9:00am (EST)

“The bears made a strong statement last week but Friday’s recovery was slightly bullish.  There were a number of sectors and stocks in play and while much of the news was bearish, the bulls held longer-term support despite the short-term breakdown.  Earnings and economic news will continue to be the driver of near-term catalysts for April but May is shaping up to be the battleground for a breakout or breakdown, or a continued trading range.

The breakdown in commodities continued with a slight rebound by week’s end.  We wanted to update the Copper chart because we have mentioned it gives a good view of the overall global economy.  We have been warning of Copper’s impending drop below $3.50 for months and last week’s breakdown may have finally caught Wall Street’s eye.  Copper tanked to a low of $3.08 last weekend is at its lowest level since October 2011.  A close below $3 would signal a slowdown in the global economy and will be a big story which, in turn, could lead to weakness in the market as the pros lock-in current gains for the year.

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Gold fell to a low of $1,321 last Monday but rebounded to clear $1,400.  It’s been a dead cat bounce with 4 lives as Gold closed higher the rest of the week.  Last week’s chart clearly showed the drop to $1,400 coming but we were a little surprised of the test to $1,300 come so quickly.  The short-term charts showed a possible test to $1,325 but we have a feeling Gold could test $1,000 at some point if the selling pressure returns.

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Silver tested a low of $22 and we said last week a test to $22.50 was in the cards.  We are salivating to see Silver fall to $20, or below, but the spot prices are still incredibly high.  We did call around and found some silver for under $3 a spot so we are actively seeking to add to our position,  If Silver falls below $20, we wouldn’t mind paying a $2-$3 spot for American Eagles, or open up a coin shop to play the rebound to $50 down the road.  Silver is a big component of manufacturing and while it may take 3-5 years for a double, buying silver at these levels is starting to look luscious.  For those of you that have never purchased Silver, start buying third positions at current levels in case it does get cheaper.  Buy another third at $20 and if we get lucky and Silver drops to the teens, complete the rest of your purchase.

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Earnings were a mixed bag with some good, some bad but overall, they were ugly.  We were looking at Tech and the Financials, specifically, for clues of a test to news highs or a break below support.  The earnings bar is really low for a lot of companies to beat Wall Street’s estimates but it’s the revenue shortfalls that we are noticing.  Over 65% of the companies that have reported beat earnings buy only 55% are topping revenue.

We wanted to see a breakout in the Financial stocks but when JPMorgan (JPM, $47.23, up $0.59) failed to break $50 on its earnings report, we knew the sector could be in trouble.  Bank of America (BAC, $11.66, up $0.22) fell below its 50-day and 100-day moving average (MA) and Goldman Sachs (GS, $138.72, up $0.12) failed to clear $150 when they confessed to the suit-and-ties.  The Financial Select Spiders (XLF, $18.08, up $0.25) give a better snapshot of the recent weakness and could be a good tell if they will help or hurt the bulls’ case.  The break above $18.50 was bullish the prior week for a possible test to $20 and continued new highs but the close below $18 and back test is worrisome.  The XLF looks like it could fall to $17.50 and a close below $17.25 would be bearish.  A rebound and close above $18.25 would be bullish.

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As far as Tech, we felt there was a chance Google (GOOG, $799.87, up $33.96) would miss Wall Street’s estimates but it would have been a hard bet to make and why we didn’t.  Shares recently topped out at $844 and the cat calls for $1,000 were growing louder so you had to respect the upside as the company beat estimates by 92 cents a share.  Google came in at $11.58 while the suit-and-ties had penciled in $10.66.  However, revenues came in at $13.97 billion versus estimates for $14.09 billion.  The big story Wall Street is missing is the huge tax break Google got during the quarter for “Federal research”.  If analysts were to back this number out of the equation then Google would have earned $10.36 a share and missed by 30 cents!

We haven’t talked about negative Monday/ Friday closes in a while as Friday’s have been mostly bullish all year long with Monday’s mixed to bearish over the past few months.  However, the blue-chips had a lower previous Friday and a lower Monday before Friday’s slightly higher close.  We were amazed to see the blue-chips end in positive territory after International Business Machines (IBM, $190.00, down $17.15) rare earnings miss.  The 8% drop in the stock accounted for 130 negative Dow points and McDonald’s (MCD, $99.92, down $1.99) added another 15 red points.  If the Dow ends higher on Monday it would suggest a continued trading range but a lower finish would suggest further weakness is ahead.

