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The market fell on Monday to start the holiday week and may have squashed any confidence of a Santa Clause rally coming to the market. The market was holding tight to the 11,800 line on the DJIA, but late action in the market sold past the line. The issue came with commentary from ECB President Mario Draghi saying that market conditions are unstable in Europe, and the central bank will not come to the rescue of eurozone nations with a large bond program. The final straw came when the eurozone agreed to provide 150B euros in loans to the IMF. Expectations, however, were for 200B euros.
The news from home was limited. We did get a nice number from the NAHB Housing Market Index, which judges the confidence of homebuilders. The number came in at 21, which was the highest level in the past year and a half. Yet, the number is far from the neutral 50 or positive feelings above 50. That number provided some lift and floor to the market, but the eurozone crisis seems to be weighing more heavily. The number, though, does give us confidence that other housing indicators coming out this week might be fairly positive.
There were no major earnings out this morning, but we did have some interesting upgrades and downgrades that had impacts on the market. BMC Software (NASDAQ:BMC) was upgraded from Underweight to Neutral by JP Morgan. We have a Buy rating on this stock, and we think they have a lot of upside in 2012. Downgrades came in for General Growth Properties (NYSE:GGP) from Credit Suisse as well as SuccessFactors (NYSE:SFSF) from Lazard Capital and Piper Jaffray. It was a light day overall for data, news and events for the U.S.
We had a solid day as we were able to lock in gains on Onyx Pharmaceuticals (NASDAQ:ONXX) that we bought on Friday with a 2% gain. We also traded Ultra Proshares DJ-UBS Crude Oil (NYSEARCA:UCO) for a 1% gain intraday.
Our other positions are all moving fairly well. We are holding $35 calls into Carnival (NYSE:CCL) earnings for tomorrow morning. We have sold the $580/$575 put spread on Google (NASDAQ:GOOG) for Jan21. That position moved against us today, but we like GOOG a lot moving into the future. Starbucks (NASDAQ:SBUX) remains strong, and we feel confident about sold $39 puts we have. We have $55/$52.50 bull put spread on Bed, Bath and Beyond (NASDAQ:BBBY) that really is dependent on Wednesday's earnings. We are bullish BBBY. We are holding a 62.50/60 bull put spread on Monsanto (NYSE:MON) based on historical December performance. We also are holding sold $26 puts in CarMax (NYSE:KMX) that is another earnings play. Finally, we have a sold 300/290 bull put spread in AutoZone (NYSE:AZO).
Feeling the pressure of the market, we added a bearish position to the mix today, selling the 42.50/45 put spread on InterDigital (NASDAQ:IDCC) weekly options as that stock looks very weak. The only thing holding it up is possible buyout, but that has been the story since July.
Moving into tomorrow, the market broke the key 11,800 level on the DIA. We did hold 1,200 on the S&P, which may be a key level to watch as well for the SPY. If that breaks, it is probably the final confirmation that Santa is not coming down our market chimney this year. We have some key data points out tomorrow from the housing industry that we are excited to see, but it is doubtful they can do battle with the malaise and overhang of the European markets. If strong, they can give us some chance. If bad, it could be a weak day in the markets.
One position that we are definitely fond of for upside is the IWM if we do get some catalyst for upside. The IWM failed its 50-day MA, but it has been one of the strongest market ETFs behind the DIA. It is just below that 50-day MA, and a retake of that level would be very bullish. If we see that, we would be a fan of the 73/76 bull call spread for Jan21 expiration. Additionally, the DIA is forming a golden cross right now, and that may spark some strength in the DIA versus the QQQ and SPY.
Disclosure: I am long BBBY, MON, SBUX, GOOG, CCL, UCO, AZO, KMX.
Additional disclosure: I am short IDCC.