Good morning y’all, hope everyone enjoyed the weekend. A little late with our preview today as someone may have been celebrating an anniversary a little too much last night and was responsible for today’s morning post. This week is shaping up to have a similar feel to last week as the same news events will likely be driving the markets for most of the week, starting with President Barack Obama’s pre-recorded address airing tonight on the major networks. Charlie Rose conducted an interview with President Bashar al-Assad in which he adamantly denied use of chemical weapons, stating that the weapons were used against his own forces. The situation remains a pressure cooker that could have catastrophic repercussions if handled incorrectly, which means volatility could return to the market at any point stemming from related news. Speculation over Fed tapering will likely continue as well, which we would welcome with open arms for our $T and $HD positions.
In the meantime, we appear headed for a higher open as S&P futures have traded in a tight range over night but are sitting up 3-4 points. Apple $AAPL is trending up in premarket action as the run-up into the company’s events tomorrow and Wednesday has begun in earnest. Look for continuation throughout the session today as the stock looks ready to break out, but there is the stigma that Apple’s events have become “buy the rumor, sell the news” situations, so take profits and trail with stops if you’re long stock. We remain long via both stock and options, and we may look to take off a portion of our options position today if the stock really surges.
Molex $MOLX is making news this morning on reports that the company is being bought out for $38.50 per share by Koch Industries, a premium of roughly 30%. The stock is halted and we’ve placed a large, low-ball limit bid in the stock as a lottery ticket, but we have no expectation of getting filled. Blackberry is also trading up over 4% in the pre-market as speculation continues over a possible buyout of the Canadian smartphone maker. While a takeover does seem imminent, these events are so hard to predict and there will likely be several head fakes in the stock before a deal is announced. Finally, Facebook $FB is up once again on another upgrade and $50 price target from Sterne Agee. Zuckerberg continues to count his billions.
One name we will be watching closely this week is Tesla $TSLA. The stock has begun to move sideways and is flirting with a breakdown below its 8 day moving average. Any short in Tesla must be tactical as the stock remains on an incredible trajectory with a strong chart, but opportunities to the short side may present themselves if the stock cannot resume upward momentum.
We’ll take a deeper dive in our mid-day update into some other names – one of us is a little behind this morning. Good luck out there today everyone, stay tactical and profitable!
Happy Friday y’all. Well, the “most important jobs number ever” is upon us, with NFP coming out at 7:30 CST. Consensus is calling for an addition of 180,000 job, while Goldman Sachs is the resident optimist on the street with an estimate of 200,000 additional jobs. We’ll cop out and say jobs fall somewhere in between there, and we’ll throw our hat in the ring with an estimate of 189,000 jobs.
So what does this mean for the market? Well, it’s hard to say right now, but we’ll take a stab at it. Markets have shown a considerable amount of resiliency this year as bad news has been good news and good news has been good news. Anything aside from a disastrous jobs number will probably signal to the Fed that we are ready for tapering (though the actual jobs picture is still fairly putrid – Bloomberg flashed a great chart this morning showing a massive deceleration of full-time jobs versus rapid growth in part-time jobs, rhetoric that is being translated as “a job is a job,” which I’m sure many Americans would disagree with). In our view, we’re not convinced that tapering is a death sentence for the market like some pundits are expecting. We partially outlined our stance yesterday, and we do believe that interest rate sensitive equities will take a hit, but with expectations of tapering happening sooner rather than later, perhaps equity markets have already priced in that expectation. That’s not to say that markets will surge out of the gate no matter what today, but we would refrain from calling tapering a major downside catalyst.
There are still other factors that could send the market into a swoon, including the ongoing situation in Syria and the seemingly never-ending debt ceiling debate (which feels like a non-event). While it is likely the proverbial can will be kicked once again when it comes to the debt ceiling, predicting an outcome in Syria is an exercise in futility as the Obama administration has been horrendous when it comes to execution. Let the market react as it will, just be wary of leaning too hard one way or the other. This is a headline-driven market until further notice, and selectivity will be paramount until these events are in the rear view mirror.
We pared our gross exposure yesterday to pocket some gains and allow some added mobility ahead of this jobs number. Whatever your market sentiment, just remember one thing today: keep your head on a swivel.
(Anchorman is clearly a theme this week)
Got a prediction for the jobs number and the corresponding market reaction? Throw it in the comments.