The late April swoon came right on cue last week and this week could be more of a tell if there is further weakness or a snapback rally.  Economic news and earnings will once again dominate the week with Apple’s (AAPL, $390.53, down $1.52) numbers as the main event after Tuesday’s close.  Shares have been in a freefall for months after topping at $700 in late September.  The stock fell below the $400 for the first time in over 2 years last week so this report could be one of the biggest in the company’s history.

If shares rally on better-than-expected earnings AND revenue, the overall market will likely benefit.  The same is true if Apple announces worse-than-expected numbers.”  (from 4/21/2013 Weekly Wrap Update)…

The bulls bounced back last week after pushing the top of the current trading range despite a mixed bag of earnings and economic news.  The bears tried to make some noise at the beginning of the week following the prior week’s push to support but were unable to hold the bullish run to new highs.

The last 3 weeks have seen the Dow up 300 points, down 318 points, and with last week’s gain of 165 points, all signs are pointing towards a volatile May not only for the Dow but for all of the indexes.  History says “sell in May and go away” and the talking heads will be preaching this theme over the next few weeks but it isn’t always the case as the upcoming month also has a history of being bullish.  (read more…)

 

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The Dow added a 12-pack, or 0.1%, to close at 14,712 on Friday.  The blue-chips traded to a low of 14,457 on Monday’s open but held the 14,400 level and 14,444 which was the previous Friday low.  The Dow ended the session with a 10-point pop and needed to clear 14,600 to reverse the downtrend.  Tuesday’s triple-digit pop reached a high of 14,721 and easily cleared this level to set up a test to 14,800.  If cleared, a run to 15,000 and new all-time highs is a good possibility.  Wednesday’s high was 14,747 and the index pushed 14,768 on Thursday.  Friday’s high was 14,743 and although the low checked in at 14,684, the bulls held 14,700.  The Dow was at 14,547 before Monday’s open and added 165 points, or 1.1%, for the week.  YTD, the blue-chips are up 1,608 points, or 12.3%.

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The S&P 500 slipped 3 points, or 0.2%, to finish at 1,582.  The index tested a low of 1,548 to start the week but held 1,550 and added 7 points by the close to end at 1,562.  The close above this level set the stage for a test to 1,575 and if cleared, 1,600.  Tuesday’s push to 1,579 and the close at 1,578 was confirmation the index could test its all-time intraday high of 1,597 set earlier this month.  Wednesday’s pop to 1,583 was a tease as the S&P finished flat for the session but Thursday’s high checked in at 1,592.64 and nearly topped the all-time close of 1,593.  Friday’s high was 1,585 but the index spent much of the session in the red before a push to the flat line by the close.  The index held 1,575 but a 2% pullback gets 1,550 back in play while a 1% push this week should trigger 1,600.  The S&P 500 started the week at 1,555 and jumped 27 points, or 1.7%, by Friday’s close.  For the year, the index has advanced 157 points, or 10.9%.

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The Nasdaq dropped 11 points, or 0.3%, to close at 3,279.  Tech needed to hold 3,200 to start the week and following a dip to 3,198, the index rebounded to clear 3,225 with Monday close of 3,233.  This set the stage for a run to 3,250 and if cleared, 3,275-3,300.  Tuesday’s run to 3,275 and the close at 3,269 gave us a good clue the Nasdaq would challenge decade highs again.  Wednesday pop to 3,277 was nice but the index ended flat before Thursday’s run to 3,301.  Friday was a rough day as there was no green to be found with the low coming in at 3,268.  The index held 3,275 but there is risk down to 3,250-3,200 on a close below this level.  Otherwise, the bulls are looking to clear 3,300 again and push the 52-week and 12-year high of 3,306.95.  The Nasdaq came into the week at 3,206 and was up 73 points, or 2.3%, with Friday’s close.  For 2013, the index is showing a gain 260 points, or 8.6%.

