SOME Recommendations Performance
July 23, 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 450% gain.
Here are the gains on some of the stock options recommended by SOME during the last week:-
TASER International, Inc. (TASR)…………….15%
SLM Corporation (SLM)…………….18%
Kraft Foods Inc. (KFT )…………….30%
VMware, Inc. (VMW)…………….25%
Eastman Kodak (EK)…………….12%
US Natural Gas Fund (UNG)…………….17%
Cheesecake Factory Incorporated's (CAKE)…………….25%
RadioShack Corporation (RSH)……………20%
Deere & Company (DE).………….30%
Urban Outfitters, Inc. (URBN).……………13%
Walgreen Co. (WAG)……………27%
Corinthian Colleges, Inc. (COCO).…………..30%
Apollo Group (APOL)……………….20%
The CBOE Volatility Index (VIX)………………25%
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 start with a sluggish session, then stocks eventually picked up steam as investors digested the highly anticipated stress test results from across the pond. The Street let out a collective sigh of relief when the data showed only seven of the 91 European banks tested would struggle to weather a "sovereign shock," with Spain accounting for five of the casualties. While some argue that the tests weren't as "stressful" as they'd hoped, the overall results were reassuring enough for Wall Street, with the bulls pushing the S&P 500 Index (SPX) north of the 1,100 level for the first time in more than a month.
"Not a bad way to end the week," concluded Senior Technical Strategist Ryan Detrick from Schaeffer’s Research. "We saw some more encouraging earnings, and it was another step in the right direction for the bulls."
"The lack of bad news in the stress tests helped the market," said Tom Schrader, managing director at Stifel Nicolaus. "Everyone was anticipating some negative news and when that didn't happen, everything popped."
Friday also brought a respite from the economic data that have plagued Wall Street of late, with the mixed reports casting a less-glowing light on the state of the recovery. The major indexes tottered between gains and losses right up until the release of midday results from stress tests of European banks, with stocks rallying in relief in the aftermath.
Once the European results registered, the major indexes pulled decisively higher for a second day, accumulating gains that came with the latest round of corporate earnings that by and large beat expectations, including results from telecommunications provider Verizon Communications Inc. (VZ).
Results for Major Market Indexes
The Dow Jones Industrial Average (DJIA – 10,424.62) finished the day, with a big gain of 102.32 points, or 0.99%.
The S&P 500 Index (SPX – 1,102.66) had a nice gain also, on the day, of 8.99 points, or 0.82%.
The Nasdaq Composite (COMP – 2,269.47), fared well also having a gain of 23.58 points, or 1.05%.
The Russell 2000 Index of smaller companies had the best gain of 15.17 points, or 2.39%, to settle at 650.65.
GE lifted the Dow and S&P 500 after it announced its first dividend increase since its historic slashing more than a year ago. The company also said it will restart stock buybacks this quarter after nearly two years. GE's shares ended up 3.3%.
Verizon Communications (VZ) and American Express (AXP) were other top Dow gainers. Verizon jumped 3.8% after the telecommunications giant's earnings excluding charges beat analysts' forecasts.
American Express rose 3.7% after the credit-card company's second-quarter profit nearly tripled, beating analysts' estimates. The S&P 500's climb also came as the health-care sector moved into positive territory amid merger-and-acquisition speculation for biotech company Genzyme. Genzyme (GENZ) leapt 15% after The Wall Street Journal reported that France's Sanofi-Aventis (SNY) has made an informal acquisition approach to the biotech drug maker, citing people familiar with the matter.
"If you've got companies like General Electric raising dividends and M&A activity cash they want to use," Mr. White said. "It's a good prescription for us to be able to hold this 1,100 hurdle on the S&P."
By the close of the week:
The Dow Jones Industrial Average (DJIA) ended the week on an impressive gain of 3.2%.
The S&P 500 Index (SPX) had an even better weekly gain of 3.5%.
Meanwhile, the Nasdaq Composite (COMP) notched the best gain of the three major indexes, with 4.2%.
About 8.5 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.
Market breadth: Breadth was positive and volume was light. On the New York Stock Exchange, winners beat losers by four to one on volume of 960 million shares. On the Nasdaq, advancers beat decliners by over three to one on volume of 2.43 billion shares.
Notes of Interest….
• The Dow Jones Industrial Average’s (DJIA) ended above its 10-week trendline – a feat accomplished only once since April 30.
