SOME Recommendations Performance
August 06, 2010
Success is simple. Do what's right, the right way, at the right time.
Success is simple. Do what's right, the right way, at the right time.
Another great week has been had, due to the continued volatility of the market, for recommendations, therefore profits have grown accordingly. As the market has improved we have been able to capitalize on this situation, although the increase again on Friday did hinder us slightly, and members who followed these recommendations for the past week were able to enjoy a 440% gain.
Here are the gains on some of the stock options recommended by SOME during the last week:-
Chesapeake Energy Corporation (CHK)…………….15%
Crocs, Inc. (CROX)………….10%
Sunoco, Inc. (SUN)…………….25%
Kinross Gold Corporation (KGC)…………….26%
Deere & Co. (DE)…………….15%
Brocade Communications Systems (BRCD)…………….32%
Applied Materials, Inc.…………….24%
Evergreen Solar, Inc.……………23%
OfficeMax Inc. (OMX)………….15%
Pfizer Inc. (PFE)…………….25%
The Coca-Cola Company (KO)……………15%
Ford Motor (F)……………10%
Potash Corp./Saskatchewan (POT)………….25%
Kohl's Corporation (KSS).…………..35%
Garmin Ltd. (GRMN)……………….20%
Congratulations on a great week and let’s keep the profits rolling!
If you are not already a member of Stock Options Made Easy, then you may wish to become one so that you can benefit from the profits that are being generated!
Friday saw the stock market close lower as concerns about unemployment continued to weigh on the market, although all three major gauges ended the week with gains.
Stocks dropped dramatically in the wake of a disappointing nonfarm payrolls report from the Labor Department, as traders were confronted with hard evidence of a frustratingly weak jobs market. In fact, the news seemed to be the final straw for analysts at Goldman Sachs, as the brokerage firm slashed its forecast for U.S. economic growth in 2011 and predicted "another round of unconventional monetary easing" from federal policymakers.
The major market indexes all tumbled to heavy losses by midday -- but the bulls proved their resilience by switching into bargain-hunting mode in afternoon trading. As a result, stocks pared their losses into the close, and what could have been a catastrophic session wrapped up with remarkably unremarkable declines.
"Things are looking good for the bulls, as volatility continues to sink lower," said Schaeffer’s Senior Technical Strategist Ryan Detrick. "In fact, the CBOE Market Volatility Index (VIX) closed today at its lowest level since before the May 6 flash crash."
The late-day recovery pushed both the S&P and Nasdaq back into positive territory for the year.
"If you look through it all, it seems like the market wants to go up, that's the important thing," said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.
"Economic data is going to continue to be frustrating, but within the context of the economy stabilizing and slowly improving. Investors will want to look through these short-term blips and want to buy, for now."
Results for Major Market Indexes
The Dow Jones Industrial Average (DJIA – 10,653.56) finished the day, with a loss of 21.42 points, or 0.20%.
The S&P 500 Index (SPX – 1,121.64) also had a loss, on the day, of 4.17 points, or 0.37%.
The Nasdaq Composite (COMP – 2,288.47), also had a loss of 4.59 points, or 0.20%.
The Russell 2000 Index of smaller companies had a gain of 4.39 points, or 0.67%, to settle at 650.68.
Consumer stocks ranked among the worst performers as the monthly jobs report highlighted worries about consumer spending, which accounts for about two-thirds of U.S. economic activity. Retailer Office Depot (ODP), which sells school and office supplies, slid 7 percent to $4.54, while the S&P consumer discretionary index .GSPD shed 0.5 percent.
By the close of the week:
The Dow Jones Industrial Average (DJIA) ended the week on a gain of 1.80%.
The S&P 500 Index (SPX) ended up 1.80% for the week.
Meanwhile, the Nasdaq Composite (COMP) also finished the week up 1.5%.
Big swings in stocks are more common on days with light volume, On Friday, only about 7.17 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the New York Stock Exchange by a ratio of about 8-to-7, while on the Nasdaq, three stocks fell for every two that rose.
Notes of Interest….
• The Dow Jones Industrial Average’s (DJIA) ended on a deficit of just 21.4 points, or 0.2%, after sinking to a loss of nearly 160 points at its intraday nadir. The blue-chip barometer notched a weekly victory above both its 20-week moving average and the 10,600 level for the first time since May 14.
• The S&P 500 Index (SPX) finished on a slim deficit of 4.2 points, or 0.4%, and staged a Friday finish above its own 20-week trendline for the first time since April 30.
• Nasdaq Composite (COMP) ended on a minor dip of 4.6 points, or 0.2% -- but couldn't conquer stubborn resistance at its 20-week moving average.
