9:00am (EST) continued

The Dow gained 115 points, or 0.9%, to settle at 12,767 on Friday. The blue-chips traded down to 12,398 on Monday’s back test but held near-term support at 12,350. We said the first wave of resistance would be at the 12,600 level which was tested on Tuesday and Wednesday. The bulls cleared this area on Thursday’s close which set up Friday’s run to 12,800. We said a break above 12,800-13,000 could be a possible trend change which could easily carhDow to new highs for the year. A 5% pullback, to start, would put the Dow under 12,200 (to 12,129), if the market doesn’t like the Greece news. The Dow was at 12,554 to start Monday’s session and advanced 213 points, or 1.7%, for the week. For 2012, the blue-chips are up 550 points, or 4.5%.

 Longer-term chart:

The S&P 500 jumped 14 points, or 1%, to close at 1,342. The index tested a low of 1,307 on Monday but held 1,300 and tested 1,325 over the next two days before breaking through on Thursday’s close of 1,329. This set up Friday’s pop to 1,350 as the index reached a peak of 1,343. We said a move back above this level would get 1,375-1,400 in play and a 5% pop would get the S&P to 1,409. A 5% plunge the other way would put the index at 1,275 which is a level we have said is crucial in holding if 1,300 failed. The S&P 500 came into the week at 1,325 and advanced 17 points, or 1.3%, by Friday’s close. YTD, the index is showing a gain of 85 points, or 6.8%.

Here is the longer-term S&P 500 chart:

The Nasdaq surged 36 points, or 1.3%, to close at 2,872. Tech traded to a low of 2,806 at the beginning of the week and held the 2,800 level on Monday’s drop. We have been mentioning 2,850 as the marquee battlefield which was cleared on Monday’s run to 2,883. This area was tested on Tuesday, cleared on Wednesday but not on the close, and tested again on Thursday. We didn’t think the bulls had enough muscle to clear 2,900 (which held) but a 5% move this week not only clears this level, it would put the Nasdaq at 3,015. We have been saying that as long as 2,900 was in the picture, the bulls could push 3,000. A 5% pullback would get the Nasdaq back down to 2,729 and below crucial support at 2,750. The index started Monday at 2,858 but Friday’s gains only lifted the index 14 points, or 0.5%, for the entire week. For the year, Tech is higher by 267 points, or 10.3%.

Here is a 30-month chart for Tech:

The Russell 2000 tacked-on 9 points, or 1.2%, to finish at 771. The small-caps traded to a high of 776 to start the week but tested 750 on Monday’s fade. The bears broke through this level on Tuesday and Wednesday which was bearish and would have brought 740-720 back into the mix. However, the close above 750 both days kept a run back to 780 alive but Friday’s high was only 772 which was below resistance and below Monday’s top. Our charts outlined a break above 800 could lead to 830 and a 5% pop would but the Russell 2000 at 810. A move of 5% the other way would equate to 732. The Russell 2000 was at 769 before Monday’s opening bell but was only up 2 points, or 0.3%, after all the noise. The index is showing a gain of 31 points for 2012, or 4.1%.

Here is a longer-term chart of the Russell 2000:

The S&P Volatility Index ($VIX, 21.11, down 0.57) came into the week at 21.23 and fell below 20 on Monday’s rush higher at the open. By the end of the session, the VIX was back above the 22.50 level after closing at 23.56, up 11%. The index closed below 22.50 on Tuesday (22.09) but what kept us bearish (and why we added 3 more trades last week to our Daily) is the fact the index traded higher throughout the rest of the week. The VIX touched 23.90; 24.93; and 24.81 over the next 3 days before Friday’s pullback.

Here is the chart we showed you of the VIX last week:

This past Monday was a negative close for the market and had it been positive, we might have factored in a possible trend change as it would have been the third-straight positive Friday/ Monday close for the market. Futures were showing a strong open last Sunday night when we went to press but Monday ended with a 250-point swing on the Dow after a nearly triple-digit gain at the open.

We saw signs of the VIX tripping 25 which still has us feeling bearish and we don’t believe the upcoming earnings cycle is going to be a good one. If companies are going to miss expectations, the next 2 weeks will be the time they confess.

