General Options Blog

Where Is The Market Headed Over The Next 5 Weeks?

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Stocks hit new all-time highs yet again, but suffered a pullback into the close. Are stocks set for a big pullback as we approach the end of the year, or will today's dip be just another fabulous buying opportunity? One chart that will help show where the market is headed is posted below. When trying to look at where the market is headed, I think understanding where it's traded previously is important. Looking where stocks have traded at specific times in the past can lend a hand in determining where stocks are going in the future.

Below is a chart showing the current price of the $SPY (the green line) and the 5-year average of the $SPY (the red line).

Using price history as guide we should see a 3 percent rise from current levels heading into the Christmas holiday before a small sell-off as we get closer to the end of the year. A 3 percent rise would bring the S&P 500 to the 1,850 level and the DJIA to 16,500 before year's end.

spy12345

November 25, 2013 Watch List

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I figured I'd just copy and paste each morning's comments, as the setups have been the same for the past eight Mondays, meaning we've closed in the green the past seven weeks. Futures are solidly in the green, as Asia and Europe have kicked off this last week in November in strong fashion.

The U.S. also struck a deal with Iran and that has helped support futures this morning, as any uncertainty surrounding that country can be removed for the short term.

Gold looks poised to continue its downward trend, and it's now down over 1 percent pre-market. I think it has a real shot at touching $1180 this week, and I may look to add some puts on GLD at the open.

CBRL reports earnings before the bell tomorrow. Like I've said many times in the past, earnings are a complete crapshoot but I do love the story and will more then likely hold all my calls into earnings. Dont forget: the last time we held some of our CBRL calls into earnings, an EPS miss resulted in the calls losing all their value the next day.

I had another issue with GotoWebinar last night with the Week Ahead, so it's in two segments here for those that missed it:

https://www.optionmillionaires.com/forum/showthread.php/711-The-Week-Ahead-with-UPB-and-JB-11-24

VJET Voxeljet a top way to play 3D printing market, says Piper Jaffray
Piper Jaffray said it wants to "dispel some inaccurate information" regarding Voxeljet's financing activities. Piper says the company participated in some customer financings, but they have been limited in scope and communicated in regulatory filings. The firm views Voxeljet as one of the top ways to play the 3D printing market. However, it keeps a Neutral rating on the stock, saying shares are likely to remain highly volatile over the next 6-12 months
LULU lululemon's board should take proactive measures, says ISI Group
ISI Group said its time for lululemon's board of directors to take proactive measures to stabilize the company's path. The analyst believes Chairman and Founder Chip Wilson should officially distance himself from the business, which would be a big step forward in improving the brand's public image and provide a more attractive environment for a high quality CEO. The firm uses the Best Buy analogy as a guide and believes its extremely positive results would be a similar outcome
DE Deere downgraded to Market Perform from Outperform at BMO Capital
BMO Capital downgraded Deere to reflect little pent-up demand, a negative mix shift, weakening crop prices, and declining farmer incomes. Price target lowered to $84 from $95
ATVI Activision Blizzard added to Select List at Stifel
Stifel added Activision to the Stifel Select List and sees a path for improving fundamentals driven by the launch of Destiny, increased visibility for Blizzard, software and new gen console money flows, and Vivendi transaction follow-through. Shares are Buy rated with a $21 price target
FL Foot Locker price target raised to $44 from $42 at RW Baird
Baird raised its price target on Foot Locker following Q3 results. The company reiterated its comp and profit guidance but the firm believes results could come in above forecasts and store remodels should now become a tailwind. Shares are Outperform rated
TWC Charter could pay $160 per shares for Time Warner Cable, says UBS
UBS said Charter (CHTR) could pay $160 per share for Time Warner Cable (TWC) due to the potential for $1B in annualized operating synergies and a combined company leverage of 5x
TWTRTwitter initiated with a Market Perform at Wells Fargo
Wells Fargo believes the current valuation of Twitter reflects the company's near and medium-term opportunity. The firm started shares with a Market Perform rating and $36-$39 price target range
VFC VF Corp. price target raised to $270 from $243 at Citigroup
Citigroup raised its price target for VF Corp. shares to $270 after meeting with management and reiterates a Buy rating on the stock. Citi calls the meetings upbeat and reiterates a Buy rating on the stock

I'm starting to like the AG sector again and I'll be trying for some DEC strikes on POT as well as trying to grab some more GLD puts:

Stock Ticker Call/Put Strike Expiration Closing Price Entry Price
POT CALL $33.00 December 0.27 0.27
GLD PUT $115.00 Weekly 0.15 0.15

Let's have a great start to the week!