• Crude futures were also dealt a crushing blow by today's dismal data on nonfarm payrolls, with the benchmark contract notching its third straight daily decline. However, crude's losses were minimized by a weak day for the U.S. dollar, which backpedaled against the euro. By the close, crude oil for September delivery was down $1.31, or 1.6%, to end at $80.70 per barrel. For the week, crude managed to eke out a healthy gain, adding 2.2% from last Friday's close.
• Gold futures gained from the precious metal's reputation as a relative safe haven. As the day's poorly received jobs data effectively spoiled Wall Street's appetite for equities and other riskier assets, gold futures climbed modestly. Gold for December delivery settled on a gain of $6, or 0.5%, at $1,205.30 per ounce. On a weekly basis, gold futures rose 1.8%.
• Bonds: Treasury prices turned higher Friday. The 10-year note's yield fell to 2.86% from 2.91% late Thursday. The two-year note's yield dropped below 0.5% for the first time ever Friday, but then pared back some of those losses to trade at 0.52% later in the day.
U.S. employment fell for a second straight month in July as more temporary census jobs ended while private hiring rose less than expected, pointing to an anemic economic recovery.
Non-farm payrolls fell 131,000 the Labor Department said on Friday as temporary jobs to conduct the decennial census dropped by 143,000.
Private employment, considered a better gauge of labor market health, rose 71,000 after increasing 31,000 in June. In addition, the government revised payrolls for May and June to show 97,000 fewer jobs than previously reported.
Analysts polled by Reuters had forecast overall employment falling 65,000 and private-sector hiring increasing 90,000.
The unemployment rate was unchanged at 9.5 percent in July for a second straight month, just below market expectations for a rise to 9.6 percent. The steady jobless rate largely reflected a drop in the labor force as discouraged workers gave up the search for jobs.
Job growth has taken a step back after fairly strong gains between February and April, putting in jeopardy the economy's recovery from its worst downturn since the 1930s.
Growing unease over the health of the economy is weighing on President Barack Obama's popularity and hurting the Democratic Party's prospects of keeping control of Congress in November's mid-term elections.
The state of the labor market is one of the factors that will determine the timing of the Federal Reserve's first interest rate rise since reducing overnight lending rates to near zero in December 2008.
Fed Chairman Ben Bernanke has said the U.S. central bank could take steps to further ease monetary policy if the recovery were to falter. The central bank holds its next policy-setting meeting on Tuesday.
Economic growth slowed to a 2.4 percent annual rate in the second quarter after expanding at a 3.7 percent pace in the first three months of this year.
Despite the tepid private sector jobs growth, the pace of layoffs has moderated significantly from the first quarter of last year, when employers were culling an average of 752,000 jobs a month.
Last month, the dominant service sector added 38,000 jobs after June's 34,000 gain. More disturbing, temporary help services, seen as a harbinger of future permanent hiring, fell 5,600 after increasing 11,200.
State and local governments, struggling with huge budget deficits, purged more workers last month, pushing government payrolls down by 202,000 compared to a 252,000 drop in June.
Payrolls in the goods-producing sector unexpectedly rose in July, reversing the prior month's decline as manufacturing employment was boosted by auto makers who did not shut down their plants in July for retooling. Manufacturing jobs increased 36,000 after gaining 13,000 in June.
The sector is leading the economic recovery, which started in the second half of 2009. However, construction employment fell 11,000.
The average workweek edged up to 34.2 hours after slipping to 34.1 hours in June.
Employers normally increase working hours for existing staff before hiring additional workers.
European Markets ended lower. France's CAC lost 1.3%, while Germany's DAX slid 1.2%. Britain's FTSE 100 closed 0.6% lower.
Asian Markets ended mixed. The Shanghai Composite jumped 1.4% and the Hang Seng rose 0.6%, but Japan's Nikkei slipped 0.1%.
The dollar fell versus the euro, the British pound and the Japanese yen.
The dollar tumbled against the yen and euro Friday morning after July's U.S. job report brought more bad news.
The latest sign that job growth isn't keeping up sent the trade-weighted dollar index down to 80.3. That's 9% below its peak just two months ago.
In June, when the dollar topped out at $1.18 against the euro and 92 yen, the recovery in the United States looked more robust and Europe seemed on the verge of being sent to its death bed. Some euroskeptics were calling for the dollar to trade at parity with the euro.
But on Friday, the dollar approached $1.33 against the euro and 85 yen, which puts it near a 15-year low against the Japanese currency.
