Yet again, the market rallied off lows and did not break down despite concerns over Greece and a less than ideal set of earnings for the market. The European finance ministers rejected a plan by private creditors for Greek bonds that leaves Greece at the verge of what many believe is default. The market reacted to that news at the open but rallied from there on the back of good earnings from AK Steel (NYSE:AKS), Polycom (NASDAQ:PLCM), VMWare (NYSE:VMW) while Baker Hughes (NYSE:BHI) disappointed and McDonald's (NYSE:MCD) and Harley (NYSE:HOG) were flat.
Moving into tomorrow, we believe the market has a lot on its plate and could breakdown if Apple (NASDAQ:AAPL) falters, the Fed does not say anything about QE3, and Greece continues to linger. If we do falter, here are some stocks we are watching for potential further downside:
We like the following stocks for bear call spreads right now: Abercrombie & Fitch (NYSE:ANF), Barrick Gold (NYSE:ABX), CTrip (NASDAQ:CTRP), Fluor (NYSE:FLR), Hess (NYSE:HES) and RadioShack (NYSE:RSH). ANF seems like a candidate to continue lower as the European crisis continues. Reports out of Europe are that sales are weak, and the company is having to heavily discount clothing to meet lowered demand due to the economic crisis there. ANF depends a lot on Europe for sales. ABX has moved counter to gold since the beginning of the year, and they have broken some key levels. They seem to have limited upside into their next earnings report. CTRP has had a nice rally, but it has been on nothing. Sales are not going well in China for travel, and competition is rising. FLR and HES seem to have hit resistance and have not broken out with this market. Weakness would mean a further dip. RSH is about to report another weak earnings report.
Earnings are crucial to this market moving forward. Tonight and tomorrow morning we get a large slate of big names that will move this market. We have earnings coming from Apple (AAPL), most importantly. This may be the most important report of earnings season. A beat will power the market. A miss will cause distress. Other crucial reports include Boeing (NYSE:BA), ConocoPhillips (NYSE:COP), Delta (NYSE:DAL), Xerox (NYSE:XRX) and Yahoo (NASDAQ:YHOO). A ton of exciting reports that will move different sectors, and we believe they should all be watched fairly carefully.
We had a good day here as we got a 1.3% gain in a long trade we entered yesterday on VeriSign (NASDAQ:VRSN). We also got a 20% gain in sold $14 puts we entered in Blackstone (NYSE:BX) at the beginning of the year. We also closed puts sold in Ashland (NYSE:ASH) for a 13% gain. We added an iron condor on Apple for an earnings play. We added a long position selling bull put spread on VF Corp. (NYSE:VFC), and we went long on Priceline.com (NASDAQ:PCLN) with selling a bull put spread.
We have the following positions. In our Short-Term Equity Portfolio we are long eBay (NASDAQ:EBAY) and VeriSign . In our options portfolio, we are long Priceline, Blackstone, Dollar Tree (NASDAQ:DLTR) and United States Oil (NYSEARCA:USO). In our earnings portfolio, we are long VF Corp. CarMax (NYSE:KMX), Avis Budget (NASDAQ:CAR), Vertex Pharma (NASDAQ:VRTX) and Ashland. We are short AOL (NYSE:AOL). We are in an iron condor in Apple.
Picture courtesy of getty images, Chart courtesy of finviz.com.
Disclosure: I am long EBAY.
Additional disclosure: We have the following positions. In our Short-Term Equity Portfolio we are long eBay (EBAY) and VeriSign (VRSN). In our Options Portfolio, we are long Priceline (PCLN), Blackstone (BX), Dollar Tree (DLTR) and United States Oil (USO). In our Earnings Portfolio, we are long VF Corp. (VFC) CarMax (KMX), Avis Budget (CAR), Vertex Pharma (VRTX), and Ashland (ASH). We are short AOL (AOL). We are in an iron condor in Apple (AAPL).