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The market rebounded on Tuesday after falling to start the week as it was led by housing data and positive market conditions in Europe. Leading the way (crazy to say) were housing starts and building permits as both numbers blew the estimates out of the water. Housing starts came in at 685K vs. expectations for 627K. While a lot of these starts were on apartment buildings, it is still great to see the housing industry moving in the right direction. The market loved the news and rallied drastically off the start.
The situation in Europe was safe at least for a day. An economic survey in Germany showed business confidence grew in November, and that helped the DAX move higher as well as other European markets. Asian markets enjoyed a nice rally as well. That global setting allowed for us to move higher throughout the day on our own positive news and not be bogged down by any issues from European or Asian markets.
There are a number of key earnings coming out this week, and this morning we got numbers from Carnival (CCL), ConAgra (CAG) and General Mills (GIS). CAG and GIS gave us a look into consumer staples and were mixed with CAG doing well while GIS faltered. CCL was also somewhat disappointing, but the company did meet estimates. Overall, none were too exciting or drastic enough to impact the market too greatly. We have some very key earnings coming in after hours and tomorrow morning from Cintas (CTAS), Oracle (ORCL), Paychex (PAYX), Nike (NKE) and CarMax (KMX).
We had another outstanding day here. Yesterday, we got involved with Ultra Proshares DJ-UBS Crude Oil (UCO). That ETF returned over 7% for us this morning ... 7% in one day in stock. We also locked in some gains on some option positions. We locked in an 11.5% gain on half of our sold $39 puts we have for Starbucks (SBUX) as SBUX broke out today. We also locked in a 7% gain on an AutoZone (AZO) bull put spread we were operating with the 300/290 strikes for Jan21 expiration. We did, however, get hit with a small loss on a couple of calls we picked up in Carnival (CCL) for the $35 level.
Our other positions we have include short positions in InterDigital and Sina (SINA). We continue to hold long positions on the Starbucks, Monsanto (MON), CarMax (KMX) and added two new longs today.
We went long on Greenbrier Companies (GBX) today as we liked the action in the stock and the upgrade it received from Stern Agee. We think the stock has potential to $24, then $26 by earnings. We also went long on Bed, Bath and Beyond (BBBY) for a short-term trade as we think this stock should continue up into earnings and pop on earnings.
Moving into tomorrow, the market should have a follow through. We get a lot of key earnings that will be very important to the marketplace. Oracle, Nike and Paychex especially will have a lot of impact. Good numbers there can really be influential. What the market wants most of all is enough information to be able to ignore Europe. People want a Santa Clause rally, and if we get another up day in the market tomorrow, the market may make a rally for itself for the rest of the year. We also get existing home sales that can continue to play the tune of the market. There is nothing expected out of Europe that can be too detrimental. So, we should feel confident of seeing some follow through. That follow can spark some money flow into the market for sure.
Something that we are looking at is IBM (IBM). The company was on a tear before losing its footing a bit during last week's pullback. We think the company has now put in a nice bottom that we can use to make a play with after returning to the upside. The $180 line looks quite strong right now as the company jumped right off an upward price channel and moved higher. We think that the $180 line should hold for quite some time. We can sell the $175/$170 put spread on IBM for 14% max gain. IBM has the Buffett line at $185, and we think that IBM should move toward $200 in this rally.
Disclosure: I am long GBX, KMX, MON, BBBY, SBUX, GOOG.
Additional disclosure: I am short IDCC, SINA.Charts courtesy of finviz.com and briefing.com.