• The S&P 500 Index (SPX) finished atop the 1,100 level for the first time since June 21 and also atop its10-week moving averages for the first time since late April.
• Crude futures finished lower today, thanks to easing concerns about a tropical storm in the Gulf of Mexico. More specifically, Tropical Storm Bonnie is no longer expected to halt production in the region for more than a few days, according to forecasts from the National Weather Service. By the close, crude oil for September delivery shed 32 cents, or 0.4%, to settle at $78.98 per barrel. For the week, however, black gold racked up a solid gain of nearly 4%.
• Gold futures also ended in the red today, as the encouraging stress test results of European banks lessened the metal's safe-haven allure. Furthermore, gold futures peeked their head above the $1,200 level in early trading, sparking a slew of round-number-related profit taking. Against this backdrop, August-dated gold futures finished $7.80, or 0.7%, lower at $1,187.80 an ounce. For the week, the precious metal ended relatively flat, giving up less than 0.1%.
• Bonds: Treasury prices fell as stocks rose and investors pulled money out of the safety of government debt. The slide lifted the yield on the 10-year note to 2.99% from 2.93% late Thursday.
Banking: Pay czar Kenneth Feinberg's latest review of pay practices at banks that received bailout funds showed 17 companies made $1.6 billion in "ill-advised payments" during the financial market crisis. Companies listed included Citigroup and Goldman Sachs.
The release of the test results -- which showed that the major European banks are sufficiently capitalized should a double-dip recession take place -- seemed to soothe investors, paving the way for an afternoon rally.
The test of 91 banks showed all but 7 would be able to hold on during a downturn and emerge in good shape, even if they suffered billions in asset write-downs and trading losses. However, critics contend that the tests didn't go far enough to account for how banks holding sovereign bonds might react if a particular country defaulted on its debt, say Greece or Spain.
"This week's homework will be to more fully analyze and digest the methodology and results to see their credibility and relevance," analysts at Action Economics noted, taking a more diplomatic voice than some.
Peter Boockvar, equity strategist at Miller Tabak, was among those questioning the rigor of the tests, while conceding the results offered some clarity.
Financial stocks, which had struggled early in the day, started to climb after the results were released at midday.
Brian Peardon, a wealth adviser at Harrison Financial Group, said there could be an initial, "gut" reaction to the results based on the headlines alone, but the full impact on the market won't come until next week because there is so much information to sort through.
"It will take the weekend to digest whether they're good or bad," Peardon said.
Some analysts were skeptical because there was little known about the criteria used to test the banks.
"There's obviously a lot of smoke and mirrors in these types of tests," said Albert Meyer, portfolio manager of the Mirzam Capital Appreciation Fund. "They no doubt provide us with numbers that aren't too alarming, even if they are correct." "To us the bank stress test results came out as a non-event. When you look at the results they didn't look very stressful," said Scott Snyder, portfolio manager of the ICON Advisers Europe fund ICSEX.O. The method of the stress test has drawn scrutiny particularly because of the way the tests treated European government debt.
Even so, U.S. investors had already shown a distaste for the European banking sector as data reveal the massive net selling that has occurred over the last two years.
U.S. mutual funds cut their holdings of publicly traded European banks identified in the tests to just $12.1 billion from $29.8 billion, a whopping 59.2 percent decline in the last two years through May, according to Lipper, a Thomson Reuters company.
The bulk of the sell-off was between 2008 and 2009. However even after the U.S. government conducted its own stress tests in May of last year -- widely believed to have put a floor underneath U.S. financial shares -- holdings in Europe's banks continued to decline.
"It stands to reason the most visible banks in Europe are the most scorned, perhaps because we know more about them. The holdings of ING, Bank of Ireland, Commerzbank, and Royal Bank of Scotland used to account for $4.4 billion in account assets. Now they are less than $800 million," said Jeff Tjornehoj, U.S. and Canada research manager at Lipper.
By comparison, U.S. bank shares, as measured by Standard & Poor's Financial index .GSPF, have risen 13.57 percent since the U.S. government announced its stress test results on May 7, 2009, through Thursday.
European Markets were mixed. Germany's DAX index rose 0.4 percent, Britain's FTSE 100 fell less than 0.1 percent, and France's CAC-40 rose 0.2 percent.