Morning y’all. Sovereign debt and economic stimulus is making all the headlines with the US and German 10-Year yields inching higher. The US 10Y is trading at roughly 2.94% while the German bund clipped 2% for the first time since 2012. The ECB is leaving benchmark interest rates unchanged at 0.5%, and the Japanese yen crossed 100 while the Nikkei rallied overnight for modest gains.
S&P futures are more or less flat this morning ahead of perhaps the biggest jobs data we’ve seen since the last release (rimshot!). In all seriousness, today’s jobless claims and Friday’s jobs report will be paramount in the decision making process regarding tapering, which should accelerate the rise of rates. While recent jobs data has shown decent growth, we’re not convinced that the underlying economy is as stable as some of the pundits would have you believe. With that said, we think it is indeed time to taper to allow this market to make a directional move without being throttled by every headline coming out of the Fed. Look for a lot of commentary regarding tapering in the coming days, while headlines out of the G20 and continued discussion regarding the Syrian situation could serve as shocks to the market. We would expect the market to take a definitive direction following today’s jobless claims.
On the company front, not a ton of news this morning. Yahoo $YHOO made a “splash” by unveiling a new logo… yawn. The stock has been on quite a tear this year, but Marissa Mayer is going to need to start delivering sooner rather than later, and we’re not sure how spending $1 billion on Tumblr is going to radically alter the face of the firm. Samsung is still in the spotlight after yesterday’s product reveal, setting the stage for Apple’s $AAPL event next week. The perpetual turnaround story at Groupon $GRPN received another shot in the arm from Morgan Stanley with an upgrade to overweight. Groupon has been acquiring warehouses to improve distribution of its consumer goods, and the company’s mobile efforts have shown improvement. As Chicagoans, we’ve always had a healthy disdain for the Groupon platform and in the few times I’ve been to the site, I’ve rarely found deals that are even of vague interest to me. Still, it’s hard to argue with the direction of the stock, and it seems like getting Andrew Mason out of the way has reignited the fervor of growth surrounding this name. Still, we can’t see Groupon becoming a serious competitor for Amazon $AMZN just yet, as some have speculated.
We’ll be looking to manage our $FCEL position today as the company has surged higher following a strong earnings report. The conference call is slated for this morning and we will be looking for further commentary on profitability in the coming quarters. Seasonally, this stock has performed well during fall trading, and we may be hesitant to exit our positions if the stock can hold gains today. We’ve been preaching it all week, but it remains difficult to have conviction in either direction with so many external variables impacting markets, and this is an environment that presents very few buying opportunities for long-term holdings. For now, we will stay nimble and try to be extremely selective when taking day, swing and momentum trades.
That’s one way to start a month. What looked like a rip-roaring, bullish beginning for September was quickly erased by news from Washington regarding the Syrian situation. John Boehner offered the backing from the House of Representatives for President Obama’s military action in Syria, while the UN had its report from the region vetted while John Kerry and Chuck Hagel outlined a plan of action to Congress. Markets rallied some late in the session and closed off of the lows, with the S&P 500 closing at 1639.77, though well of the morning’s highs of 1651.35.
Today was a lesson in how not to manage your trade. We identified two profitable entries, one in the morning and one in the afternoon, one long and one short, and we mismanaged the exits on each position. We took an early long in $DDD that should’ve been good for a nice gain had we been more prudent near the highs of the day. Conversely, we got long puts in the middle of Tesla’s $TSLA plummet from the highs that could have gone for a 20% gain, but we pushed the envelope thinking the broader market would continue to sell off. We lost some money on the $TSLA trade while breaking even in $DDD.
Our active positions performed fairly well today. Apple $AAPL managed to stay green all day despite the aggressive selloff, and AT&T got slammed for most of the day, closing near the lows while driving up put premiums. We also saw gains in our $TAP put position. Our focus turns to $FCEL tomorrow as the alternative energy company is set to report earnings. In case you missed it, we initiated a call position in the stock earlier today.
We held off on making any additional moves today as the market’s bounce off the lows made it difficult to have much conviction either way. Most names gave back a significant portions of early gains, and it became difficult to separate leaders from laggards at the end of the day as the market recovered from the lows. Hopefully tomorrow will provide some more direction, but we expect we will need to remain nimble in the coming days as the situation in Syria continues to play out. Once that situation clears, we must still deal with tapering and the debt ceiling, which will undoubtedly impact markets and could serve as a shot in the arm for the bears, but it is unlikely we will hear much on those topics until after Congress makes a decision on Syria.