- JB

November 22nd, 2013 Watch List

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Despite three red days to start the week, the market is poised to make it seven straight weeks of gains, with the SPY only down .08%. Yesterday's rally saw the Dow close above 16,000 for the first time ever, as weekly jobless claims came in at multi-month lows. The VIX continues to be a very great indicator, touching the upper Bollinger band yesterday, thus signaling a possible reversal.

I closed all my DUST calls and will look for another entry, as I think gold is destined to go below $1200 very soon. I'm still holding my ICE and MLNX calls, and added some CBRL calls for earnings next week. I also may look to add to my position on CBRL today. Additionally, TRIP had a nice upgrade this morning and I think the stock is headed over $90. I'll be looking to position myself for that move today.

Don’t forget: the market is only open for 3 1/2 days next week, with the market closed for Thanksgiving Day on Thursday while only being open for half the day on Friday.

Here are some of the analyst changes of note for today:

TGT Target weakness a buying opportunity, says BMO Capital
BMO Capital believes Canada supply chain issues will be corrected and notes the U.S. business is trending in line with expectations and recommends buying shares on weakness. The firm rates Target an Outperform with an $80 price target
INTC Intel analyst dat likely to be catalyst, says Jefferies
Jefferies believes Intel's analyst day yesterday will serve as a catalyst and left the meeting with increased conviction in its Buy thesis on the stock. The firm thinks Intel is extending its manufacturing lead over TSMC and raised its price target for shares to $32 from $30
TRIP TripAdvisor price target raised to $95 from $82 at Deutsche Bank
Deutsche Bank raised its price target for TripAdvisor shares to $95 after leaving the PhoCusWright conference more upbeat on the company's growing centrality to the travel booking process. The firm has a Buy rating on the stock
DLTR Dollar Tree pullback presents a buying opportunity, says Wells Fargo
Wells Fargo views yesterday's post-earnings pullback in shares of Dollar Tree as overdone and sees a buying opportunity at current levels. Wells still thinks the stock can outperform retail from here and keeps an Outperform rating on Dollar Tree. Note shares were upgraded this morning at Barclays
VFC VF Corp. price target raised to $245 from $224 at JPMorgan
JPMorgan raised its price target for VF Corp. shares to $245 after meeting with management and keeps an Overweight rating on the stock. The firm is positive on VF's diversified portfolio and Timberland turnaround progress
P Pandora price target raised to $35 from $30 at Canaccord
Canaccord said Pandora's Q3 results were solid and expects ad pricing to exceed traditional radio over time. Shares are Buy rated
GME GameStop upgraded to Buy from Hold at Needham
Needham upgraded GameStop based on valuation and better than expected Q3 results driven by GTA V. The firm believes management guidance is "extremely conservative" and that sell-through of next-gen consoles and cost leverage will drive shares. Price target is $60
ANF FBR sees little downside risk in shares of Abercrombie & Fitch
FBR Capital says Abercrombie & Fitch's Q3 results were as expected and it keeps an Outperform rating on the stock with a $43 price target. FBR sees little downside risk given A&F's global brand and the $7 per share in cash expected by year-end, with significant upside potential driven by a turnaround, takeout, or management succession

Here are the strikes I am looking for at the open :

Stock Ticker Call/Put Strike Expiration Closing Price Entry Price
CBRL CALL $130.00 December 0.45 0.40
TRIP CALL $100.00 December 0.50 0.45

Let's have a great end to the week, and I'll see you Sunday night!

- JB

If I Had A Nickel For Each Time: Perhaps It’s Time To Hoard Them

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The chief executive of French mining group Eramet has blamed a "violent crisis" gripping the world nickel market for what he says are huge losses at a subsidiary, and said conditions are unlikely to improve for two years.

Eramet company head Patrick Buffet said overcapacity in the global market for the metal was causing Société Le Nickel, the group's nickel subsidiary based in New Caledonia, to rack up losses of 2.5 billion French Pacific francs ($27 million USD) per month.

"The crisis in the nickel [market] is very, very violent and nobody expected it to reach such a level," Mr. Buffet told reporters in Noumea on Thursday after a board meeting of Société Le Nickel, the largest private employer on the main island of Grande Terre in the French Pacific territory.

His warning came after parent group Eramet last month posted a 5% drop in third-quarter sales to 754 million euros, mainly because of slumping global nickel prices.

Mr. Buffet said "alarming" levels of overcapacity stemmed from a steep rise in production from major consumer China, which in less than 10 years has spurred its output of the metal from zero to 450,000 metric tons per year, after importing cut-price ore from Indonesia.

High levels of mineral stocks on the London Metal Exchange and elsewhere had pushed down prices to "extraordinarily low levels" of between $6 and $6.50 per pound, well below the company's cost of production, Mr. Buffet said.