Company Earnings Reports
Ford Motor (F) reported better-than-expected quarterly sales and earnings that reversed its operating loss from a year ago, building on its return to profitability following several years of weakness. Shares gained 5.2%.
Verizon Communications (VZ) , Dow component, posted a quarterly loss due to costs associated with a buyout of 11,000 workers. Excluding those costs, the telecom posted earnings that topped estimates and revenue that missed forecasts. Shares gained 3.8%.
McDonald's (MCD) , Dow component, reported better-than-expected quarterly earnings that rose from a year ago, but reported weaker-than-expected sales at stores open a year or more -- a retail metric known as same-store sales. Shares fell 2.1%.
Microsoft (MSFT) , Dow component, after the close Thursday, reported higher quarterly sales and earnings that topped estimates, thanks to strong sales of its Windows 7 and an improved personal computer market. Shares ended little changed.
American Express (AXP) , Dow component, after the close Thursday, reported higher quarterly sales and earnings that topped expectations. The company's CEO also issued a tepid outlook on the economy. Nonetheless AmEx shares rallied 3.6%.
Company News and Movements:
• Shares of Genzyme (GENZ) spiked 15.4% on a report that French biotech Sanofi-Aventis (SNY) has informally approached the company about a potential buyout, the Wall Street Journal reported Friday. Sanofi-Aventis' American Depositary Receipts (ADRs) slipped 4.2%.
• Dividend hike: Investors were also heartened Friday by a dividend increase by General Electric Co. (GE), with the biggest U.S. conglomerate hiking its quarterly payment to shareholders by 20% in another signal that better times could be ahead.
The following companies had some impressive options movements:-
American International Group, Inc.
During the past five sessions, traders on the CBOE and ISE have bought to open 7,080 puts on AIG, along with just 3,402 calls. The stock's five-day CBOE/ISE put/call volume ratio of 2.08 reveals that bearish bets have more than doubled their bullish counterparts during this time frame.
AIG has racked up an impressive year-to-date gain of 21.7%, easily besting the broader equities market. However, the stock has been battling its 90-day moving average lately. This trendline has alternately provided support and resistance in the recent past, and it's currently acting as a stubborn technical ceiling.
Hecla Mining Company
As for HL, the stock has racked up a heavy dose of call volume during the past week. Traders on the CBOE and ISE have bought to open 7,679 calls on HL within the past five sessions, along with a mere 547 puts. In other words, more than 14 calls have been purchased for every put.
Out in the September series, call traders have set their sights even higher. HL's September 6 strike carries a whopping accumulation of 17,253 contracts.
However, not all of these calls are necessarily bullish bets. With short interest accounting for a noteworthy 14.4% of HL's float, it's possible that some of these out-of-the-money calls were purchased in order to hedge short stock positions.
If the shorts are looking to limit their upside risk, it's likely because HL has an earnings report on deck next week. The company is expected to report a profit of 5 cents per share before the market opens next Wednesday, July 28. HL has topped consensus earnings estimates in three of the past four quarters, so another upside surprise is not out of the question.
Range Resources Corp. (RRC)
Natural gas guru Range Resources Corp. (RRC) today announced that it will report its second-quarter figures slightly earlier than expected next week, rescheduling its conference call for 9:00 a.m. EST, as opposed to 1:00 p.m. EST, on Tuesday, July 27. Investors apparently aren't happy with the eleventh-hour switch, with the shares of RRC tapping a new 52-week low of $38.38 in intraday trading.
However, new lows have practically become par for the course for RRC, which has given up about 23% since late 2009. In fact, the security has underperformed the broader S&P 500 Index (SPX) by 9% during the past 20 sessions, and finished last month south of its 20-month moving average for the first time in a year. This long-term trendline could now switch roles to act as resistance for the struggling stock.
In light of the company's schedule juggling, as well as RRC's subsequent decline, put volume has skyrocketed on the commodities concern. So far today, the security has seen roughly 10,000 puts cross the tape – about 12 times its expected single-session put volume.
Most active has been the at-the-money August 39 put, which has seen close to 6,300 contracts change hands on open interest of fewer than 200, pointing to a plethora of new positions. In the same vein, the out-of-the-money August 37.50 put has seen almost 2,800 contracts traded on open interest of fewer than 300.
The Kroger Co. (KR)
Put players stormed The Kroger Co. (KR) on Thursday, with nearly 7,200 puts traded -- six times the grocer's usual daily volume of around 1,134 contracts.
