1:20pm (EST)
Although the futures were pointing towards a higher open , you could almost feel the nervousness in the bulls as Ben Bernanke spoke this morning before the market opened. A lot has been riding on the real “Big Ben” as he tries to quarterback the economy into the endzone and if he could make interest rates below 0% to where the government pays us to borrow money, he would.
[caption id="attachment_7833" align="aligncenter" width="312" caption="Daily chart of support and resistance for AAPL."]
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We will save our long-term comments on how he is driving down the American dollar but at some point, the printing presses can’t run forever.
In any event, Bernanke reiterated the central bank is ready to do more to stimulate the sluggish economy and his comments were the latest confirmation the central bank is about to ramp up its purchase of Treasury bonds to spark growth. We wouldn’t be surprised if it were Monday. No wonder our assessment of government economic policies have fallen to the lowest level since Obama took office.
Bernanke’s comments helped the futures strengthen and better-than-expected economic news led to a decent open. Retail sales continue to surprise as they rose 0.6% month-over-month in September. Wall Street was expecting a 0.5% increase. The Empire State Manufacturing Index rose to 15.73 in September, compared to estimates of 8.0. The consumer price index (CPI) rose 0.1% month-over-month in September but fell short for estimate of 0.2%. Excluding food and energy, the CPI was unchanged last month.
Business inventories increased 0.6% in August which was better than expectations for a 0.4% gain. And finally, the Reuters/University of Michigan consumer sentiment index for October came in at 67.9, versus the consensus estimate of 69.0.
However, the Financial stocks are getting whacked again and we continue to say they will need to rebound and get healthy before the bulls can push through the April highs and start a real run at higher levels. It was just 3 years ago this month the Dow was at 14,000…
The Dow managed to open higher and made its way to a high of 11,141 but sold-off after some of the economic news hit. The index then traded to a low of 11,010 and as you can see in the 130 point swing, volatility is picking up. The index continues to test our 11,150 target and a close above this level will have the bulls feeling good over the weekend. Currently, the Dow is down 40 points to 11,054.
The S&P 500 is staying within our 1,170-1,175 range and is flat at 1,174. A close above 1,175 today should lead to a test of 1,200 next week so we are watching this level like a hawk.
The Nasdaq traded above our target of 2,450 yesterday but didn’t close there but has broken through this level on the heels of Google’s (GOOG, $$599.93, up $59.00) blowout quarter. The index is trading at 2,458 (up 23 points) and a close above our target should lead to a push towards 2,500. However, we said the other day the Nasdaq could see 2,600 and the index has a good chance of doing that on Monday if Apple (AAPL, $310.00, up $7.69) can once again impress Wall Street.
The company reports earnings on Monday and it could shape the direction of Tech over the next few weeks. Apple should report great earnings but expectations are high. The only problem that worries us is the shortage of supply on some of the components used to make the iPhone and iPad. However, if Google can do it, we are sure Apple can follow suit.
One analyst came out today with a $500 price target for shares of Apple.
As far as Google, some traders took a chance on the October 600 calls (GOOG101016C00600000, $1.00, up $0.60) before the close yesterday as they were only selling for 40 cents. In our training video for our options manual “How to Trade Options on Momentum Stocks”, our editor-in-chief went over how to look at playing Google’s earnings.
Although there was no recommendation, this type of trading out-of-the-money calls (or puts) are like going to a casino. Sometimes they hit, sometimes they don’t but you have to act fast and you have to know what you are doing. The October 600 calls are currently at $1 but they traded to a high of $5.90 at the opening bell!
Had you bought 10 contracts of the Google 600’s, it would have cost you $400. Imagine this morning waking up to a gain of $5,500! Or, if we expand it for the high rollers, a $4,000 investment would have been worth $55,000. The ROI (return on investment) would have been 1,275%.
Now this is important, since October options expire today, the battle ground will be if Google stays above or below $600 a share. If the shares stay below $600, these options will expire worthless and as we go into the close today, these options could trade wildly. The key was to get in yesterday before the close and out at the open today.
We show you how to find these trades and we have played them in the past with the likes of Priceline.com (PCLN, $355.20, up $6.14), Nike (NKE, $82.27, up $0.50) and others but we didn’t feel like going to Vegas this week. However, we are going over this weekend as we have a trade for Monday.
If you are serious about taking your trading to another level and want to learn how to find trades like this, then you should seriously consider a purchasing to our trading manual. We will be doing another video this weekend to go over other types of trades and we look forward to you joining us!
For October, we are also offering a free 1-month subscription to our exclusive Members Area if you purchase the option trading manual. You can get a peak at what’s inside by clicking on the hot, shiny yellow button to your left on the website.
We have some last minute updates before the weekend which is why we are running a little late today. We are swinging the bat on an earnings trade for Monday and wanted to do a little more research. Subscribers, check the Members Area for the NEW TRADE!
We will be back Sunday night with the Weekly Wrap and until then, have a good weekend!
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