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The market started the week on a positive note with light trading and a lack of market moving headlines. The market was mostly muted as investors await the start of earnings season and what it will tell us about our economy as well as how Europe is affecting corporations. The start of earnings season is marked by Alcoa (AA). The company will be giving us a look at the aluminum industry as well as a better idea of how a bellwether is doing in this market. Investors and traders were cautious going into the report and the earnings week marked by the light volume and lack of movement.
Economic data were quiet except for a late report that showed consumer credit rose by over $20B in November as consumers spent money they don't have. Europe was also quiet as eyes were on Italy with its yields back over 7% and a late sell-off. A meeting between Merkel and Sarkozy about the euro did little to spark the markets. Overall, it was a quiet day for everyone around the globe.
Earnings season is right around the corner, which should provide us with the first major push for the year up or down. There were a significant amount of upgrades and downgrades for companies that did provide some major movement. Goldman Sachs, alone, made 12 moves. To highlight, they upped the PT on Apple (AAPL) to $550, bumped Ralph Lauren (RL) to Conviction Buy, and downgraded a slew of insurance companies including XL Group (XL) and Calamos (CLMS). The company also dropped its Kindle Fire targets for Amazon (AMZN).
We had a slow day here as we did not exit anything, but we did spend some time adding new positions. We shorted XL Group (XL) at 19.80 with 2% and 3% targets for a trade. We also traded Avis Budget (CAR) with a Buy at 11.32, looking for 2% and 5% gains. We sold the Feb18 $9 puts at 0.15 as well. We also sold puts on Ashland (ASH) for Feb18 at the $50 level.
We have the following positions. In our equity portfolio, we are short XL. In our options portfolio, we are long IBM (IBM), Starbucks (SBUX), Apple (AAPL), Ultrashort ProShares Nasdaq (SQQQ), Macy's (M) and we are short United States Oil (USO). In our earnings portfolio, we are long Ashland (ASH), Avis Budget (CAR), Monsanto (MON), CarMax (KMX), Bed, Bath, and Beyond (BBBY), and Tempur-Pedic (TPX). We are short Polycom (PLCM).
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 Chico's FAS (CHS) and the Blackstone Group (BX). Chico's looks like a nice short right now with limited upside. The company has been dropping since the beginning of the year, breaking its 50-day and now 20-day MA. The spark to the downside has been occurring since it popped on a buyout rumor that has not seemed to have had much weight, filling the gap. Now, the stock has a downward moving price channel as well as a lot of downside risk to break the gap. Additionally, $10 is where the stock was post-earnings, which may retest before the next report. We would be selling calls against CHS. BX broke out today, breaking its 200-day MA and has broken out of an upward price channel - an ultra bullish signal. The company looks strong moving into its next quarterly earnings, and it has been a top pick for analysts to start the year. Until the technicals change, we would love to hop on for the ride.
Additional disclosure: We have the following positions. In our Equity Portfolio, we are short XL. In our Options Portfolio, we are long IBM (IBM), Starbucks (SBUX), Apple (AAPL), Ultrashort ProShares Nasdaq (SQQQ), Macy's (M) and we are short United States Oil (USO). In our Earnings Portfolio, we are long Ashland (ASH), Avis Budget (CAR), Monsanto (MON), CarMax (KMX), Bed, Bath, and Beyond (BBBY), and Tempur-Pedic (TPX). We are short Polycom (PLCM).We may initiate positions in any stocks mentioned.Charts courtesy of finviz.com and briefing.com.