We also mentioned the week after June options expiration is extremely bearish, historically, for the market and last week’s economic news was lousy. There are a number of key events this week so no matter where the market ends on Monday it will only be a start of something better or worse to come. The bulls will need a lot of headlines to go their way to keep a sustained rally going while the bears are hoping fundamentals take over.

The news out of Greece is looking favorable for the bulls as the pro-bailout party, led by Antonis Samaras, has won Greek’s parliamentary election. This increases the likelihood the country will remain in the Eurozone and the overseas markets are showing strong gains as we go to press. 

 

As we head to press, futures are showing a lower open and look like this.  Dow futures are down 67 points to 12,648 while the S&P 500 futures are lower by 7 points to 1,331.  The Nasdaq 100 futures are declining 7 points to 2,557.      

MEMBERS AREA

Please remember, ALL “Exit Targets” and “Stop Targets” are targets.  You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one.  We will send out a “Profit Alert” or “Trade Update” if we want you to close a position OR if a new trade comes out.  Otherwise, follow instructions at all times in the 9am and 1pm updates.  Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames but it is rare that we do.

Facebook (FB, $30.01, up $1.72)

July 24 puts (FB120721P00024000, $0.40, down $0.20)

Entry Price:  $0.65 (6/14/12)
Exit Target: $1.05-$1.30
Return: -38%
Stop Target: None

Action: This is a 60-minute chart for Facebook which makes support and resistance a little easier to see. We said there could be risk up to $30 and shares closed right at resistance Friday. There was a ton of call and put option buying at the June 30 strike which may have pushed shares to resistance so neither side won. A move above $31.50-$32 would be bullish but we are looking for a drop back below $28 this week and $25 by mid-July.

FedEx (FDX, $87.63, up $0.79)

July 77.50 puts (FDX120721P00077500, $0.80, down $0.20)

Entry Price:  $0.92 (6/12/12)
Exit Target: $1.95
Return: -13%
Stop Target: 45 cents

Action: There is risk up to $88-$90 and we would like to see a close below $87.50 today which isn’t asking much. We are looking for a test down to $80 or worse by mid-July.

Potash (POT, $38.60, up $0.69)    

July 35 puts (POT120721P00035000, $0.55, down $0.25)

Entry Price:  $0.75 (6/11/12)
Exit Target: $1.50
Return: -27%
Stop Target: None

Action: Shares of Potash traded to a high of $39.08 to start the week and Friday’s high of $38.80 was still short of resistance at $40. Shares remain below their 50-day and 200-day MA’s and we are looking for a drop below $35 by mid-July.

iShares Russell 2000 (IWM, $77.22, up $1.02)

July 70 puts (IWM120721P00070000, $0.75, down $0.20)

Entry Price:  $1.20 (6/6/12)
Exit Target: $2.40
Return: -38%
Stop Target: 60 cents

Action: The small-caps have given us good clues on market direction so let’s see if 780 holds on the Russell 2000. If so, we would like to see a move towards $75 over the next few weeks.

 

Veeco Instruments (VECO, $33.28, up $0.51)

July 30 puts (VECO120721P00030000, $1.00, down $0.25)

Entry Price:  $1.00 (6/6/12)
Exit Target: $2.00
Return: 10%
Stop Target: 50 cents

Action: Veeco traded to a low of $32.11 for the week and we are looking for a drop below $30 over the near-term, $25 by mid-July. A move above $34, which has been solid as resistance, would be bullish but we would expect $36 to hold.

Illinois Tool Works (ITW, $54.48, up $0.40)

July 50 puts (ITW120721P00050000, $0.60, down $0.20)

Entry Price:  $1.05 (6/4/12)
Exit Target: $2.10
Return: -43%
Stop Target: None

Action: There is risk to $56 and the 200-day MA is just below at $55.75. Shares feel to a low of $53.60 last Thursday but were able to close above $54 for the week. We are looking for a drop below $53week which should lead to a quick trip to $50 or below.