To counter its problems, Société Le Nickel will reduce spending and rein in investments and has also not ruled out job losses, Buffet declared.

Mr. Buffet also remarked that he foresaw the coming years as being "extremely painful" for the market, while there would be no improvement in conditions for two years.

New Caledonia is home to a quarter of the world's reserves of nickel, a key ingredient in the manufacture of stainless steel.

November 21st, 2013 Watch List

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Make that three red days in a row, as the markets struggled to stay green into the afternoon and found some weakness after the FOMC minutes were released. Folks continue to use the infamous “Taper” as a reason for markets to go up or down.

The CPI and PPI that came out yesterday and today both continue to show a lack of inflation, the fact of which continues to help the move down in gold. I think the yellow stuff will touch $1200 at some point in the coming days and I also stick to my $1100 target on it before the year is out.

Jobless claims also came in lower than expected this morning, which has given a bid to the U.S. dollar. Futures have come off the highs as well, but they're still up nicely. As a result, I'd love the SPY to hold $178 today. Despite yesterday's gyrations the VIX remained somewhat flat, a sign that these pullbacks are nothing more than some profit taking.

SHLD did report earnings this morning and that's somewhat of a surprise, since the date was never confirmed. The numbers came in within the pre-released range. The stock is down pre-market and I'll hold my December 85 calls, which will take a beating. I won't look to get into more SHLD unless it comes down to around $50 or so.

3-D stocks continued to get pummeled and they look about ready to bounce, but trying to time that bounce can be hazardous to your account! Quite a few analysts are out defending the stocks, so maybe they'll find a bottom today. I'll be watching SSYS for an entry point.

Here are some of the analyst changes of note for today:

JCP J.C. Penney reiterated as a Sell at UBS
UBS maintains its Sell rating on J.C. Penney despite near-term momentum given cash burn and valuation concerns. The firm does not expect J.C. Penney to have positive EBITDA until 2015 and believes shares are trading at a premium to its $7 price target
GMCR Green Mountain FY14 guidance conservative, says Buckingham
After Green Mountain reported stronger than expected Q4 results, Buckingham thinks the company is poised for significant margin expansion. The firm believes the stock has minimum downside, while investor sentiment towards the name should improve as market share losses subside or reverse in FY14. It keeps a Buy rating on the shares
LOW Lowe's weakness a buying opportunity, says RW Baird
Baird said the weakness in Lowe's is a buying opportunity as their positive thesis remains intact. The firm sees demand in the sector continuing to recover, higher ticket projects gaining momentum, and expenses improving next year. Shares are Outperform rated with a $56 price target
SSYS Stratasys longer term fundamentals remain unchanged, says Piper Jaffray
After hosting investor meetings with management, Piper Jaffray says Stratasys remains very positive with respect to the strength of its business. The firm believes the company's longer term fundamentals remain unchanged and says it remains a buyer of the stock following the recent pullback. Piper keeps an Outperform rating on Stratasys with a $131 price target
VJET Voxeljet vendor financing concerns priced into shares, says Citigroup
Citigroup believes investors concerns around Voxeljet's loans to customers are priced into the stock following the recent 30% pullback. Citi thinks vendor-financed transactions are not typical for Voxeljet, as the company only financed three deals out of 52 printer sales. However, the firm expects investors to now have a heightened sensitivity to financed transactions. Citi believes Voxeljet's long-term opportunity remains on track and keeps a Neutral rating on the stock with a $55 price target
QCOM Qualcomm price target raised to $85 from $75 at Macquarie
Macquarie reiterates its Outperform rating on Qualcomm following yesterday's analyst day and believes the company's continued technology leadership and broad array of applications give the company a leading position as the industry shifts to cloud computing.
SNDK SanDisk weakness would be a buying opportunity, says Susquehanna
Susquehanna believes SanDisk could see near-term choppiness but would use any weakness as a buying opportunity as they remain positive on the longer-term earnings. The firm believes the overall SSD revenue stream can help scale operating cost which could provide another driver for EBIT margin expansion. Shares are Positive rated with a $80 price target
GM General Motors shares should be bought at current levels, says Buckingham
Buckingham expects General Motors' earnings and cash flow to be boosted by the launch of its K2XX platform. The firm thinks the stock could react favorably to the company's November sales results, as it estimates that its sales are outperforming the industry this month

CBRL reports earnings next Tuesday, so I'll be looking for a position. I may try to time a bounce in SSYS as well:

Stock Ticker Call/Put Strike Expiration Closing Price Entry Price
CBRL CALL $130.00 January 0.35 0.30
SSYS CALL $145.00 December 0.50 0.45

Let's have a great day!!

- JB