Option Investor
Newsletter

Daily Newsletter, Thursday, 2/4/2010

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Nowhere To Hide

by Keene Little

Click here to email Keene Little
Market Stats

The "nowhere to hide" theme is going to be a common one this year. Just as we saw in 2008, when there was nowhere to park your money, except cash, so too will 2010 be a time when cash is king. The tops in January have been near universal in all sectors and in all countries. Diversification today simply means watching it all move pretty much in unison. While you might be able to take advantage of short-term moves in various sectors and countries, you have to stay on top of each one to ensure you don't get trapped by a bigger move in the wrong direction than you bargained for. Do yourself a favor and stick with what you know and then trade it (buy and hold is out--am I right or am I right?).

One look at the numbers in the above table tells you pretty much all you need to know about today--it was ugly. The DOW lost more points today than any day since April 2009. Down volume and declining issues swamped up volume and advancing issues. And new 52-week lows beat out new highs, something we haven't seen in a long time. With the market still relatively close to its highs for its rally from March it is telling that a greater number of stocks are already making new 52-week lows.

The dollar was up today and that's actually one of the few places I would recommend a buy-and-hold approach right now. Buy the USD/EUR forex pair or UUP and let a strong dollar rally help your position. At the very least it would be a great hedge against any commodity/stock position that you do not want to sell.

Helping the dollar today were more fears of European bankruptcies. Along with Greece we know of several other countries on the ropes (Portugal is threatening to be next in line behind Greece, and then we've got Spain, Italy, Ireland and soon to be others) and the European Union is between a rock and a hard place with an untested currency (the Euro has not faced any stiff test yet but is about to). If the EU bails out Greece they will need to bail out the others and most of the EU countries have no stomach to bail out anyone else, let alone another country. This is where isolationism and protectionism come to the fore, as it does in every depression.

If the EU doesn't bail out Greece, or the others, then the countries will be booted from the EU. And of course if that happens then effectively the EU is no longer a Union of countries. It will be every man (country) for himself. The Euro will collapse with a historical footnote describing the experiment that failed. Those fears will boost the U.S. dollar since where else are you going to invest your money? Like it or not, there aren't many other places to stash your cash. It's like Winston Churchill's quote, "It has been said that democracy is the worst form of government except all the others that have been tried". Insert 'U.S. dollar' for 'democracy' and 'currency' for 'government' in that quote.

I've also talked about the deflationary cycle that we have to get through. A credit bubble is followed by the bubble bursting. A bursting credit bubble results in debt destruction. It's really quite simple, and unfortunately unstoppable, once it gets extreme as it did. The government's actions almost always lead to unintended consequences and the consequence of trying to get everyone into a house they couldn't afford, a car they didn't need and credit that only got people living beyond their means will cause a lot of pain that not even the mighty Fed will be able to stop. They can slow the process down, as they did in the past year by giving the heroin addict another and bigger dose, but the let down the next time will be even more painful than if they simply let the painful process proceed as it will anyway.

When you look at the amount of debt accumulated, especially since the 1980s, it's scary. The chart below shows it as a percentage of GDP (I've shown charts before and mentioned that there are various ways of measuring total debt and the below chart is from data collected by Ned Davis Research), and includes data through September 2009 (we know the debt has increased significantly since then).

US Total Debt as Percentage of GDP, 1923-2009, chart courtesy Ned Davis Research

Debt to GDP hit a high of 260% in the 1930s but so far our debt ratio is about 370% and climbing. We're well into territory where no other country EVER has survived this level of debt. Currency default has always been the outcome. Who knows how long it will take but that's where we're headed. Sobering to say the least.

But here's the good news--the private debt has taken a nose dive. This is one of those bad news/good news things. The bad news is the consumer has closed his wallet and stopped spending like a drunken sailor. The amount of credit available has also been taken away. This is causing economic pain because our economy is so dependent on consumer spending. But we've all known for a very long time that we can't spend our way to wealth. The government continues to foster that idea on us because their very jobs are dependent on it. But once we collectively learn what the government has done to us it will be one more reason why we'll lose faith in those who supposedly represent us.