First Solar (FSLR, $13.95, up $0.50)

July 10 puts (FSLR120721P00010000, $0.30, down $0.10) 

Entry Price:  $0.62 (5/23/12)
Exit Target: $1.20
Return:  -52%
Stop Target: None

Action: Shares could trade to $15 on an upbeat market but a close below $13 would get this trade going again. These are cheap options on a volatile stock so try not to get frustrated as we wait for a drop to single-digits by mid-July.

 Apollo Group (APOL, $33.12, up $0.17)

August 27 puts (APOL120818P00027000, $0.80, flat)

Entry Price:  $0.90 (5/10/12)
Exit Target: $1.80
Return:  -22%
Stop Target: 45 cents

Action: This is a 15-year chart for shares of Apollo which shows strong resistance at $35. Shares fell to a low of $32.26 last week and we would like to see a move below $32 this week.

 
Arena Pharmaceuticals (ARNA, $8.40, up $0.32)

July 3 calls (ARNA120723C00003000, $5.50, up $0.30)

Entry Price:  $1.00 (4/30/12)
Exit Target: $2+ (closed half on 6/5/12 at $3.40)
Return:  345%
Stop Target: $4.50 (HARD STOP on other half)

Action: This is a 10-year monthly chart for shares of Arena. We knew when Arena traded to a high of $7.23 on Monday it would clear the way for a run at $8. We have a price target of $10+ if there is no delay with their obesity drug, Lorcaserin, which could go to market by the end of the year if all goes well. For those of you just joining us, the company will meet with the FDA on June 27.

Other 2012 Portfolio OPEN positions (3):  These are trades that are still open in the portfolio but are down over 50%.  They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around.  This means we would not open any new positions.  We are still keeping track of the trades and we will record the results, accordingly, when we close them or if the options expire.  Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.

E*Trade Financial July 12 calls (from March 2012)
Bank of America January 12.50 calls 2013, July 12 calls (from March 2012)
Best Buy July 16 puts (from May 2012)

WATCH LIST SECTION

These trades are NOT recommendations.  They are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices.  We try not to have more than 12-15 open trades at any one time which is why we created a Watch List.  We will not list entry prices because these stocks are on the verge of breaking out or they could sell off but these are the trades we are watching as new candidates.

Salesforce.com (CRM, $134.56, up $5.20)

July 100 puts (CRM120721P00100000, $0.55, down $0.25)

Thoughts: Shares could rally to $140 but the trend is still lower. We are expecting a test to $120 over the near-term, $100 if support at $125 fails.

Advanced Auto Parts (AAP, $69.74, down $0.92)

July 65 puts (AAP120721P00065000, $0.95, down $0.10)

Thoughts: Watch for now.


 

Freeport-McMoRan Copper & Gold (FCX, $34.34, up $0.44)

July 30 puts (FCX120721P00030000, $0.55, down $0.15)

August 29 puts (FCX120818P00029000, $0.70, down $0.20)

Thoughts: A move above $35 would be bullish but we are expecting a test to $30 over the near-term and the mid-$20’s by August. The 52-week low is $28.85.

Coinstar (CSTR, $62.81, up $0.01)

July 55 puts (CSTR120721P00055000, $0.65, down $0.10)

July 57.50 puts (CSTR120721P00057500, $1.10, down $0.15)

Thoughts: Resistance at $64 has held up well but we are looking for a drop below $60 over the next month or 2.

KLA-Tencor (KLAC, $48.31, up $1.00)

July 44 puts (KLAC120721P00044000, $0.45, down $0.15)

September 37 puts (KLAC120922P00037000, $0.50, down $0.10)

Thoughts: We would like to see a quick pop to $50 which is where we might start half positions as we expect a drop to $44 or worse over the next few months.

 
Schlumberger (SLB, $66.46, up $1.08)

July 57.50 (SLB120721P00057500, $0.60, down $0.20)

August 55 puts (SLB120818P00055000, $0.85, down $0.20)

Thoughts:  We said shares could test $67 on fluff. We like the July 57.50’s if this level holds over the next day or two.

 

PowerShares QQQ (QQQ, $62.99, up $0.77)

July 60 puts (QQQ120721P00060000, $0.70, down $0.30)

Thoughts:  Watch for now.