Click to enlarge chart
What a great start to 2012! The market rallied today on a number of positive news stories, led by a stronger than expected ISM Manufacturing Index as well as good manufacturing data from China. The ISM Manufacturing Index rose 1.2 from 52.7 to 53.9 in November, beating expectations for 53.2. This news came on the heels of a strong manufacturing report for China in December that at least for a day silenced the issues with China's slowdown. Additionally, Germany's unemployment dropped to a two-year low as announced today.
When Europe stays out of the headlines, we have a good chance of rising as economic data and news from the U.S. continue to show improvements. The Fed also helped influence the market as they noted that they would provide individualized outlooks on where interest rates are going four times a year from each Fed Chair. The 2012 start was positive, but there are still a number of major issues for the marketplace. For one, we have issues with Europe, our own debt issues, China's slowdown, and much more. It should be an interesting year.
Earnings season is right around the corner, which should provide us with the first major push for the year up or down. Upgrades and downgrades were busy today. Some of the important ones included Cisco (NASDAQ:CSCO) being upgraded to Overweight by JP Morgan. Chipotle Mexican Grill (NYSE:CMG) got pushed to Buy from Deutsche Bank. American Eagle (NYSE:AEO) was budged to Buy at Piper Jaffray. Riverbed (NASDAQ:RVBD) was upgraded to Outperform from Oppenheimer.
We had a terrific day here. We were able to exit a number of profitable positions. We sold Jan21 $410 calls on Apple (NASDAQ:AAPL) this morning for a 20% gain that we entered last week. We were able to sell a portion of our Macy's (NYSE:M) long for a slight gain. We were able to buy back two bull put spreads for gains over 11% with a Monsanto (NYSE:MON) $62.50/$60 spread for Jan21 as well as GOOG $580/$575 spread for Jan21.
We have the following positions. In our Equity Portfolio, we are long on Macy's and Monsanto. We are short Polycom (PCLM). In our options portfolio, we are long IBM (NYSE:IBM), Starbucks (NASDAQ:SBUX), Target (NYSE:TGT), Google (NASDAQ:GOOG) and Apple, and we are short United States Oil (NYSEARCA:USO). In our earnings portfolio, we are long Monsanto, CarMax (NYSE:KMX), Bed, Bath and Beyond (NASDAQ:BBBY), and Tempur-Pedic (NYSE:TPX). We are short Polycom.
Moving into tomorrow, the market looks good to continue higher as long as we get some good data and Europe can stay out of the spotlight. We have economic data from factory orders and auto sales. We believe that the market should stay strong though on the hype of the New Year and as long as we continue higher, money flow is going to want to enter this market.
Two stocks that we think look ready to move are Jones Group (NYSE:JNY) and Berkshire Hathaway (NYSE:BRK.A). JNY looks like it is probably a pretty good short right now. The company has failed to break its 50-day MA, and it did not follow the market higher today. The company has a lot of resistance above it. They popped last week, but there was little volume to the move or conviction. The company seems to be moving back down without a catalyst higher.
Berkshire looks ready to breakout on the chart below. They had a golden cross today, and they look like they are narrowing for a move higher.
Additional disclosure: We have the following positions. In our Equity Portfolio, we are long on Macy's (M) and Monsanto (MON). We are short Polycom (NASDAQ:PLCM). In our Options Portfolio, we are long IBM (IBM), Starbucks (SBUX), Target (TGT), Google (GOOG), and Apple (AAPL), and we are short United States Oil (USO). In our Earnings Portfolio, we are long Monsanto (MON), CarMax (KMX), Bed, Bath, and Beyond (BBBY), and Tempur-Pedic (TPX). We are short Polycom (PLCM).