While the private sector has massively reduced the level of debt, the government has taken over for us and is now the drunken sailor. As you can see in the chart below, the private sector debt has collapsed while the public debt is heading for the moon. The private sector is saving again and the government is taking those savings (and the savings well into the future and from future generations) and spending wildly. If for no other reason come November, this chart tells you why we need to vote every stinkin' one of the bums out of office. Only Ron Paul seems to get it. And take away the Nobel prize from Paul Krugman who wants the government to spend another trillion on a stimulus plan since the first one worked so well.

Private and Public Debt, 1968-2009, chart courtesy FactSet

OK, rant over. It is what it is and our job is to simply trade what we're given. It helps to understand the longer-term fundamentals that the market will have to deal with but in reality we trade off the shorter-term charts so let's take a look at what we've got this week.

To review where we are and where I think we're going, I want to start off with the SPX monthly chart tonight. From the 2000 high I think we're going to see a great big A-B-C pullback that corrects the big bull market from 1949 following the Great Depression and the sideways stock market. Needless to say, a correction of a 51-year bull market can be expected to take some time. This correction would typically take about one third the time of the previous bull market leg up which means about 17 years or until 2017. So, only 7 more years of bad luck! Actually I think the bear market will be over sooner than that but obviously not something we need to worry about yet.

That's obviously a big broad-brush approach to where we are in the market so the monthly chart shows where I think we are in the pattern. Remember, this is only my opinion, not fact. It is based on cycle and EW (Elliott Wave) theory. Most people, and I mean in excess of 90% at the January high, believe the March low was THE low and that we're in another bull market. Many are looking for some kind of correction to the rally but think it will be a great buying opportunity for a further rally into the end of this year. I am predicting much worse things to come. We haven't had to deal with the aftermath of a huge credit expansion since the years following the roaring 1920s, but this time we made the credit expansion of the 1920s puny by comparison.

Looking at the monthly chart below, and considering the pattern that calls for a large A-B-C correction of the last bull market, the first leg down, wave A, was the 2000-2002 decline. Wave B was the 2002-2007 rally and since the October 2007 high we've been in wave C down. The c-wave will be a 5-wave move and the 1st wave of it was the 2007-2009 decline. The 2nd wave was the rally from last March to the January high. That puts us at the beginning of the 3rd wave down if the January high was the end of the rally.

S&P 500, SPX, Monthly chart

I think we have our answer as to whether the January pullback is simply another correction to the rally from March or is instead a reversal back to the downside. That's the big argument right now between the bulls and the bears. After leaving an outside down month, which is a key reversal signal, I think we have our answer. Until proven otherwise I think we've now entered the next leg down and it's time to view all bounces as shorting opportunities. Remember, 3rd waves are the strongest of a 5-wave move and that's what we're now entering. It won't give us the same number of points down as the 1st wave down but it will exceed it in percentage terms (the 1st wave down for SPX was nearly -58%).

After more than a year of having the government pull out all the stops in an effort to arrest the sink rate in the stock market, prop up the dead-fish banks (remember when Bill Fleckenstein called the tech stocks that term during the dot.com bust?) and create a stimulus plan, one has to wonder what's the next act if we start back down again. Lower rates into negative territory? Oh wait, they're effectively already there. Pay us to borrow money? Oh wait, tried that too (cash for clunkers and home buying credit). The wave of recognition is fast approaching when most will realize we spent trillions that we don't have and have zilch to show for it and we probably won't get it back. What will really devastate the market is the recognition that the Fed is impotent, and worse, that it always has been. It will be one of the factors behind an effort to abolish the central banking scheme. Bernanke is going to wish he had lost his bid for confirmation to a second term.