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The Russell 2000 gave back 5 points, 0.5%, to close at 935 on Friday.  The small-caps have been flirting with the 900 level in recent weeks and Monday’s test to 899.92 was no different.  However, the index recovered of its lows and 1% loss to finish the session with a 2-point gain to 914.  We said last week a close above 920 would be bullish for a run to 940 and Tuesday’s pop to 929 showed some strength.  Wednesday’s run to 934 was impressive considering the overall flat day that led to Thursday’s close right on 940.  Friday’s low was 932 but 930 held.  There is risk down to 920 if the bulls don’t get a win on Monday and then 900 again on a break below this level.  A close back above 940 and then 945 should be enough to get 954 and the all-time high back in the picture.  The Russell 2000 surged 23 points, or 2.5%, for the week after coming in at 912.  The small-caps are up 86 points, or 10.1%, for the year.

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The S&P Volatility Index ($VIX, 13.61, down 0.01) came into the week at 14.97 and traded up to 16 on Monday’s early morning pullback before ending at 14.39.  The close below 15 kept the bulls motivated and Tuesday’s drop under 13.50 to 13.48 was a bonus.  Wednesday’s close of 13.61 was the result of a flat session.  The VIX traded down to 13.13 on Thursday’s rally but ended the day slightly higher at 13.62.  Friday’s range was 13.49-14.18 but 15 held and the bulls made a push back below 13.50.  Anything above 15 should be watched carefully and 17.50-18 would be a warning signal for a reversal.  A close back below 13.50 to start the week and then 13 by midweek would signal new highs for the S&P 500.  The 52-week low is for the VIX is 11.05.

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The bulls are back at the top of the ranges from March after holding the bottom uptrend lines from the prior week.  Friday’s action was bullish despite the mixed finishes considering the weaker-than-expected GDP numbers and the bounce off the lows.  Amazon.com (AMZN, $254.81, down $19.89) weighed heavy on Tech after giving up 7% and Google (GOOG, $801.42, down $7.68) wasn’t much help either.  The good news is both stocks held near-term support and Apple (AAPL, $417.20, up $8.82) showed some strength after holding $400.

Trading ranges can be frustrating and we have been warning of one since early April:

From our April 6, 2013 Weekly Wrap: 

“The trading ranges since early March have been:  Dow 14,400-14,600 with a breakout to the upside; S&P 1,540-1,560 with a push to all-time highs; Nasdaq 3,200-3,250; and for the Russell – 930-950 but is currently stretched to the downside.  The fact that the market held it March lows is bullish but a break below the February lows would be bearish.  In the meantime, the market remains in a trading range.

We mentioned last week April is the best month for the Dow with average gains of 2% over the past 6 decades and it is also the second best month for the S&P 500.  Although Tech has been weak of late, April has shown strong gains since the 1970’s and is the third best month for the Nasdaq.  There has been a lot of talk that April is the new May but we wouldn’t count the bulls out until the month settles.  However, the market gave mixed signals all week ahead of Friday’s big event and the clues we discussed last week have started to unfold so the bears need to be respected.” (END)

The bulls have trying to make a push out of the current range and this week’s news has the potential to help or hurt them.  There will be a number of unemployment news this week highlighted by Friday’s Nonfarm Payrolls report.  Also in the mix will be the FOMC meeting and a number of ISM announcements, as well as a bevy of other economic reports on tap.  If all goes well, the bulls could push new highs:

From our April 14, 2013 Weekly Wrap:

“If earnings come in better-than-expected and economic news doesn’t disappoint then the indexes should see a continued rally.  If so, the extended targets we could see are: Dow 15,300; S&P 1,625; Nasdaq 3,350.  We will keep our target of 975 for the Russell 2000.

We must admit even we are surprised by the GAINS the indexes have made for the year but we are not surprised by the rally as we told you it would have legs from December through April.  May might be a different story and there could be some seasonal weakness in late April but until the bottom uptrend lines from the 5-year charts crack, the bulls are in control.” (END)

There has been a lot of talk about the seasonality of May and as we close out April and look into next month we thought it would be worth mentioning the history of May and the market.  The “sell in May and go away” theory has played out well in recent years but historically the month has also been bullish.

From the mid-1960’s through the mid 80’s, the S&P 500 fell 75% of the time, or 15 out of 20 May’s.    However, from 1985 through 1997 May was fantastic with 13-straight bullish closings with gains averaging over 3% per year.  A 3% pop this May would mean new historic highs.

The action since the late 1990’s has been mixed with 7 up May months, and 7 down.  The good news is that post-presidential years have been bullish with Tech leading the way.  The S&P 500 usually has the second best May, followed by the Russell 2000 and then the Dow.