"The smart money is quickly running away from the greenback," said Peter Schiff, a longtime critic of U.S. fiscal profligacy who runs Euro Pacific Capital in Westport, Conn.
Company Earnings Reports
Kraft Foods Inc (KFT)
Dow component Kraft Foods Inc (KFT) was among the bright spots, rising 2.4 percent to $30.36 after the company, whose products include Kraft cheese and Maxwell House coffee, reported a higher-than-expected quarterly profit. Kraft also raised its target for cost savings from its acquisition of Cadbury, the British company known for its chocolates.
American International Group (AIG)
American International Group (AIG) said Friday it swung back into the red during the second quarter, but the government-owned insurance giant’s non-GAAP profit blew away Wall Street’s expectations.
AIG, which received a $182.3 billion rescue from the U.S. during the financial crisis, said it lost $2.66 billion, or $3.96 a share, last quarter. In the year-earlier period, it reported a profit of $1.82 billion, or $2.30 a share.
However, excluding one-time items, it earned $1.99 a share, significantly beating estimates from analysts for EPS of just 99 cents. Revenue at the insurance behemoth tumbled 16% to $19.98 billion.
AIG reported a quarterly net loss Friday due to the sales of some of its divisions, as the company undergoes a restructuring following its government bailout.
But its core insurance companies - which will be the company's largest units after its restructuring - nearly doubled their earnings. Shares of AIG rose nearly 5% in premarket trading.
AIG reported a loss of $2.66 billion, or $3.96 per share, in its second quarter - compared with the $1.82 billion or $2.30 a share, it earned in the year-earlier quarter.
AIG took a $3.3 billion charge for discontinued operations, including the sale of Alico, its second-largest foreign life insurance business.
Without charges, AIG said its adjusted net income was $1.34 billion, or $1.99 a share for the quarter, up from $1.14 billion, or $1.71 a share, a year earlier. Income from continuing operations more than doubled to $1.29 billion.
The insurer still owes taxpayers about $102 billion of the $136.5 billion it took in a government bailout during the downturn. As a result of the bailout, the government still has an ownership stake in the company that can be converted into about 80% of its common shares and a $49.1 billion stake in its private shares.
Fannie Mae said it lost $1.2 billion in the second quarter, down significantly from an $11.5 billion loss in the prior quarter. The government-run mortgage finance company said that its financial condition has vastly improved over previous quarters, but it still requested more government assistance.
Company News and Movements:
• After the closing bell, Hewlett-Packard Co (HPQ) Chief Executive Mark Hurd resigned on Friday following an investigation of sexual harassment, the world's top computer maker said.
Shares of HP, a Dow component, tumbled 9 percent to $42.14 in extended-hours trading. The stock was initially halted after the news.
• Shares of grain companies like Archer-Daniels-Midland Co (ADM) and Bunge Ltd (BG) continued to outperform the overall market after rallying more than 5 percent on Thursday, on expectations their wheat exports will be increased by Russia's decision to suspend grain shipments as it faces its worst drought in a century.
Bunge shot up 2.2 percent to $55.66, while Archer-Daniels-Midland slipped 0.2 percent to $30.18.
Halliburton Company (HAL)
During the past 10 days, traders on the ISE have bought to open 10,588 puts on HAL, compared to just 2,371 calls. The stock's 10-day ISE put/call volume ratio of 4.47 ranks in the 99th annual percentile, indicating that speculators on this exchange have purchased puts over calls at a faster clip only 1% of the time during the past year.
Likewise, short interest on HAL vaulted higher during the past month, accelerating by 18.7%. However, shorted shares account for only 2% of the equity's float, which is hardly an overwhelming accumulation of bearish bets.
So, while bearish speculation is ramping up on HAL among both stock and options traders, it seems that pessimism is still far from peak levels.
Meanwhile, analysts maintain an overwhelmingly upbeat attitude toward the oil services issue. Zacks reports a whopping 23 "strong buys" and four "buys," compared to just three "holds" and zero "sells." This top-heavy configuration leaves plenty of room for potential downgrades.
On the charts, HAL seems to be trapped in a kind of technical purgatory. The shares are holding steady above support at their 10-month and 20-month moving averages, which haven't been breached on a monthly closing basis since April 2009. However, the formerly supportive $32 region has repeatedly halted the stock's rally attempts, acting as a staunch technical ceiling since October 2009. With HAL lingering not far from this familiar roadblock, it's no surprise that opportunistic put players are ramping up their bets for a short-term decline.
