Trade: Selling the JCP Aug 19-18 Put Spread and 25-26 Call Spread Condor for $.35
Risk: $65 per 1 lot
Reward: $35 per 1 lot
Notes: good risk vs reward that JCP moves less than the measured move of 14.4%
Category: Blog
Euro (6E) and Oil (CL) Pivot Points for 8.10.2012
S&P Emini Pivot Points for 8.10.2012
Doherty at the Close 8.9.2012
American Express (AXP) lost -2.50%, the Dow’s biggest loss, with Visa and Mastercard also losing ground on the day as US economy data shows customer spending declining.
In U.S. economic headlines, initial jobless claims, an indicator of cuts to the labor force, fell by 6,000 last week to a seasonally adjusted 361,000. Economists had forecast that number would rise to 370,000. Claims from the prior week were revised slightly higher.
In Europe, the Stoxx Europe 600 added 0.4% for its fifth consecutive day of gains, despite a downbeat survey from the European Central Bank that showed expectations for the euro-zone economy to contract more sharply this year than in previous estimates.
In corporate news, MDRX raged 18.44% after the electronic health record company raised its full year earnings outlook, though second quarter results fell short of estimates. Monster Beverage (MSNT) dropped near 10% after they missed earnings and estimates. Wendy’s (WEN) rose 1% after the fast food chain rose in sales and profitability over the last quarter.
Treasury Yield Curve Special 8.9.2012
The Fed is playing with the idea of dropping rates on longer duration treasuries to spark riskier investment practices such as lifting the stock market. As you can see from the 3-D treasury graph over time below, Yields have been flattened towards zero across the board with risk of the longer duration bonds falling more every time that Bernanke opens his mouth. Stock market bulls are constructing their portfolios to reap the benefits of money flooding out of the treasury market into stocks. This is demonstrated by the outperformance of blue chip stocks.
Although I am bullish on interest rates on the long term, I believe that the Fed will be forced to step in and buy long duration bonds before the economy bounces back to full health.
David Cornes holds a degree in economics from the University of Montana.
Bloomberg Interview 8.8.2012 Keene: News Corp. Will Report Similarly to Disney
Halftime Report 8.9.2012
Everyone that I talk to is bearish on this market. After brainstorming, we figured out why markets are rising, even though our economy still appears to be injured. Our answer was QE3.
I am satisfied that the market did not rally after the release of today’s initial claims number beat expectations. Do you see an improvement in the job market?
S&P 500 futures were down 2 points to 1396.25, Dow futures fell 26 points to 13094, and NASDAQ futures gained 2 points to 2708.75.
Gold futures rose 70 cents to $1616.70 and WTI crude futures were up 20 cents to $93.55.
Soybeans rose 46.40 cents to $16.4640 and corn rose 12.60 cents to $8.2320.
Elizabeth Arden Inc. (RDEN) gained over 10% after reporting increased sales and margins, yet a 33% fall in profit.
E-Trade Financial Corp. (ETFC) gained 6% after news that the current CEO will depart. The position will be filled by Frank Petrilli, a current member of the board of directors.
Yelp Inc. (YELP) gained over 6%, making this week’s gains nearly 30% after a report of a 67% gain in revenue during the previous quarter.
Boingo Wireless (WIFI) fell over 23% after reporting earnings below analysts’ estimates. This happens to be one of my least favorite companies in the country as I receive daily Spam e-mail requesting that I use their services.
David Cornes holds a degree in economics from the University of Montana.
Signs the Market is Getting Complacent – Put/Call Ratio and Bull Pct. Index – 8.9.2012
As you can see in the graph below, the S&P 500 curve and the Put/Call ratio were near convergence. The relatively low Put/Call ratio in this case coupled with the S&P lingering around the significant 1400 level leads me to believe that a rally would not be out of the question with macroeconomic expectations such as QE3. 
David Cornes holds a degree in economics from the University of Montana.
Movers and Shakers – MNST – 8.9.2012
The energy drink company reported an increase in Q2 earnings of 30%, however missed analysts expectations. Gross sales grew by 28.7% to $678.9 million with net sales up 28.2% to $592.6 million. Analysts’ expectations for sales were $596.1 million. Profit rose to $109.8 million or 59 cents a share, missing expectations of 61 cents a share. Last year at this time, MNST reported profit of 45 cents a share or $84.2 million.
In recent years the energy drink industry has taken off. Year-to-date MNST is up 47%. Although production costs have risen, MNST’s customer base remains strong as the energy drink sector remains popular. I myself prefer coffee, so I am not drawn to MNST’s product line, however the numbers do not lie, people want Monster Energy drinks.
David Cornes holds a degree in economics from the University of Montana.
Morning Rage 8.9.2012
The Hang Seng climbs just over 1% to a 3 month high lifted by the real estate market. StanChart, who
we have heard a lot about this week, rose again today 4.3%. Property data released today showed sales
rose in July prompting stocks forward. Evergrande, China Resources Land, and China Overseas Land rose
4.0%, 2.3% and 2.6% respectively. Li & Fund gained 3.1% ahead of its first half earnings with a first half
profit of 312M. Consumer inflation was down to 1.8% from 2.2% in China and factory output was at
9.2% in June, the weakest in over 3 years.
The FTSEurofirst inched forward .1% with a boost from miners due to Chinese inflation data. Banks and
commodities also helped prop the market as Standard Chartered also gained in Europe up 3.8% fighting
its accusations. Norwegian offshore engineering group Subsea 7 gained 5.8% today. Dane drugmaker
Novo Nordisk added 2.8% with better than expected 2nd quarter revenue. A few German stocks held the
country down as Porsche lost 4.6% and their second biggest lender, Commerzbank, dropped 4.4%.
Interesting news from Morgan Stanley as machines replace traders in the bond and interest-rate trading
divisions, this is due to sluggish activity and to prepare for a time when they will trade live stocks.
Commodities are looking mixed this morning with crude and gold up and natural gas and silver currently
down.
Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market.
Comments can be directed to ryghcw19@uww.edu