Futures are pointing to a lower start to this holiday shortened week with the S&P set to open .74% lower as I write this. Asia markets closed mixed overnight while Europe indexes are in the red this morning. The US dollar is higher while Oil, Gold, and Yields are lower.
And this is what UPB is reading this morning: https://www.optionmillionaires.com/morning-reads-54/
And here is my rant from Friday if you missed it: https://www.optionmillionaires.com/jbs-afternoon-rant-july-1st-2022/
The big headlines from this weekend were wrapped around housing prices and the US dollar. Housing seems to be the last shoe to drop. If there can be any optimism around a short-lived downturn, housing could be it - that is if prices can hold. This weekend there were countless pieces around housing and the eventual move down that maybe coming(or is coming). The good thing is that we are not anywhere close to a situation in 2008 where so many homeowners went underwater and were sitting on 2-3 mortgages, who were then forced to liquidate at below market prices that just exacerbated the situation... and then all those shady debt products based on those mortgages that went pretty much to zero. If there was one thing that came out of 2008 that was good, it was the more stringent mortgage process and requirements we have today. So hopefully this is 'peak' housing talk and, even if there is a drop in housing prices, it is 5% or so on average.
The US dollar is hitting 19 year highs and the EURO is set to hit parity with the US dollar - something some folks have been calling since the EURO was 1.30 or so versus the US dollar. I mentioned it a while back( https://www.optionmillionaires.com/the-dollar-is-trash/ ), that the stronger US dollar is great for small caps and also great for the US Debt. The stronger dollar will make parts/components less expensive for US companies. Those with multi-national exposure - typically large-cap companies - will be negatively impacted as their products/services become more expensive for consumers abroad. Not saying small-caps are set to go on a run, just think there will be more opportunities in that space for upside in the coming weeks, especially when the market finds some footing. The US debt payments also becomes less expensive to foreign debt holders as the Dollar strengthens, helping offset rising rates.
On a sidenote: I am finishing up a back-half Webinar with some ideas for the last 6 months of the year and it should be up in the next day or too.
Last week was a frustrating one. Some will say cash is a position, but in the risky option trading world, sometimes not losing cash is a position. I still prefer buying calls for bounces in lieu of adding puts for downside as premiums remain elevated.
I still love TRIP, TZOO, BHC, IBM, and BPT for upside. All five will need to add to Friday's gains. I also like EXPE here with travel exploding. The company posted a monster Q1 a few weeks back yet its off nearly 60% since the results. Have to think this heads back to $120 or so in the coming weeks. They will report earnings in the first week or so of August so may get some Monthly August strikes today:
CVGW looks set to retake $45 and above in the coming week or two. The company looks to be on the rebound after shaking up its management. May look at some $50 strikes for that move:
U has been churning between $35 and $40 since May. One of these bounces will see it break thru that $40 handle and head into the mid-high $40s in short order. Will continue to have on watch for some calls:
Gold is still on watch as well. The stronger US dollar is typically a negative for Gold and think it can break that $1785 handle again and then it will head to $1700 in the next week or two. Will look to add some GLL, DUST, and/or JDST calls today on Gold weakness:
Gold:
Still eyeing some names in the Biotech space as well... SAGE, which is the usual, and may look to add some SRPT, which presents at a conference on July 7th and could see a move to $90+:
The SPY closed back above that $380 handle on Friday - would like to see some buyers come in and get another close above or I fear a move to $368 or so may come quick:
Here are the analyst changes of note for today:
| Evercore adds Stryker to 'Tactical Outperform' list, lowers target to $250 |
| Evercore ISI analyst Vijay Kumar lowered the firm's price target on Stryker to $250 from $285 and keeps an Outperform rating on the shares. Kumar is also adding Stryker to the firm's "Tactical Outperform" list ahead of earnings reporting season for the Life Science Tools and MedTech groups |
Disney downgraded to Mixed from Positive at Vertical Group |
| Vertical Group downgraded Disney to Mixed from Positive, citing concerns about a spending slowdown for national TV advertising |
| Oppenheimer remains bullish on Tesla following Q2 deliveries |
| Oppenheimer analyst Colin Rusch says that with Tesla Q2 deliveries/production largely in line with adjusted Street expectations after CEO Elon Musk publicly discussed supply chain and ramp headwinds as a strain on cash flow, he expects investors to focus on production run rate and pricing dynamics short term as key drivers of Revenue and gross margin under normalized operating conditions. The analyst anticipates COVID-19 precautions in China along with production disruptions in select geographies impacted by the Russia/Ukraine conflict could have a lingering impact on component availability. He expects headwinds to be largely resolved by Q4, but would not be surprised by some margin pressure in the meantime. Rusch has an Outperform rating on the stock and remains bullish on the shares considering Tesla's potential earnings leverage, technology leadership position, and the recent selloff in shares |
Momentus initiated with an Underperform at Evercore ISI |
| Evercore ISI analyst James Ratcliffe initiated coverage of Momentus with an Underperform rating and $2 price target. While admitting that Momentus's Vigoride platform could fill a need in "a potentially rapidly growing satellite launch market," Ratcliffe is cautious given that the company's Vigoride spacecraft and MET thruster have not yet been successfully tested in orbit, the company will need significant additional capital by mid-2023 and the demand environment looks "promising," but "remains highly uncertain. |
| Sarepta named a 'Catalyst Driven Idea' at Morgan Stanley ahead of 9001 update |
| Morgan Stanley analyst Matthew Harrison named Sarepta as a "Catalyst Driven Idea" ahead of management presenting a more comprehensive SRP-9001 update at the International Congress on Neuromuscular Diseases, or ICNMD, conference in Brussels on July 7, citing his belief that a 4-5 point improvement in the cross-over cohort from baseline could potentially raise investor expectations that accelerated approval maybe possible, assuming a clean safety profile. His base case expectation is that the company presents "directional evidence" supporting the efficacy of SRP-9001, but that it cannot define a clear path to accelerated approval, adding that he doesn't expect the shares to move much if this is the outcome. However, Harrison sees two other scenarios in which the stock could be up 10%-20% or down 10%-15% if either SRP-9001 clearly demonstrates clinical improvement or if there is a new safety signal and/or limited clinical efficacy, respectively. He maintains an Equal Weight rating and $74 price target on Sarepta shares ahead of the July 7 meeting |
| Alibaba price target raised to $140 from $130 at JPMorgan |
| JPMorgan analyst Alex Yao raised the firm's price target on Alibaba to $140 from $130 and keeps an Overweight rating on the shares. The analyst sees room for a positive surprise to consensus Q2 estimates on Alibaba's cost optimization. On-the-ground observations and local news flow suggest a further scale-back of investments by Alibaba over the quarter, Yao tells investors in a research note. As a result, losses from the company's multiple initiatives, like Taocaicai and local service, may improve more than expected sequentially, says the analyst. Yao expects Alibaba share price upside to be driven by positive earnings revisions, before rotating to multiple expansion when its earnings growth recovers to 20%-plus on a 6-12 months view. He's more positive on Alibaba's margin outlook and notes the company remains one of his top picks in the China Internet universe |
And here is what I am watching today: SAGE, SRPT, GLL, DUST, JDST, IBM, BPT, EXPE, U, SPOT, ROKU, and CVGW.
Let's have a great day!
-JB