We have been right in calling for an extended market rally and while we have become somewhat nervous trusting the bulls, our extended fluff targets from mid-April will come into play on a 2%-3% push higher.  At some point we do expect a nasty pullback or correction but it might not come until June or July.  There is likely to be some “window-dressing” this week as some fund managers lock in their gains in anticipation of a weaker May but the market still hasn’t experienced the “blow-off” or euphoric top pop that usually accompanies bull markets.

If Apple, Amazon and Google hold support and make another push higher then we can see Tech leading the way higher in May.  We will also have to see some strength in the Financial stocks and some M&A (merger and acquisition) activity would help keep the uptrend alive.  Meanwhile, if the small-caps start to crack and the VIX rises, be prepared for a pullback to the bottom of the trading range, or worse.

Futures are showing a mixed open this morning:  Dow futures are lower by 2 points to 14,647 while the S&P 500 futures are off a point to 1,575.  The Nasdaq 100 futures are up 2 points to 2,832.

 

MEMBERS AREA

Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades.  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 “New Trade” 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.  Closed Trades for 2013: 38-28, including the Weekly Wrap that is 12-1).

 

Solazyme (SZYM, $9.25, up $0.10)

June 10 calls (SZYM130622C00010000, $0.45, up $0.05)

Entry Price:  $0.35 (4/25/13)
Exit Target:  $0.70
Return:  29%
Stop Target:  None

Action:  Solazyme had a strong week as shares tested $8 on Monday and Tuesday before Wednesday’s surge to $8.75.  Thursday’s push past $9 was beautiful and Friday’s pop to $9.34 showed additional strength.  The real test comes at $9.50 and the 200-day MA and if cleared, shares should push $10+.  Short-term support will try to hold at $9 and there is additional help at $8 that served as prior resistance.  Earnings are due out on May 8 and we are looking for an upside “surprise” for the suit-and-ties.

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SAIC (SAI, $14.65, down $0.10)

June 15 calls (SAI130622C00015000, $0.40, down $0.05)

Entry Price:  $0.25 (4/24/13)
Exit Target:  $0.75
Return:  60%
Stop Target:  None

August 15 calls (SAI130817C00015000, $0.55, down $0.10)

Entry Price:  $0.40 (4/24/13)
Exit Target:  $1.20
Return:  38%
Stop Target:  None

Action:  Shares reached a 52-week high of $14.92 last week and a break above $15 would be bullish.  Resistance is choppy up to $17 on the longer-term chart but we only need a run to $16 to double and triple our money on these 2 trades.

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Symantec (SYMC, $24.42, down $0.03)

May 25 calls (SYMC130518C00025000, $0.55, flat)

Entry Price:  $0.60 (4/11/13)
Exit Target:  $1.20
Return:  -8%
Stop Target:  None

Action:  Shares made a nice move back above $24 last week but face resistance at $25.  If cleared, the stock could run to $27-$28 by mid-May.  Support is at $24 and the 50-day MA followed by $23.50.

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Keryx Biopharmaceuticals (KERX, $8.15, down $0.19)

June 10 calls (KERX130622C00010000, $0.40, down $0.10)

Entry Price:  $0.70 (2/12/13)
Exit Target:  $1.40
Return:  -43%
Stop Target:  None

Action:  Keryx made a run past $8.50 on Monday and traded to a high of $8.64 followed by Tuesday’s pop to $8.77.  However, shares failed to hold $8.50 either session and they tested $8 on Wednesday’s pullback.  There was another failed attempt at a breakout on Thursday as shares peaked at $8.41 and Friday’s test back near $8 was a bummer.  If shares close below $8 there is risk back down to $7.50.  A close above $8.50 should get $9 in play and a possible push to $10.

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MGM Resorts International (MGM, $13.52, down $0.01)

June 15 calls (MGM130622C00015000, $0.25, flat0, flat)

Entry Price:  $0.40 (1/2/13)
Exit Target:  $0.80
Return:  -38%
Stop Target:  None

Action:  MGM had a tremendous week, surging 11% and reaching a high of $13.74.  The 52-week high is at $13.78.  Earnings are due out this week on Thursday and while we believe they will be better-than-expected, there is risk back to $12.50 and the 100-day MA on a miss.  The 52-week high could be challenged if all goes well and we have been calling for a run to $15 since the beginning of the year.

