Weekly Market Assessment
This is the end, beautiful friend! This is the end, my only friend...the end! Ahead of his time, Jim Morrison, of The Doors, sang the song "The End" which I will use to signify the ending of an unorthodox and monumental approach to monetary policy, called Quantitative Easing or "QE" by the Federal Reserve! Our "beautiful friend", was of course, the $4.6 trillion dollars that was pumped into the economy to spur growth and launch the markets into all time highs! The markets relied on this "friend" however, this friendship has ended. Quantitative easing helped create a more than 200% gain in the major markets since the bottom. Every time a correction came, it offered another buying opportunity. However, after such a fall out, investors rightfully lost trust in the market and never returned on any correction for fear of another episode of a loss in principal. After 3 go-arounds of extreme monetary policy, it has finally ended... for now. Will this be the end and will the market be able to stand on its own two feet? Have we reached a point where the past must be forgotten? Do we buy and hold or miss out on another triple digit move upward? The stock market is a reflection on how the economy is performing, which translates to - are companies top and bottom lines moving at a rate that express growth? Only time will tell if QE has disrupted this correlation between the two.Will the buy on the dip approach still work? Have investors become too complacent knowing that the Fed will be there to step in and save the markets from collapse? This is what happens when we rely on outside market factors that have a significant impact on how the markets function. Many still believe including myself that the Fed has entered into a game that it was not asked to join but forced into. For a market to function properly it needs to completely fail, then be rebuilt by those capable of fixing the previous mistakes, while improving efficiency which leads to profitability. Most believe the problems created previous to the Great Recession have only been postponed to a later date. This concern has kept investors out of the market for fear of an inevitable collapse because of the consequences of the Federal Reserve interfering with the mechanics of a market. This is where we stand today; the end of an extreme and unconventional approach to monetary policy that may have been ahead of our time! We will now see if its intended goals will work. However, if it fails and takes the market with it, then in the words of Jim Morrison, "This is the end" may bring more then just the ending of a program. For now, let's welcome new all time highs!
The Rant: Going Off on a Tangent with My 2 Cents
Nothing this week
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.
Continental Resources (CLR) $55.13- After CLR announced great earnings, Harold Hamm the founder and CEO, stated that he would be removing his hedged oil positions and cash in on the the realized gains from these protected positions. This is huge, as he now leaves his future reserves open to weak crude prices. His bet is that oil prices will rise and he now wants to be able to capture the entire gain when oil prices rise. I am in and holding CLR.
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk:
S&P 500 (SPX) -No Trades
SPDR S&P 500 EFT (SPY)- Follows the S&P 500. I have bought "PUTS" at 204, which is above the current closing price on Friday to protect my net long positions.
Alibaba (BABA)- After making the watch list and holding common shares in multiple accounts the BABA position was closed out at $110 for a 17% gain. BABA continues to move higher and currently trades at $114.56!
Continental Resources (CLR)- After announcing earning on Thursday, Harold Hamm the legendary oilman who runs the company announced that he would be taking off all of his North Dakota energy oil hedges, betting that prices will recover soon after sinking 25 percent in recent months. This was huge and the stock reacted accordingly. I purchased shares on this announcement at $51.75.
Lakeland Industries (LAKE)- Sold out of this position on Wednesday after it broke down to 11.70 from its highs of ~$29. As mentioned weeks ago I shorted this company at $17.80. and got out at 11.90 for a 33%
Twitter (TWTR)- Reported earnings last Monday after the close. TWTR trades at an insane valuation and needs to meet every major growth metric to hold this valuation. I didnt believe these expectation would be met and bought a weekly $48 "PUT". TWTR missed expectations and sold off the the following morning to $42 and is down 19% just this week. I exited this option position for a nice 81% option gain!