12:50pm (EST)
The bulls are trying to push Monday’s highs ahead of the Fed’s 2-day meeting that began today. The big announcement on what the zombies will do as far as tapering will finally be answered and another pending market headline will be in the books.
Much of the “smart money” and Wall Street have penciled-in a reduction in the Fed’s $85 billion monthly bond-buying program to the tune of $5-$10 billion. We are still on the fence on if the zombies will cut the cord or not because history shows when the Fed does cut its stimulus packages there is usually a sharp selloff in the market.
Bernanke cares very much about his legacy so he will be ultra careful in pulling the puppet strings. On one hand, he doesn’t want to create a bubble in the market, while on the other he knows there is downside risk no matter what he does. Although we have said all along a taper cut won’t come until December, if there is a one, we believe it could be $20 billion.
Big Ben has been a master in staying a step ahead of the market and with rumors galore flying around on who will replace him as Fed Chairman he could do something totally unexpected.
Elsewhere, we wished we would have kept closer tabs on Coinstar’s name change to Outerwall (OUTR, $49.30, down $6.67) because it would have been a great short ahead of earnings.
Shares are down 12% after the company warned that it expects to earn between $0.82-$0.94 a share, on revenue of $569-$589 million. This was a drastic reduction of earlier forecasts between $1.36-$1.51 a share, on revenue of $604-$630 million.
The company doesn’t report earnings until late October but now is the time for companies that are going to miss Wall Street’s expectations to confess if the aren’t going to meet them. Sometimes, companies raise earnings guidance ahead of earnings season but Outerwall is in a dying sector and could be in further trouble.
The September 50 puts (OUTR130921P00050000, $1.40, up $1.35) would have been a great trade as they are up 2,700% today but they expire this Friday and there was no way we would have played these for a quick trade even though they closed at a nickel on Monday..
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The October 50 puts (OUTR131019P00050000, $3.00, up $0.40) closed at 60 cents yesterday and are up 400%.
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Q3 earnings season starts in October and while there are still a few companies winding down their numbers into the end of the month, the premium trades are coming so we just have to be patient. We have done well playing earnings over the past few months as we wait for a breakout or breakdown out of the trading range and we will be in great position to play the move.
As we head to press, the Dow is up 41 points to 15,536 while the S&P 500 is higher by 6 points to 1,703. The Nasdaq is gaining 21 points to 3,739.
We do have a New Trade we are getting into today on a stock we feel will move 10% over the next month or so. If we are right, the options we are recommending should get us a 100+% return. Subscribers, check the Members Area for the updates and stay locked-and-loaded as we may have additional trades on the way.