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Other 2013 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 2013Portfolio link in the Members Area to view ALL open/ closed trades.

 

Ironwood Pharmaceuticals May 20 calls (from March 2013)

Spider S&P 500 May 150 puts (from April 2013)

PowersharesQQQ May 66 puts (from April 2013)

 

 

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 candidate.

 

Nasdaq OMX Group (NDAQ, $28.73, up $0.53)

May 30 calls (NDAQ130518C00030000, $0.25, up $0.05)

June 30 calls (NDAQ130622C00030000, $0.70, up $0.15)

Thoughts:  At the beginning of the month, shares fell from $32 to under $28 and we made a note to ourselves to watch for a rebound once a bottom appeared to be in place.  Shares rebounded to $28.91 on back-to-back days and a close above $29 would be bullish for a run back to $32 and 52-week highs.  Support is at $27.50

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PhotoMedex (PHMD, $16.06, up $0.29)

May 17.50 calls (PHMD130518C00017500, $0.25, up $0.10)

June 17.50 calls (PHM130622C00017500, $0.65, up $0.10)

Thoughts:  Shares could make a run to past $17 and earnings are due out on May 6.  The company has beaten estimates for the past 2 quarters by 6 and 7 cents.  Support is at the 50-day MA, or $15.25, followed by $15 and the 100-day MA.

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Walter Energy (WLT, $17.27, down $0.71)

June 25 calls (WLT130622C00025000, $0.50, down $0.10)

Thoughts:  It has been a rough 52-weeks for Walter Energy as shares have fallen from a 52-week high of $69.41 to a low of $16.24.   There is a chance shares hold current levels but here is risk down to $16, or worse, on continued weakness.  A close above $18 and then $20 would be super bullish.

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Vertex Pharmaceuticals (VRTX, $79.02, down $1.30)

June 95 calls (VRTX130622C00095000, $0.95, down $0.45)

July 100 calls (VRTX130720C00100000, $0.70, down $0.20)

Action:  We believe shares are on their way to par which is Wall Street gibberish for $100.  Support is at $77.50 but a break below this level would be short-term bearish following the surge from $55.  We could go long on a move back above $85.

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SolarCity (SCTY, $23.34, down $0.55)

May 25 calls (SCTY130518C00025000, $0.75, down $0.20)

Thoughts:  We have said this recent IPO could trade past $20 and last week’s high was $24.45.  A run to $27 is possible over the near-term while a break below $20 would be bearish.

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Sunpower (SPWR, $13.25, up $1.09)

June 14 calls (SPWR130622C00014000, $1.40, up $0.50)

Thoughts:  These options opened at $1.25 and we didn’t want to chase although they did reach a peak of $1.88 on Friday.  Support is at $11.50 and the 50-day MA.  A close above $14 would be very bullish.

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Clorox (CLX, $86.67, down $0.39)

May 90 calls (CLX130518C00090000, $0.35, down $0.15)

Thoughts:  Resistance at $90 has been a brick wall and last week’s pullback into earnings on Wednesday was a gift or we need to use put options.  There is support at $85 and the 50-day MA but a break below this level would be bearish.

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Cyberonics (CYBX, $42.99, down $0.25)

May 40 puts (CYBX130518P00040000, $0.55, flat)

June 40 puts (CYBX130622P00040000, $1.75, up $0.05)

Thoughts:  Resistance is at $45 and we are expecting a drop below $40 by mid-May.  We ran out of time on our last week but we may get back on the horse on a close below $42.

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Bank of America (BAC, $12.42, down $0.02)

June 12 calls (BAC130622C00012000, $0.75, flat)

Action:  Shares tested support at $11.50 to start the week, falling to $11.57 before ending the session higher.  We got a close back above $12 and the 50-day MA on Tuesday and a 3% pop on Wednesday to $12.37.  Thursday’s high of $12.54 gets $12.75 and the 52-week high of $12.94 back in the mix on continued strength.  Support is moving up from $11.50 to $12 and a move back above $12.75 would be bullish.

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ADT  (ADT, $43.91, down $0.13)

May 46 calls (ADT130518C00046000, $0.70, down $0.10)

Thoughts:  Earnings are out on Wednesday.

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