Weekly Outlook: Last week was not a pretty sight, and it looks to be more of the same this week as the market will deal with the weakness from the non-farms payroll report that came out on Friday. The jobs report announced that 120K jobs were added in March vs. the 200K expectations.
The unemployment rate did tick down to 8.2%, but the weakness in the NFP report is definitely going to continue the selling that came in last week. We do start earnings this week as well as have a number of Fed speeches and reports due out throughout the week that can make it interesting. Weakness, however, will be the name of the game to start the week.
The most important things this week will be the start of earnings season, developments in Europe around Spain as bond yields rose there last week, economic data, and Fed speeches. For economic data, we are not having as busy of a week as last week. Some of the important reports though include Export/Import Prices as well as the Fed's Beige Book on Wednesday. PPI on Thursday and CPI on Friday will be crucial as well as Michigan Sentiment. That is really the extent of data for the USA this week, so earnings, Europe, and the Fed will more likely direct each day.
It is the start of earnings season this week. We get things under way on Tuesday with Alcoa (AA) as the company always leads off earnings season. We do not have high expectations for the company, but their report will definitely help move the markets on Wednesday. Thursday, the market will get a crucial report from Google (GOOG) that is sure to have a significant impact on Friday's move along with Friday morning's report from JPMorgan Chase (JPM) and Wells Fargo (WFC).
For us, JPM and WFC are the two most important reports of the week because financials have been one of the leaders in 2012 so far. We are definitely curious to see if that success is going to continue when earnings are released, so those reports will definitely mean a lot for the market.
From there, we have to look at Europe. Europe gave the market some reason to go "risk-off" again as Spain's bond yields rose last week and murmurs of the problems over there resurfaced last week. Strength in Europe would help as things here are slower this week and the NFP came in weak. The crucial reports for Europe this week are German Trade Balance and EuroZone Sentix Investor Confidence on Tuesday. The ECB's monthly report on Thursday will be important as well as Industrials Production. Friday finishes off with CPI for Germany that will be important as well. Its a lighter week of data for Europe as well, and so yields will be important. If Europe can show any strength, it will take some pressure off the US markets.
We also have a lot of speeches and information coming from the Fed this week. First, we have the Fed's Beige Book on Wednesday. Bernanke has speeches on Monday and Friday, and you can bet that the bulls and bears will be parsing his speech for anything to move the market. Vice-Chair Yellen will speak on Wednesday. The Fed killed market momentum last week when they commented no more QE after Bernanke seemed to telegraph QE considerations two weeks ago. We will see what comes of the speeches.
Overall, we see the market as following through from last week on some weakness to start out the week. There is not any major data, earnings, or announcement expected before Monday's open, so we can expect some tough moments to start the week. There is plenty of opportunity throughout the week for the market to get back on track if its want to, but it seems like we are entering a weak period right now. We need to be willing to adjust accordingly.
Stocks To Trade:
Two stocks we will be looking at for weakness this week will be General Motors (GM) and Silver Wheaton (SLW). While we like GM for long-term holdings, the chart is showing some near-term weakness in the company. The stock saw the 20-day MA recently cross the 50-day, which is a sign of weakness. Further, the stock has shown a multiple top and was sitting right above its 200-day MA on Thursday's close. Its likely with weakness on Monday it will break that level and be seeing more weakness this week if things being to sour.
The market did not react well to GM sales last week, dropping the stock, which has created short-term fundamental weakness as well. Silver could be ready to break down even further as metals have become quite weak over the past couple weeks. Silver is also less of a safe haven play and tied more to the economy. If we see more weakness surrounding the economy at home and in Europe this week, we could see silver start to lose its footing further, SLW is breaking down on its chart and does not look strong at all. We would be a seller there.
Trade #1: Short GM and sell $28 Calls
Trade #2: Sell $34 Calls for April expiration
Oxen Group Holdings:
We have the following positions. In our Short-Term Equity Portfolio we are long VF Corp (VFC) and Monster Beverage (MNST). In our Options Portfolio, we are long Apple (AAPL), Visa (V), PetSmart (PETM), Google , IBM (IBM), Starbucks (SBUX), and short Apollo Group (APOL) and iShares Russell 2000 (IWM). We have a reverse iron condor in Direxion Finanicals (FAS). In our Earnings Portfolio, we are long Ace (ACE), Ashland (ASH), Coinstar (CSTR), Canadian Pacific (CP), Panera (PNRA), Goldman Sachs (GS), and Ulta Salon (ULTA). We are short Amazon.com (AMZN).
Chart courtesy of finviz.com.
Disclosure: I am long MNST.