Market Recap: The market put together a fairly nice day as it rallied somewhat on some decent economic data as well as hopes from the G-7 conference call. The main rallying point was ISM Services, which came in better than expected slightly and improved slightly month-over-month. It was the first decent data point in what seems like ages, and the market was also getting some support from some potential for the G7 to push toward some type of economic plan that would help ease the pain in Europe. Further, we are holding some key technical areas with the 200-day MA in the S&P 500 (SPY) and mental support at 12000 on the Dow Jones (DIA).
It was, all in all, a really quiet day for the market, and it will definitely be a more important day tomorrow with more data and reaction to the G7 call in Europe. The market seems to have found some near-term support, so if things remain at least quiet overall, we could see more upside. Yet, we all know that more trouble is brewing in Europe, and that will continue to linger.
Two trades that we are looking at right now that we like are a pair trade with Under Armour (UA) and Illinois Tool Works (ITW) as well as reverse iron butterfly in Decker Outdoor Corp. (DECK). UA is looking very solid right now as it held the 50-day and 20-day MA as well as is headed back toward $100. Further, the stock has gotten a lot of positive comments from analysts lately and has held up nicely despite market weakness. ITW is in a weak auto parts cycle, and we expect weakness to continue. The stock is below a lot of support lines and its nice pair with UA long. Decker Outdoor is a stock that moves into earnings in the June to July period. The company from June to July expiration has moved under +/-4% only once in past eight years. Six out of eight times, it has moved more than 10%. We expect more large swings into earnings as things are weakening for Ugg line.
Trade #1: Long UA, Short ITW
Trade #2: Jul21, 52.50/50 and 52.50/55 Reverse Iron Butterfly, DECK
Tomorrow is highlighted by eurozone data like GDP, Household Consumption, and Fixed Capital. Those markets will be reacting to that news, which if good could strengthen the euro and provide a nice catalyst to American markets. The ECB rate decision will also be quite important tomorrow to see if a rate cut does occur. Some speculation that it may occur has been happening. If so, that news will goose the markets as well. In the States, we will get our Fed Beige Book, which everyone will be scouring for any conversation about possible QE developments. We also get crude inventories and two Fed speeches tomorrow as well. It's going to be a day with a lot of potential to power us higher if some conversation about rate cuts comes out from ECB or Fed developments. Lack of those developments, however, will definitely leave the market without much near-term catalyst.
Oxen Group Moves
We had a mixed day as we had to exit our bull put spread in FedEx (FDX) for a loss on a break of the 200-day MA but our new Goldman Sachs Paper Trades are looking solid. We added the above pair trade in UA:ITW as well as reverse iron butterfly in DECK.
We have the following positions. In our Short-Term Equity Portfolio we are long Under Armour , Sanderson Farms (SAFM), Bed Bath & Beyond (BBBY) and TripAdvisor (TRIP). We are short Illinois Tool Works , Tyson Foods (TSN), Molson Coors (TAP) and SPDR Dow . In our Options Portfolio, we are long Comcast (CMCSA), Monster Beverage (MNST), Disney (DIS) and Panera Bread (PNRA). We are short Priceline.com (PCLN), Sina (SINA), Apple (AAPL), and General Dynamics (GD). We have a reverse iron condor on Ultra Proshares Financial (FAS). In our Earnings Alpha portfolio, we are long Discover (DFS), Western Digital (WDC) and Dollar General (DG). We are short Adobe (ADBE) and Walgreen (WAG). We have a reverse iron condor in Verifone (PAY) and reverse iron butterfly in Joy Global (JOY) and Decker's Outdoor .
Chart courtesy of finviz.com.Disclosure:
I am long MNST.