9:00am (EST)

“The zombies decided to work the extra week as we expected and are now set to adjourn from Congress this Friday.  It was refreshing to know Obama has a tripped plan to Hawaii regardless on if a deal gets done or not.  For all the teamwork that was promised during the election, where has it been?  We have know since August 2011 this Fiscal Cliff was coming and during that time nothing was done until after he last minute as the U.S. lost its triple-A credit rating.   

 

The zombies dragged their feet again last week and while we didn’t believe a deal would get done, we were hopeful just so that we could stop typing the words “Fiscal Cliff”.  We thought Thursday’s late night session between the head Z’s would create some Santa magic for Wall Street but after an hour there was still a stalemate.

 

Friday’s action was slightly bearish but the indexes are still holding support.  We were looking for a small gain of any kind on Friday just so that we could have said the market closed higher on a Monday and Friday for the first time since October.  This is usually one of the clues we look for when the market is in a trend but with the close, it is easy to say we are still in a choppy, slightly bullish, now bearish market. 

 

The Financial stocks made a push past resistance to start the week and traded above the $16.20 level.  A push past $16.40 would indicate a breakout while a dip below $15.80 would be the start of a possible new trend lower.  The bulls will need the Financial stocks to pull their weight, along with Tech, if the indexes are going to make a run at the 52-week highs.

 

We will again watch American Express (AXP, $56.65, down $1.07) for clues on how the Financial stocks are doing.  We were up 40% on the January 57.50 calls (AXP130119C00057500, $0.95, down $0.45) by Wednesday as they had reached a high of $1.40 on the stock’s pop to $58.35.  We were looking for a run to $60, which could still happen, but we locked in profits of 20% as we felt a pullback was coming.  The long-wick candle stick on the daily chart below made us nervous and our instincts served us well as we would be down 5% on the trade if we had left it open.  We still think shares can make a run to $60 but a close below $56 and the 50-day MA could lead to a test down to $53 again.  If so, we will be ready to pounce on put options.

We have been all over Apple’s (AAPL, $509.79, down $19.90) chart like grass on dirt but we haven’t pulled the trigger on a trade yet.  However, we may be getting close.  We mentioned last week a close below $520 would lead to a test to $500 and Friday’s 4% haircut was an eyesore.   

 

It has always been risky to bet against Apple as far as buying put options because it has been a strong company for many years.  However, in recent quarters that has been some slipups and earnings misses so it could go either way with their next earnings release.  Wall Street will have a wide range of numbers as the suit-and-ties make last minute adjustments and analyze their numbers and supply chains.  Apple will need to knock the cover off the ball and then some as an earnings match won’t be enough.  We will cover more on this story in the coming weeks and there could be some litigation news out this week concerning the company.  Good or bad, the verdict could also have a major impact on the stock.

The Apple December options are risky and the January options may not provide enough time to play a $100 move in the stock but let’s watch them to see how they trade.  The January 600 calls (AAPL130119C00600000, $3.40, down $1.05) were down 23% on Friday and the January 400 puts (AAPL130119P00400000, $1.62, up $0.74) surged nearly 85% after opening at $1.05 and closing at 88 cents on Thursday.  

The Apple February 600 calls (AAPL130216C00600000, $8.85, down $2.35) dropped over 20% on Friday and could also be used on a run back towards $600.  On a drop below $500, the January 400 puts and the February 400 puts (AAPL130216P00400000, $5.10, up $1.70) can be used to play further weakness.  They gained 50% on the stock’s 4% drop.

These options have higher premiums than we normally like to trade but we could take “half” positions to limit our exposure and to play the stock’s next major move.

In review, the game plan is basically the same as last week.  We will be watching Tech and Apple along with the Financial Select Spiders and American Express (and JPMorgan Chase, $42.81, up $0.03).  We are also looking for a miracle by Friday for the zombies to announce a deal.  A higher Monday close would also be a nice start for the bulls.” (from12/16/2012Weekly Wrap)…

The market closed higher on Monday as Tech and the Financial stocks lead the way higher through midweek.  Head Red Zombie (Boehner) was working on a Plan B that he thought would pass but was quickly shot down by his own members on Thursday and was never voted on.  This led to a volatile night in futures with the S&P 500 down over 50 points at one point.

Friday was the first day of winter and the bears came out in force to celebrate.  The major indexes were down nearly 2% after the zombies let another week pass without a deal getting done on the Fiscal Cliff.  The bulls battled back in the second half of trading and they were having a super week before Friday’s punch in the face.  The good news is that they still won the week.

It was the worst day thus far for December and Head Zombie for the blue side came out after the bell on Friday and talked about the Fiscal Cliff.  His comments were an hour late as traders had already taken positions ahead of the weekend.  The talking heads and suit-and-ties were telling everyone to “sell” because the market is headed for a correction but were seeing things a little different. 

President Obama said that he was disappointed by the antics of the Republicans because he feels he and the Democrats have met them more than halfway to get a deal done.  He also did his best Arnold and said he would be back at the White House after Christmas to get a deal done by January 1, 2013.

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