This wave of recognition will be marked by waves of strong selling as panic sets in again. Pundits will blame it on European countries going bankrupt, homes not selling, more bank failures, or some company popping its cookies all over its earnings report. What they don't realize is that they're all symptoms of the same thing--the correction to a credit bubble means a painful but necessary destruction of debt (by defaulting or paying it off). The stock market's decline will simply be a reflection of the social mood shift that's creating the reversal of the credit spree of the past few decades and getting back to what really works in the long run--savings. Short term pain will lead to long term gain. It's just that the short term pain will still be measured in years and won't feel short term.

The big 3rd wave down that I've been showing on my charts is that wave of recognition. For traders they're manna from heaven. You can make more in a few short months in a big 3rd wave than years in any of the others. And when it's the 3rd wave in a bear market, which moves much faster than a bull market, let's just say you're not going to get one of these trading opportunities ever again in your lifetime (the first one was the high in October 2007). A bit overstated? No.

If the correction to the January decline finished at Tuesday's high then it was smaller than usual--it was short in both time and price. This is pointing to the underlying weakness in the market if that's all we're going to get for the bounce. If the decline kicks into gear from here we could see SPX drop below 950 by the end of the month (or faster). On the weekly chart below the first leg down shows as wave-i of what should be 5-wave move down into the summer to create one larger degree 1st wave down. We'll take it one leg at a time to see how it sets up along the way.

S&P 500, SPX, Weekly chart

On the weekly chart above, wave-i down into the end of February/early March, is shown in more detail on the daily chart below. If we're to get a typical 5-wave move down it's looking like the 1st and 2nd waves have already completed and now we're starting the 3rd wave down, which should drop to the 1000 area. Then another correction (4th wave) and a 5th wave down into the end of the month, with a downside target in the 940-950 area.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- cautiously bullish above 1105
- bearish below 1071

On the 60-min chart below you can see this week's bounce retraced only 38%, which is relatively weak for a 2nd wave correction. It tells us the market has an underlying weakness and jumpy bulls. Instead of waiting for a higher bounce to visible resistance near 1113 (50-dma), they started selling early into the bounce. This morning's news out of Europe got them even jumpier and they pulled the plug on more of their holdings.

For Friday I think we have a good setup for a bounce to correct the leg down from Tuesday. It should be a smaller degree 2nd wave correction and if that's what we get, and as long as it stays below about 1091, it will be an outstanding shorting opportunity. The next leg down after that will be a 3rd of a 3rd wave down (within the beginning stages of an even larger 3rd wave down). It would be a setup for a Black Monday. It's possible we'll see the market simply give up here and drop like a stone on Friday. The market is short-term oversold but crashes come out of oversold, not overbought. Now that last Friday's lows were broken the bulls realize they don't have the same setup as they did back in November after the sharp pullback in October. That's making many of them very nervous right now.

S&P 500, SPX, 60-min chart

For this week I kept thinking we'd see a bounce up to the 50-dma (10425 on the DOW) or broken trend lines but today's hard selloff makes it look like the bounce finished early and it's no different for the DOW. It didn't even make it back up to its broken uptrend line from August-November (although it did get close). There is a small possibility we'll see the market make another stab higher to create a larger bounce pattern off last Friday's low, shown with the dashed line, but I think the chances of that happening are now remote. If it happens it will be a very good setup for shorting it, especially if it made it back up to about 10500. But the odds are now with the bears and a fast decline down to the 9400-9500 area looks like the next move for them. A drop to the 9000 area by the end of the month in a typical 5-wave decline from the January high is shown on the chart

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- cautiously bullish above 10315
- bearish below 10000

NDX made it marginally back above its broken downtrend line from 2000-2007 (log scale) for a small correction to the January decline (like the others) but then today broke firmly below its August-November uptrend line. If it doesn't recover quickly, like it did on Monday, it will be a confirmed break of support and an indication the 3rd wave down is in progress. It has a downside target near 1550 before consolidating and then heading lower to about 1425 by early March. As with the others, this will be closely monitored along the way to see how the pattern, and therefore price projections, will change. For those of you on the live Market Monitor, this is what we want to trade aggressively but carefully and will try to catch the bulk of the move.