RadioShack Corporation (RSH)
During the past 10 days, traders on the ISE have bought to open 11,188 puts on RSH, compared to just 3,911 calls. The security's 10-day ISE put/call volume ratio of 2.86 ranks higher than 94% of other such readings taken during the previous year, suggesting that traders on this exchange have purchased bearish bets over bullish at a faster pace only 6% of the time.
However, thanks to a glut of call open interest in the front-month series, RSH's SOIR is still docked at an optimistically skewed 0.40, in the fourth annual percentile. A preponderance of 36,417 contracts at the August 22 call seems to be slanting the SOIR toward the bullish camp, as this wealth of out-of-the-money calls completely dwarfs open interest accumulations at RSH's other front-month strikes.
For the record, peak put open interest resides at the August 19 strike, with 19,443 contracts in residence. With RSH trading just shy of $20 at last check, the equity is perched between peak call and put open interest for the front-month series -- which could keep the shares pinned in a relatively narrow trading range as expiration approaches.
Elsewhere, short interest on the electronics retailer has dwindled lately. During the most recent reporting period, short interest contracted by 2.2%, yet these bearish bets still account for nearly 9% of the equity's available float. In other words, there are still plenty of shorts betting on the stock to slide.
On the analyst front, most brokerage firms maintain a downbeat stance on RSH. Zacks reports seven "holds" and two "sell" or worse ratings, compared to six "buy" or better recommendations.
Judging by all of these data points, there seems to be a generally bearish mood toward RSH among analysts and investors alike. Buyout hopes buoyed the stock earlier this summer, but negativity has naturally crept in as the retailer's takeover prospects have gradually fizzled.
As a result, RSH is clinging to a rather slim year-to-date gain of just 2.6%. The stock has decisively breached former support at its 10-week and 20-week moving averages, and is now facing a critical test of its 50-week trendline. Support from this latter moving average hasn't been violated on a weekly closing basis since mid-May 2009, so a breach of this level could prompt a fresh wave of bears to place new bets against RSH.
The following companies also had some impressive options movements:-
American International Group (AIG)
Before the open this morning, insurance giant American International Group (AIG) announced that it suffered a $2.66 billion loss in the second quarter, or $3.96 a share. In the year-ago quarter, AIG earned $1.82 billion, or $2.30 a share. The company said the loss was primarily due to a $3.3 billion non-cash goodwill impairment charge. On an adjusted basis, the company said it earned $1.34 billion, or $1.99 a share, versus $1.14 billion, or $1.71 a share a year ago. Analysts had expected the company to earn 98 cents a share.
Optimism was running high among options players ahead of the earnings report. The International Securities Exchange (ISE) reported that nearly three calls were purchased to open for every one put purchased to open during the past 10 trading sessions. This ratio of calls to puts is higher than 94% of all those taken during the past 12 months.
Meanwhile, Wall Street still has bearish leanings toward the shares, as all six of the analysts following the security rate it a "hold" or worse. This configuration leaves ample room for potential upgrades.
General Electric Company (GE)
General Electric Company (GE) has been on a technical roll since July, forming a series of higher highs and higher lows in the past few weeks. However, the stock's progress stalled this week, as GE hit resistance around $16.50. This level coincides with GE's 20-week trendline, which has capped the equity's progress since mid-May.
Option players seem undeterred by GE's technical stall-out, though, at least judging by Thursday's option activity. The September 16 call saw volume of 16,208 contracts traded -- most of which changed hands at the ask price, indicating they were purchased. Overnight, open interest increased by 9,310 contracts, revealing the addition of fresh bullish bets at this in-the-money call.
In the front-month series, option players focused on the August 17 call, with over 6,500 contracts changing hands -- 65% of which traded at the ask price. Open interest increased substantially overnight, confirming buy-to-open activity at this strike.
For the record, peak call open interest for the August series can be found at the 16 strike, with over 75,000 contracts currently in residence. With GE hovering around $16.36, these 16-strike calls are right at the money.
Google Inc. (GOOG)
Google Inc. (GOOG) has been stuck in a pattern of horizontal movement since May, with the stock's progress confined by $460 on the downside and $500 on the upside. Throughout this time, GOOG's descending 20-week moving average has provided an impenetrable ceiling for the stock. Now poised around $498, GOOG is not only facing resistance from the $500 level, but also from its intermediate-term trendline.
Put activity has been rampant on the struggling Internet issue lately, with some 23,000 puts changing hands so far today -- already three times GOOG's expected single-session put volume of fewer than 7,000 contracts.
Put players have taken a relatively conservative approach to GOOG today, with the December 400 put seeing volume of nearly 3,000 contracts traded. Most of these puts traded in between the bid and ask prices, making it difficult to tell whether they were bought or sold. However, with just 1,600 contracts currently open at this strike, it seems at least a portion of these puts are new positions.