However, this activity was not necessarily bearish. The most active strike was the September 20 put, with 5,487 contracts traded -- 99% at the bid price, revealing they were likely sold. Overnight, open interest at this strike increased by 5,384 contracts, to 5,593, indicating that that these puts were newly added. By selling to open the September 20 put, traders are counting on KR to maintain its footing atop of this round-number level for the next two months.
Intuitive Surgical, Inc. (ISRG)
Late Wednesday, Intuitive Surgical, Inc. (ISRG) reported stronger-than-anticipated second-quarter earnings and lifted its 2010 revenue guidance. Nevertheless, the shares of the medical device manufacturer initially ticked lower on the news, finishing Thursday's session at $316.98 -- just a hair's breadth north of breakeven.
In light of the stock's less-than-impressive earnings reaction, it appears short-term put holders were taking profits on their winning positions. By the closing bell, ISRG had seen roughly 3,300 August 320 puts change hands – 95% of which traded at the bid price, suggesting they were bought. Furthermore, put open interest at the front-month strike depleted by about 2,300 contracts overnight, confirming our suspicions of liquidations.
DryShips Inc. (DRYS)
Calls are the options of choice on DRYS today, with volume more than tripling the norm. So far, 10,000 calls have crossed the tape, and most of the action is centered on DRYS' September series of options. The stock's September 4 call has seen 2,294 contracts change hands, while the September 5 call has racked up volume of 1,920 contracts. Most of these calls have traded at the ask price, suggesting they were purchased.
Fuel Systems Solutions, Inc. (FSYS)
Call volume has ramped up to seven times the expected level on FSYS, with 1,360 contracts changing hands. The stock's August 29 call has seen 1,069 contracts trade, with 72% crossing the tape at the ask price -- pointing to buying activity. With volume outpacing open interest on this narrowly out-of-the-money call, it looks like new bullish bets are being added at the August 29 strike.
All three major indexes gained for the week, and the Dow is now within shouting distance of breaking even for the year, after having been in danger of falling into a bear market just a month ago.
"The market is indicating to me that it wants to go up and we're seeing some good solid earnings and economic news to support that," said John Wilson, chief technical strategist at Morgan Keegan. "But I'd love to see some better (trading) volume come in to reinforce that."
He said that the weak trading volume reflects the fact that its summer and many market pros are on vacation or are holding off on making big moves until the fall. However, it also indicates less enthusiasm on the part of buyers.
The U.S. stock market is in a better, yet still risky place as Wall Street readies for an even larger flood of corporate results in the days ahead.
"You can't tell me that we're headed to a double-dip recession when you've got these phenomenal results; the bears are out to lunch on that one," said Phil Orlando, equity market strategist at Federated Investors.
Orlando cited earnings from Apple Inc. (AAPL) and Intel Corp. (INTC) as two examples of stellar corporate results.
Yet the coming week is "potentially perilous in terms of the data flow," he said of economic reports that have had Wall Street for the past two weeks veering between the data and corporate results, which presented mostly antithetical messages on the recovery.
"Next week might be a little premature to see new housing sales firm," Orlando said somewhat sarcastically of the June data slated for release on Monday.
For European stocks, the start of the week brings the first chance to react to the results of bank stress tests, released Friday after markets there closed.
Other potential land mines in a week filled with earnings and economic reports include gauges of U.S. consumer sentiment and weekly jobless-claims numbers.
Of the 175 S&P 500 companies that already have reported, 78% reported earnings that topped analysts' expectations, 10% reported earnings in line with analysts' estimates and 12% missed, according to John Butters at Thomson Reuters.
On Friday, estimated share-weighted earnings for the S&P 500 for the second quarter stood at $193.1 billion, above the prior's $185 billion, according to Butters' data.
Should the final percentage of companies topping estimates maintain at its current rate, this current earnings season would tie with the first quarter 2010 for the second highest percentage of companies beating estimates for a quarter since Thomson Reuters began tracking the data in 1994.
So far, the highest percentage of companies reporting earnings above expectations for a quarter is 79%, which came in the third quarter of 2009, Butters said.
"On the whole the earnings season has been strong," said Anton Schutz, who manages the Burnham Financial Funds as president at Mendon Capital in Rochester, New York.
"I think you got a pretty resilient economy despite the headlines."
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