Market Recap: The market had a fairly unexciting day as the market failed to have a strong follow through on the back of 2012's best day in the market yesterday. It was not shocking to see the market falter, however, after a series of fairly weak reports came out today. Jobless claims in Great Britain came out higher than expected. Additionally, the account balance came in lower than expected for Q4 at -$124.1B. Crude inventories showed another sizable build that dropped crude prices. Stronger crude has helped keep energy stocks higher, and a drop in crude allowed for those stocks to come down a bit.
Tomorrow is yet another big day of data points that can really drive the market in either direction. We were expecting a follow through day, but it was a light day and many buyers may have waited for more information due out Thursday. What to expect tomorrow is later in the article, but here is a stock to buy and sell for tomorrow if we move in either direction.
Altera (ALTR) and ProShares Ultra Oil and Gas (DIG). Altera got an upgrade to Conviction Buy from Goldman Sachs today, and the stock broke some key MAs today as well. We like this stock as well. The chip space is definitely one of the hardest places to play the market as trends are very different for lots of companies, but we like ALTR at these levels as it is still fairly cheap with a 17 PE. The company recently dropped guidance for the coming quarter, and the stock has recovered nicely. We see a definite bottom at the 34 area, and that gives us confidence to buy here and add on any dips to there. On the flip side, oil seems to have been broken today. The vast supply levels that have been there for weeks now are starting to overshadow global fears and the economy is recovering. No one is buying WTI at the levels it is being produced, and therefore, the price needs to come down. If that happens, it could breakdown a lot of strong oil and gas stocks that have been doing very well on the back of higher energy prices. DIG would be a solid short on that theory.
The market has a ton to digest tomorrow, and that makes it a very interesting day that could go in either direction. We have just in the U.S. ... jobless claims, Empire Manufacturing Index, PPI and the Philly Fed. The Fed indices are probably the two key reports for tomorrow. Philly Fed is supposed to be higher while Empire is supposed to drop. Both will definitely be very impactful on the markets. Additionally (if that was not enough), the ECB will publish its monthly report on the state of Europe, and Italy will post government debt, which could spark Italian bonds to move in either direction. We're expecting a big day of news, and it will be interesting to see what story or headline the market latches onto tomorrow.
Analysts were pretty busy today. Here were some of the upgrades and downgrades we found most interesting. Caris joined in with Goldman Sachs on the American Eagle (AEO) part and upped the stock to Buy with $20 PT. The company is garnering a lot of attention lately as the cyclical nature of retail moves away from lower income companies like Aeropostale (ARO) and Kohl's (KSS) and into mid-level companies like AEO and Abercrombie (ANF). Soceite Generale downgraded a number of independent oil and gas companies like EOG (EOG) and Anadarko (APC), and we have to agree that a lot of these appear a bit ahead of themselves. We would not be shocked by a small correction in energy over the next month.
We did well shorting oil today with Ultrashort Proshares Crude (SCO), and we continue to believe oil is way too expensive right now. Oil should be around $100 right now, and we believe that it is still on its way down. Obviously, any developments in Iran can take this back up, but in the long run, supplies are too high. Gold (GLD) is starting to look quite attractive, and we believe 1600 is a great place to go long.
We had a solid day as we exited four positions. We had a winner in SCO in our Short-Term Equity Portfolio for a 2% gain. We had a winner in our Options Portfolio in our bear call spread on United States Oil (USO) at the 42/43 level that we made 9% on. We did well with 500/550 bull call spread in Apple (AAPL) that we entered last week in our Apple $50K Portfolio. That spread made a very solid 48% gain today. We did have a loser, however, in our Options Portfolio with iShares Treasury 20Yr Bond ETF (TLT) as the ETF gapped down, and we had to take a loss on our 113/112 bull put spread for this week. We added a long on Goldman Sachs (GS) stock today, but we kept things quiet heading into the big day tomorrow.
We have the following positions. In our Short-Term Equity Portfolio we are long GS and Boston Beer (SAM) and short Apollo Group (APOL). In our Options Portfolio, we are long Starbucks (SBUX), Ralph Lauren (RL), McDonald's (MCD), Panera Bread (PNRA), Bed, Bath and Beyond (BBBY), and Discover Financial (DFS). We are short APOL. In our Earnings Portfolio, we are long Ulta (ULTA), FedEx (FDX), Activision Blizzard (ATVI), Monster Beverage (MNST), and GS.
Chart courtesy of finviz.com.