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- cautiously bullish above 1788
- bearish below 1734

And now for a commercial break and to put in a plug for the Market Monitor--you're not going to find many services, especially for the money, that will help you manage what is likely to be a very fast-moving market in the next several months. With the kind of money-making opportunity ahead, I'd think seriously about joining us there and get intraday updates in addition to these market wraps. We sure don't get all the calls correct but I hope subscribers agree that just getting some heads-up setups and price targets is extremely helpful in managing your trades.

And now back to our regular programming. Using the log scale on the RUT's chart below you can see how well it's trading its trend lines. At the January high it did a near-perfect tap of its downtrend line from October 2007. It then broke its uptrend line from July-November last Thursday and this week spent its time testing it from below (along with its broken 50-dma). It now looks ready to head down to the 550 area before opex (how are your bull put spreads in this index?) and then to the 510 area by the end of the month.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- cautiously bullish above 617
- bearish below 600

If any of you have February bull put spreads and if the downside projections I've shown tonight will threaten those positions I would think seriously about getting out of them on an expected bounce tomorrow. Next week may not be pleasant otherwise.

The banks got hit hard today and for lots of different reasons. From European scares to BAC's troubles, traders were selling first and maybe they'll ask questions later. BAC is getting fined by SEC for not disclosing Merrill's bonuses and sued by NY A.G. Cuomo for not disclosing Merrill's losses. I sense a lot of political maneuvering and CYA by government on this one, but that could be just me. The end result for the day is that XLF closed right on support from previous lows in September and November. Look out below if that level breaks, which I think it will. Look for at least a small bounce first though.

Financial Select Sector SPDR, XLF, Daily chart

The brokers were not quite so lucky as XLF--the XBD broke support near 111 hard today and even closed slightly below its 200-dma and at the low of the day. It could be good for a bounce back up to resistance at 111 and any failure to bounce above that level should add to your conviction to get short the market in general.

Broker/Dealer index, XBD, Daily chart

As with the broader averages, this week's bounce in the Transports was pathetically small. Look for a small bounce on Friday but as long as Tuesday's high near 4000 holds, this has sell written all over it.

Transportation Index, TRAN, Daily chart

As mentioned in the beginning of this report, the dollar was the only one in the green. This is frustrating those who believe all fiat currencies are bad, especially with the Fed furiously printing more money. But with credit collapsing faster than the monetary base is being built (due to slowing velocity because banks aren't lending, and people/businesses aren't borrowing), the value of the dollar will increase. That's what deflation is all about. It's actually a healthy process but because it's not good for governments who want to run debts they have brainwashed the market into thinking "inflation good/deflation bad". Nonsense. Government bad.

U.S. Dollar contract, DX, Weekly chart

The dollar could be ready for at least a small pullback but support should be found no lower than the January 31st high of 79.76. As the weekly chart above shows, we should be at the beginning of a strong rally in the dollar. That will continue to depress prices of just about every other asset class. There's going to be a big dollar un-wind move very soon.

If charts could talk the gold chart would have been hollering at you on Wednesday "short me!" The bounce up to its downtrend line from December and its 50-dma near 1126 was a short play waiting for execution. Setups don't get much sweeter than the one on this chart. Gold is in the same position as the stock market--looking for a strong 3rd of a 3rd wave down. Silver looks the same.

Gold continuous contract, GC, Daily chart

Oil is holding up only marginally better than the metals--it hasn't broken last Friday's low yet. This week it did a little throw-over above its 50-dma and broken uptrend line from February (log scale), just enough to tag some stops, but basically it was a test of resistance and a bearish kiss goodbye. It too should be on the verge of a stronger breakdown.

Oil continuous contract, CL, Daily chart

Tomorrow's reports include the jobs numbers before the bell so the futures should give us some clues as to where the market will head.

Economic reports, summary and Key Trading Levels

The market is short-term oversold and if some of the selling, especially into the close, was fear of the job reports then we could see a relief rally Friday morning, no matter what the report says. Unless it's really really bad I think the market just priced in some disappointment. At this point anything less than scary bad will prompt a rally. The wave pattern looks good for one and I'm hoping we'll get one so that we get a good setup to short it into the weekend.