If these puts were sold to open, then traders are counting on GOOG to remain above $400 over the next several months. Conversely, these 400-strike puts may have been purchased to open, either by bearish traders betting on GOOG to slip beneath this round number, or by nervous shareholders purchasing put protection.
• **Bullish flow detected in Prudential Financial (PRU), with 8846 calls trading, or 4x the recent average daily call volume in the name.
• ** Bullish flow detected in Bunge (BG) , with 8342 calls trading, or 4x the recent average daily call volume in the name.
• **Bullish flow detected in Alpha Natural Resources (ANR) , with 5972 calls trading, or 2x the recent average daily call volume in the name.
• ** Increasing options volume is also being seen in Allstate (ALL), Comerica (CMA) , and AIG.
Stocks had been rising over the past five weeks, largely on the back of solid corporate earnings. The S&P 500 is still up 9.7 percent from its closing low for the year set July 2.
Of the 443 companies in the S&P 500 that have reported earnings to date, 75 percent have reported earnings above analysts' expectations, with only 9 percent missing estimates, according to Thomson Reuters data.
"The hope was that we would have a great earnings season, and frankly the S&P has delivered on that in spades," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
"The disappointment is that in spite of the delivery of great earnings, you still have an economy that is not engaged and clearly not improving on the employment front."
The dour jobs data added to concerns about the economic recovery, which is turning out to be less robust than many analysts had anticipated. In particular, investors are worried that consumer spending, the main engine powering the U.S. economy, will suffer as unemployment remains high.
"We were hoping for good news, and we just didn't get it," said Maris Ogg, president of Tower Bridge Advisors. Stocks are near historical lows in terms of valuation, "but it's hard for me to see how we get much outside this trading range with the uncertainty we have out there," she said, pointing to the jobs outlook and Congressional uncertainty over extending tax cuts.
Compounding worries is that consumer spending, which makes up 70% of economic activity, could further erode in the face of persistently high unemployment rates. And investors remain wary about how the weak job numbers will influence the Federal Reserve's decision at next week's meeting whether to alter its strategy for managing its $1.1-trillion portfolio of mortgage-backed securities or take other measures to spur the economy.
"The Fed will be focused like a laser beam on the jobs situation," said Stephen Wood, chief market strategist at Russell Investments. But he added that the economic recovery is "going to be like running on the beach with boots on."
"We are still seeing jobs growth but at a much slower pace than expected," said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management. "It's going to be hard to support earnings going forward without jobs growth."
Better-than-expected corporate earnings helped boost the Dow 7% in July, which was the best month for stocks in a year. But the cloudy outlook for the U.S. economy has weighed on the market so far in August, which is historically a bad month for Wall Street.
Friday's jobs report raised speculation that the government may take additional steps to shore up the recovery as previous economic stimulus measures fade.
"Traders may be thinking that this will spur the Fed into action," said said Quincy Krosby, financial market strategist with Prudential Financial.
The Federal Reserve is scheduled to make a policy announcement next week and the central bank is widely expected to hold interest rates steady. But some analysts say the Fed could signal more aggressive plans to support the economy, such as resuming its various asset purchase programs.
Meanwhile, investors flocked on Friday to less risky assets such as U.S. Treasurys and gold futures. The U.S. dollar slumped in the currency market, and oil prices tumbled.
It's not yet clear whether Friday's downturn was a sign of more trouble to come or just a temporary setback on a generally upward trajectory for the market. If stocks are going to get more fuel to advance, they will have to get it from someplace other than earnings since the corporate reporting season is winding down. That leaves the focus on the economy, and the news there has been discouraging. Housing, retail sales, personal income and now jobs reports have all been downbeat.
The monthly jobs report from the Labor Department is a key indicator on the health of the economy and is closely watched by investors and economists. Job creation has a huge effect on the rest of the economy, influencing how much people spend on cars, clothes, travel and even homes. The latest report confirmed that many employers are still reluctant to hire.
"The tension will play out for the rest of the year between corporate earnings and employment," said Sarah Hunt, a research analyst at Alpine Funds. At some point, Hunt said, earnings will have to slow to match the weaker economy or employment will have to pick up to help maintain strong earnings.
On top of that, Europe's economy is showing stronger signs of life than was expected just a few months ago, when mounting government debt there was hurting stocks worldwide. A healthier Europe gives investors another place to stash money if the U.S. economy remains weak.
Success is simple. Do what's right, the right way, at the right time.
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