12:30pm (EST) The bulls continue to run to higher ground on improved sentiment concerning Europe while economic news has been so-so but not as bad as feared. To start, the weekly Initial Claims report came in 428,000 which were much higher than the 410,000 that had been expected. We didn’t think we would get a print under 400,000 but we also didn’t expect initial claims to jump higher by 11,000 from the prior week. Elsewhere, Consumer Prices for August increased by 0.4%, which was above the 0.2% increase that had been penciled-in. Core Consumer Prices increased by 0.2%, which matched expectations. The Empire State Manufacturing Survey for September fell to -8.8 from -7.7 in August versus expectations for a -4.0 print. The Philadelphia Fed Survey for September was the main report we were watching this morning and it came in at -17.5. Following last month’s debacle (-30.7) this was a major improvement but still below Wall Street’s expectations for a print of -10.0. Turning to earnings, Diamond Foods (DMND, $77.22, up $0.75) will report earnings after the close. The suit and ties are looking for $0.44 a share on revenue of $216 million. We have been mentioning this company for a few years now since we first covered their earnings in back in February, 2009. At the time, shares were in the low $20’s and have since zoomed 275%. We have also tried playing option on Diamond Foods but they command high premiums and are thinly traded which can cause wide bid/ask spreads. The September 80 calls (DMND110917C00080000, $0.65, up $0.10), which expire tomorrow, are bidding 30 cents while the asking price on these options are 70 cents. The October 80 calls (DMND111022C00080000, $3.00, flat) have a bid of $2 while the ask is $3.50! This is why it is so important to ALWAYS use limit orders even if the options are liquid – meaning there is a lot of volume. As you can see, sometimes it is better to buy the stock if you find a solid company that is growing. We will be sitting on the sidelines when Diamond Foods reports earnings as the options are too pricey for us to get into the game. Research In Motion (RIMM, $29.76, up $0.04) is also reporting their numbers after the closing bell today. We talk more about this “situation” in our Members Area. Also, we have been pounding the table on Vivus (VVUS, $9.15, up $0.68) making a possible breakout and we are close to scoring some massive profits if shares can pop over $10. The high today is $9.62 and we recently closed out a Vivus covered call trade for our Weekly Wrap that returned 18%. We currently have two other open option trades for Vivus which could do well on continued strength.
