Market Recap: The market continues to remain fairly flat this week with a lean to the downside as things continue to remain murky in Europe. Data today was fairly unexciting in either direction, and volume was dry with a lack of buyers/sellers due to the holiday weekend and summer months. Jobless claims came in down 2K week-over-week at 370K despite missing expectations at 365K. Durable orders came in lower than expected at 0.2% with auto parts showing strength while capital goods declined another 2%. Europe was up but fairly quiet, and the euro continued its decline, which weighed on the equity/commodity markets.
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 Discover Financial Services (DFS) and a short in General Dynamics (GD). DFS has earnings right around the corner, and the company has been quite a stalwart in recent earnings reports. In fact, in the three weeks leading into earnings, the company has not declined once in the past eight quarters. We believe they will continue to stay strong into this report. With the market weak, though, we like selling puts rather than going long stock. We like the $30 level. General Dynamics was downgraded by Goldman Sachs (GS) today, and we believe that catalyst will continue to weigh on the stock. GD should a breakdown further on the charts today, and GS set a lowly $58 price target. We would like being short this stock right now.
Trade #1: DFS, Sell $30 Puts, Jun16
Trade #2: Short GD
The market continues to look very rangey, and we do not expect a big move tomorrow once again. We have some data out tomorrow with the Michigan Consumer Sentiment Index that has been strong as of late. Yet, we also have the German GFK Consumer Confidence report that we would not be banking on coming in very strongly. Further, going into a holiday weekend, volume should be light. We could see light volume move different stocks a lot with the overall market not moving a ton. Earnings that are important are Verifone (PAY) tonight. Not a lot happening tomorrow, so do not expect a huge move. Our gut is for some more downside.
We had a solid day as we got a 3.3% gain in Wal-Mart (WMT) stock as well as a 2.1% gain in Bed Bath and Beyond (BBBY) stock. We added a short in General Dynamics and Discover Financial bull put spread.
We have the following positions. In our Short-Term Equity Portfolio we are long TripAdvisor (TRIP), Buffalo Wild Wings (BWLD), Whole Foods (WFM). We are short Under Armour (UA), SPDR Dow (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 GD. We have a reverse iron condor on Ultra Proshares Financial (FAS). In our Earnings Alpha portfolio, we are long DFS, Western Digital (WDC) and Dollar General (DG). We are short Adobe (ADBE). We have a reverse iron condor in Verifone.
Chart courtesy of finviz.com.