The risk in shorting a bounce on Friday is that the bounce could rally sharply back above Tuesday's high in order to finish a larger a-b-c bounce pattern off last Friday's low (that idea is shown on the DOW's chart). I think the probability for that happening is very low but that's the risk for new entries tomorrow. Buy some puts, knowing what your maximum loss could be, and then if the market starts heading lower on Monday you can lower your stop and enjoy the ride.

There is the possibility that Friday will be strongly down (think mini crash). Crashes come out of oversold, not overbought. A gap down tomorrow morning would likely be followed by a continuation of strong selling. That's not what I'm expecting to see but I mention it because of the risk factor. I've been warning repeatedly about downside surprises now that the market has turned back down. Major disappointment is next on the agenda as the hope-filled rally turns to despair. It's that slippery slope of hope thing about to start playing again. I think it's too early in the pattern for that kind of strong move down but I don't discount the possibility. Again, any gap down tomorrow could turn into an ugly day. Let's hope instead for a bounce to allow some of you a nice entry on the short side.

In the spirit of an all-the-same market, we're seeing most of the sectors getting in line now and the downside patterns look remarkably similar. This adds confidence to my conviction that the markets have turned. We have the bigger and smaller ships cruising in formation and it looks like they've all completed their turns. If you're bearish the markets and like trading the short side you've got a very good trading opportunity ahead of you. If you're bullish and don't like to play the short side, it's going to be a painful time, especially if you're doggedly sitting in long positions while you wait out the pullback. Not even covered calls are going to help much. If you do sell covered calls use the proceeds to buy some put protection (placing a collar around your stock).

One more point about the psychology of the market and what you could hear more of this year. The big 3rd wave down this year means 2010 will be the year that most begin to recognize the serious nature of the coming correction. It will have most people getting scared, worried, angry and depressed. Know that this is part of the cycle and constantly remind yourself that it's a natural and important cleansing step towards healing and then back to growth. Stay upbeat and don't get dragged down with it all. Without the pain there will be no gain. The sooner we get through it the sooner we can start enjoying happy days again. Try hard not to get sucked into the whirlwind of self pity and depression that you'll hear all around you. And for God's sake, turn off CNBC. If you want to have financial chatter in the background at least turn on Bloomberg or something a little more serious than those clowns. They are the media and they get it wrong all the time. The only one who gets it more wrong is the government (who is famous for closing the barn door after the horses have escaped).

Better yet, rather than listening to CNBC, listen to Bobbie McFerrin's Don't Worry, Be Happy Notice that just shy of one minute into the music video he's reading the paper with the headline "Financial Meltdown". This was right in the middle of the 1987 market crash.

Stay positive this year and stay focused. We should have a very good trading year (albeit difficult). Good luck and I'll be back with you next Thursday.

Key Levels for SPX:
- cautiously bullish above 1105
- bearish below 1071

Key Levels for DOW:
- cautiously bullish above 10315
- bearish below 10000

Key Levels for NDX:
- cautiously bullish above 1788
- bearish below 1734

Key Levels for RUT:
- cautiously bullish above 617
- bearish below 600

Keene H. Little, CMT


New Option Plays

Industrials Tick Lower

by James Brown

Click here to email James Brown

Editor's Note:

So far so good. We've been bearish on the market. I'm expecting a dip for the S&P into the 1050-1035 zone. Tomorrow could be volatile as investors react to the January non-farm payrolls (jobs) report that comes out at 8:30 a.m. before the market opens. Don't be surprised if stocks gap open up or down.

Like I said earlier, I am bearish but I didn't want to load a bunch of new put plays on the newsletter and see them get stopped out if stocks pop on the jobs number. A few stocks I'm watching as potential bearish plays are: FDX, FSLR, and GS.


