HOTS Weekly Options Commentary
Peter Stolcers
Last week a stable Employment Report was released and the market surged higher. Despite mixed earnings announcements and soft economic releases, the market was able to add to those gains throughout the week until Thursday afternoon. "Hawkish comments" from one of the Fed Officials spooked the market, creating an intraday reversal. Chinese stocks were hit hard along with other stocks that have recently posted big gains.
Friday morning, the “all clear” sign was given. Chinese stocks held firm overnight and the PPI and retail sales numbers came in better than expected. The market was able to bounce and it closed above the highs made a week ago.
The economic releases this week are: industrial production, CPI, housing starts, LEI and Philly Fed.
I believe the earnings guidance, not the economic news will drive prices during the next few weeks. They are forward looking as opposed to the hindsight provided by economic releases. If GE and MCD are any indication, the earnings should come in at or above expectations. Both posted solid results.
Next week we will get an onslaught of earnings releases. I expect most companies to meet estimates and the current projected growth rate year-over-year is flat (0%). I believe that threshold will be cleared easily. The wild card is the earnings guidance that corporations will provide. If future weakness becomes a theme, the market will decline. If the earnings and guidance are consistent with the market's expectations, the market will continue to push higher.
These are some of the companies that are announcing this week: C, ETN, DNA, JBHT, JNJ, USB, WFC, INTC, STX, YHOO, ABT, MO, CIT, KO, ITW, JPM, UTX, ALL, EBAY, ILMN, ME, SYK, BAC, BGG, NUE, PH, PFE, RS, STJ, UNH, AMD, CREE, GILD, GOOG, IBM, ISRG, SNDK, TPX, VFC, MMM, CAT, HOG, HON, SLB.
We are only two weeks away from a seasonally bullish period. The earnings releases have been decent, we have not had many earnings warnings and the economic releases have been positive. As long as Americans have jobs, they will continue to spend and pay their debts. Add the Fed's half point interest rate cut to that equation and you can see why I am bullish. As long as the SPY is above 150, we will trade from the long side.
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