I wish I could start this off by saying how great today’s action was however I found it to be one of the most boring trading days of the year. Granted, we saw a nice run-up in Orient Paper (ONP), to which I booked some profits, but the volume was light and the action mostly sideways. As I’ve stated often, it is very hard to capitalize on low volume days with sideways action. It is much better to have a high emotion day where the market goes up or down on good volume, as we can make money in either direction.
Alcoa (AA) led off earnings season tonight and beat analyst’s estimates. This was a pleasant surprise and definitely a positive start to the high expectations we have for this season of earnings. We ended up having Novellus Systems (NVLS) and CSX Corp (CSX) beat earnings as well, making this an even more impressive start. Now that earnings season has kicked off, these reports may help create more emotion in the market. This should make it easier to capitalize on whichever direction the market chooses to go, unless it’s sideways again.
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Tuesday night, Intel (INTC) reports and that will be an important report that many will be watching closely. Last quarter INTC reported strong earnings and guidance, so many will look to see if they can continue this strength. Depending how the stock trades tomorrow, I might take a small gamble leading into earnings if I feel it will be a favorable risk/reward play. I expect earnings to be solid but a run-up could see a sell-the-news reaction.
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I’m optimistic for the markets over the next few weeks but I am not subscribing to the belief that the markets are going to be bullish for the rest of the year. I don’t see a reason to think we have bottomed out yet even though Doug Kass, a wiser man than I, believes we have. The S&P 500 will have tough resistance to break at the key level of 1100. Even though I do not believe we have bottomed this year, I hope Doug Kass is right and I am wrong. In the meantime, I am going to stick with momentum and quick movement to reduce my risk and protect my capital.
As always, do your own homework to see if you agree. Have a good night and I’ll see you in the live-chat come morning. Good luck out there.
Mike
At the time of publication, Kudrna was Long ONP but positions may change at any time
Random news: At the time of writing this, it seems Shanghai is starting to take a beating while the Nikkei is slightly up. We could use an Asian market rally to help fuel our rally.
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Tags: Alcoa (AA), CSX (CSX), Intel (INTC), Market Commentary, Michael Kudrna, Novellus Systems (NVLS), Orient Paper (ONP), Trading
STO March 178 calls 10 contracts for 2.35 (+2350) STO March 164 Put for 2.40 5 contracts (+1200) The net cost of this trade is $800. I will go equal weight on the puts if the price of GLD falls more. If the position starts moving in my direction I may close down the put position or add some one at a time at a higher strike to fully finance the trade