Market Recap: For the second day in a row, the market reversed its early direction. This time, the market made a larger reversal from being down to finishing in much better shape. The market fell early on fears over Europe, a dropping euro and weak earnings from Dell (DELL). Yet, new home sales came out better than expected, continuing to show a nice trend there. The market reversed after news that Spain had injected 9 billion euros in Bankia as well as the dollar dropped.
The market is continuing to perform in a very rangey flat way that we expected holding the 1300 level on the S&P, but it's also not breaking out with so many fears in the market. We continue to be pretty rangey, and we expect things to stay that way.
Two trades we like right now are long TripAdvisor (TRIP) and a bear call spread in Adobe (ADBE). TripAdvisor broke out today, and we continue to like them to be strong in the market. The market has a handful of stocks people are piling into right now, and TRIP is one of them. Look for them to push toward $50 here over the next month. On the flipside, we like selling calls on ADBE as we move into the next earnings report. Earnings are not exciting for the company, and they have historically only moved 4.5% or less in the three weeks moving into earnings, according to the past eight quarters. We like the 34/35 bear call spread for that reason. We believe ADBE will have trouble with a lot of MA resistance moving forward.
Trade #1: Long TRIP
Trade #2: ADBE, Jun16, 34/35 Bear Call Spread
The market's turnaround continues to suggest rangey markets rather than tons of upside in this market. We believe the market should continue to remain pretty flat into the holidays. Tomorrow, we will get some reaction to today's meeting of European leaders that led to today's weakness. Additionally, we will be reacting to initial claims and durable orders tomorrow. Further, the euro needs to stop its decline if we are going to see any upside in this market. We continue to remain cautious, but with the holiday coming up, we doubt we'll see a ton of movement in either direction.
We had a solid day as we got a 26% gain on our Russell 2000 (IWM) bear call spread as well as took half off of our TRIP long that we entered earlier in the day. We added a TRIP long with DJIA SPDR short (DIA). Further, we added the bear call spread mentioned above in ADBE.
We have the following positions. In our Short-Term Equity Portfolio we are long Bed, Bath and Beyond (BBBY), TRIP, Buffalo Wild Wings (BWLD), Whole Foods (WFM) and Wal-Mart (WMT). We are short Under Armour (UA), DIA and Sara Lee (SLE). In our Options Portfolio, we are long Disney (DIS) and Panera Bread (PNRA). We are short Sina (SINA), Under Armour, Apple (AAPL) and Russell 2000. We have a reverse iron condor on Ultra Proshares Financial (FAS). In our Earnings Alpha portfolio, we are long Western Digital (WDC) and Dollar General (DG). We are short Adobe. We have a reverse iron condor in Verifone (PAY).
Chart courtesy of finviz.com.
Disclosure: I am long TRIP.