while at the same time trading at a huge discount to its peers.
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 mentioned last week, this remains a major resistance level in the market. Had a week gain of 21% in this option trade.
Rackspace (RAX)- Reports on Monday after being beaten down, I have purchased "CALLS" at the $30 and $31 strike price. Looking for a relief rally after company reports.
Coach (COH)- After disappointing on its Q1 earnings, COH sold off huge, down 14%. I have purchased MAY $44 straight calls. I have added to this position as COH looks to have based with volume increasing.
Salesforce (CRM)- Provides enterprise cloud computing solutions to various businesses and industries worldwide. .Buying straight $50 "CALLS". This looks to have formed a double bottom and any decent beat from this veteran cloud computing company should bring in buyers again.