NEW DIRECTIONAL PUT PLAYS

United Technology - UTX - close: 66.38 change: -1.86 stop: 69.05

Why We Like It:
UTX has spent the last few days consolidating sideways along technical support at the 100-dma. No longer! Shares reversed at the 10-dma this morning near $68.50 and broke down to new relative lows. This looks like an entry point to buy puts. Our target to take profits is $61.00, just above the simple 200-dma. Our time frame is just two or three weeks.

Keep in mind that UTX could gap open tomorrow morning as investors react to the jobs number. If shares gap open above $68.50 we will not open positions. If the stock gaps down below $65.00 we will not open positions.

Suggested Options:
I am suggesting the March $65 puts.

BUY PUT MAR 65.00 UTX1020O65 open interest=4446 current ask $1.93

Annotated Chart:

Entry  on  February 04 at $ 66.38 
Change since picked:       + 0.00
Earnings Date            04/21/10 (unconfirmed)
Average Daily Volume =        5.1 million  
Listed on  February 04, 2010         



In Play Updates and Reviews

Stocks Crumble on European Debt Fears

by James Brown

Click here to email James Brown


CALL Play Updates

Teva Pharmaceutical - TEVA - close: 57.92 change: +0.13 stop: 54.95

Somehow TEVA avoided the market sell-off on Thursday. Shares managed to post a gain after traders bought the dip at the 30-dma. I remain bullish on TEVA but I would hesitate to open positions with the market crumbling. More conservative traders may want to use a stop loss under last Friday's low, which was $55.88. This should be a short-term trade. TEVA reports earnings on Feb. 16th and we do not want to hold over the announcement. Our short-term target to take profits is at $59.50. Our second target is $61.50.

Entry  on  February 02 at $ 57.58 
Change since picked:       + 0.34
Earnings Date            02/16/10 (confirmed)
Average Daily Volume =        6.0 million  
Listed on  February 02, 2010         


Volatility Index - VIX - close: 25.80 change: +4.48 stop: 19.90

The VIX exploded higher as investors reacted to the widespread global stock market weakness. Today's 20.7% rise in the VIX leaves it testing the 200-dma. Our original plan called for March 30 calls. Our first target to take profits is at $29.50. Our second target is $34.00.

Entry  on   January 28 at $ 23.73 
Change since picked:       + 2.07
Earnings Date            --/--/--
Average Daily Volume =          x million  
Listed on   January 28, 2010         


PUT Play Updates

Apple Inc. - AAPL - close: 192.05 change: -7.18 stop: 210.51 *new*

AAPL's bounce toward $200 yesterday proved to be a good entry point. The stock has reversed again with today's 3.6% decline in spite of an analyst upgrade this morning.

I am adjusting the stop loss down to $210.51. Our first target to take profits is at $182.50. Our second target is $165.00 although we might exit at the 200-dma. This is an aggressive trade and I'm suggesting small positions.

Entry  on   January 28 at $201.08 (small positions)/gap open entry
Change since picked:       - 9.03
Earnings Date            01/25/10 (confirmed)
Average Daily Volume =         26 million  
Listed on   January 28, 2010         


Franklen Resources Inc. - BEN - close: 98.28 change: -3.55 stop: 106.80

Financial stocks were some of the worst performers on Thursday. BEN spiked to $103.41 this morning and quickly reversed. Shares closed on their lows and look poised to keep falling.

Our target is $91.50. This is a slightly more aggressive trade and I'm suggesting smaller positions.

Entry  on   January 30 at $ 99.59 /gap higher entry point (small positions)
Change since picked:       - 1.31
Earnings Date            01/28/10 (confirmed)
Average Daily Volume =        1.2 million  
Listed on   January 30, 2010         


Gymboree - GYMB - close: 40.82 change: +0.13 stop: 42.75

GYMB managed to buck the trend today with a small gain after pre-announcing stronger than expected earnings. The company doesn't actually report until early March but management guided higher by a few cents. I am still expecting a failed rally under $42.00. Wait for the bounce to stall or roll over before initiating new positions. Our first target is $35.50. Our second, longer-term target is $32.00. Consider using small positions to limit your risk.

