9:00 a.m. (EST)
With NFL training camps starting, I figured I would coin a new phase for the stock market and to applaud the bulls for their efforts on Monday. Although the bears got a slice of the pie by taking Tech and the small-caps lower, I mentioned it would be important for the blue-chips to start the week off with a win.
The Dow added 22 points, or 0.1%, to finish at 16,982 on Monday. The blue-chips stumbled at the open as the bears pushed 16,877 but were unable to make a serious run at 16,800. The bulls made an attempt at clearing and holding 17,000 after touching 17,001 but didn’t have the muscle to reclaim short-term resistance.
The S&P 500 gained a half-point, or 0.01%, to close a shade under 1,979. The index dipped below the 1,975-1,970 level shortly after the open and tested 1,967 before bouncing back to push 1,981. The bulls failed to hold 1,980 while the bears were humbled in their attempt to get a close below 1,970. The next 10-point move could decide the next near-term trend so I’m watching the index a little more closely given the continued divergence.
The Nasdaq slipped 5 points, or 0,1%, to end just below 4,445. Tech tested support at 4,425-4,400 and split the middle by kissing 4,413 shortly after the opening bell. However, resistance at 4,450 was cleared by 5 points on the rebound but no cigar for the bulls. This level needs to be reclaimed, first, before new highs can be considered again.
The Russell 2000 also fell 5 points, or 0.5%, to settle at 1,139.50. The small-caps traded to a low of 1,132 following a half-point pop higher to 1,145 on the open. The bulls battled back and nearly held near-term support at 1,140 but there is continued risk to 1,125 following the bearish close.
The S&P 500 Volatility Index ($VIX, 12.56, down 0.13) went whacky on the open as the bears pushed 13.64 but resistance at 13.50 held during the 45 minute battle. I have repeatedly said the bulls have wiggle room to 13.50-15 but that a close above the latter could signal a short-term top. Although the VIX finished near its session low, the bulls failed to get below 12.50 by the bell. More importantly, a drop below the 11.50 level would confirm another possible run to new highs on the S&P and if 2,000 triggers.
Yesterday was busy as I closed 3 more profitable trades to start the week and opened a new position for both the Daily and Weekly. With the portfolio getting light again, there will be plenty of room for new trades heading into August and September. Even better, the longer the current trading range plays out, the bigger the move will be.
The indicators I follow continue to provide GREAT market clues so patience is needed until the stars align. In the meantime, quick and limited trades are the best way to navigate trading ranges (and divergence) while I stay focused and nimble.
Remember, June was an incredible busy and profitable month while the July action has been somewhat lackluster despite the run to new 52-week and all-time highs. I have done well preparing for the trading range following the July jailbreak ahead of the holiday and I have a feeling August will be very profitable. It just remains to be seen if I will be using call or put options.
Ahead of the open, futures look like this: Dow (-5); S&P 500 (-1); Nasdaq (-4).
Closed Trades for 2014: 74-37 – the Weekly Wrap is 22-4 (85%) for 2014 (107-11, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk. All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.
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. I will send out a “Profit Alert” or “New Trade” if I want you to close a position OR if a new trade comes out. Otherwise, follow instructions at all times in the 9am and 12pm-1pm updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
CVS Caremark (CVS, $78.38, down $0.74)
September 82.50 calls (CVS140920C00082500, $0.45, down $0.16)
Entry Price: $0.45 (7/28/2014)
Exit Target: $0.90
Return: 0%
Stop Target: None
Action: There is risk to $77 and the 50-day MA on a close below $78. I’m looking for this area to hold as support before shares resume their uptrend for a possible push past $80. The 52-week high of $79.43 was reached in early June.
iShares Russell 2000 (IWM, $112.03, down $0.57)
August 118 calls (IWM140816C00118000, $0.20, down $0.10)
Entry Price: $0.60 (7/22/2014)
Exit Target: $1.20
Return: -67%
Stop Target: None
Action: The iShares recovered half their losses by the close but the calls failed to recover. Support at $112 held but a close below this level would be very bearish. I want to give this trade until Friday before possibly bouncing.
Pool (POOL, $55.30, down $0.16)
October 50 puts (POOL141018P00050000, $0.90, flat)
Entry Price: $1.10 (7/16/2014)
Exit Target: $2.20-$3.30
Return: -18%
Stop Target: None
Action: Shares are on the verge of testing the July low of $54.16. A break below this level should lead to $50 and fresh 52-week lows. Resistance is holding at $57 along with the 200-day MA.
The break-even point for the trade is at $48.90, technically, by mid-October. In other words, this trade has plenty of time to play out.
Fortinet (FTNT, $25.28, down $0.24)
September 28 calls (FTNT140920C00028000, $0.35, down $0.05)
Entry Price: $0.55 (6/30/2014)
Exit Target: $1.10 (Limit Order to close HALF)
Return: -36%
Stop Target: None
Action: There is risk to $25-24 on continued weakness. These are September options and I will likely keep the trade open as long as $24 holds. A close above $26 would be bullish.
General Motors (GM, $34.90, down $0.17)
September 32 puts (GM140920P00032000, $0.40, up $0.05)
Entry Price: $0.40 (6/23/2014)
Exit Target: $0.80-$1.20 (Limit Order to close HALF at 80 cents)
Return: 0%
Stop Target: None
Action: GM is below all of its major MA’s and is on track to test the low $30′s. Resistance is at $36.
Other 2014 Portfolio OPEN positions (1): 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 I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly, when the trade closes or if the options expire. Click on the 2014 Portfolio link in the Members Area to view ALL open/ closed trades.
Apollo Group August 23 puts (from April 2014) – If shares fail to fall below $28 this week, I will likely close the trade for a nickel. The stock remains a short but the position is running out of time. Monday’s low was $28.09.