Entry  on   January 23 at $ 39.74 
Change since picked:       + 1.08
Earnings Date            03/04/10 (unconfirmed)
Average Daily Volume =        513 thousand 
Listed on   January 23, 2010         


Intl. Bus. Mach. - IBM - close: 123.00 change: -2.66 stop: 134.05

The CSCO-inspired bounce in tech stocks did not show up. It was high-jacked by worries of sovereign debt default. Shares of IBM gapped open lower and fell 2.1%. More aggressive traders may want to go ahead and chase this move and just move your stop loss down. I do not want to chase this move. We'll wait for another bounce. Our trigger to buy puts is still $128.50. More conservative traders may want to consider a tighter stop loss. If triggered at $128.50 our first target is $122.50. Our second target is the 200-dma.

Entry  on  February xx at $ xx.xx <-- TRIGGER @ 128.50
Change since picked:       + 0.00
Earnings Date            04/20/10 (unconfirmed)
Average Daily Volume =        8.2 million  
Listed on  February 03, 2010         


Infosys Tech. - INFY - close: 50.69 change: -2.51 stop: 55.05 *new*

INFY gapped open lower at $52.34 and closed on its low for the session with a 4.7% decline. The stock has broken technical support at its rising 100-dma. Odds are pretty good INFY will hit our first target to take profits at $50.15 tomorrow. I am lowering our stop loss down to $55.05. Our second and final target is $46.50.

Entry  on   January 28 at $ 53.40
Change since picked:       - 2.71
Earnings Date            04/15/10 (unconfirmed)
Average Daily Volume =        1.5 million  
Listed on   January 25, 2010         


JPMorgan Chase - JPM - close: 38.35 change: -1.94 stop: 41.65 *new*

Banks stocks were hit pretty hard with most of the banking indices losing about 4%. JPM fell 4.8%. This looks like a new entry point for bearish positions. I am lowering our stop loss down to $41.65. Our first target to take profits is at $35.25. Our second target is $32.00.

Entry  on   January 26 at $ 38.44 
Change since picked:       - 0.09
Earnings Date            04/15/10 (unconfirmed)
Average Daily Volume =         46 million  
Listed on   January 26, 2010         


Mckesson Corp. - MCK - close: 58.60 change: -1.60 stop: 62.51

MCK has rolled over under its 10-dma. This looks like another entry point to buy puts. The next level of support looks like the 200-dma down near $53.00. I am suggesting bearish positions now. Our first target to take profits will be $54.00.

Entry  on   January 30 at $ 58.82 
Change since picked:       - 0.22
Earnings Date            01/26/10 (confirmed)
Average Daily Volume =        2.8 million  
Listed on   January 30, 2010         


Retail Holders - RTH - close: 90.32 change: -1.99 stop: 95.05

Several of the major retailers announced better than expected January sales today. Yet the good news was lost to the wave of fear over European debt default. The RTH lost 2.1% and has broken down from its bear-flag pattern. Our first target is the $87.00 level. The 200-dma will probably be support. The RTH moves kind of slow so make sure you use an option that gives you enough time.

Entry  on   January 23 at $ 91.42 
Change since picked:       - 1.10
Earnings Date            --/--/--
Average Daily Volume =        1.7 million  
Listed on   January 23, 2010         


SIEMENS - SI - close: 86.29 change: -4.95 stop: 95.75

Target achieved. European markets crumbled as investors worried about potential debt defaults from Greece, Portugal and Spain. Shares of SI gapped open lower at $87.75, hit our first target at $87.55 and kept right on falling for a 5.4% loss on the session. I am lowering our stop loss down to $94.05. I would expect a bounce from the simple 200-dma near 84.85. Our second and final target is $81.00. More aggressive traders may want to aim lower.

Chart:

Entry  on   January 26 at $ 94.34 /gap higher entry
Change since picked:       - 8.05
                            /1st target hit @ 87.55 (-7.1%)
Earnings Date            01/26/10 (confirmed)
Average Daily Volume =        368 thousand 
Listed on   January 26, 2010