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Daily Newsletter, Saturday, 5/23/2015

Table of Contents

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

Market Wrap

No Volume, No Volatility, No New High

by Jim Brown

Click here to email Jim Brown

The market is trying to tiptoe to new highs without waking up the bears. We know they are slumbering nearby and buyers, what few there are, have been nibbling so quietly on stocks that the volatility has declined to the low of the year and market ranges are at multi-month lows over the last week. That is quite different than the helter skelter activity of March and April.

Market Statistics

Volume was the culprit last week with buyers waiting patiently on the sidelines for the long weekend to pass and hoping for a headline to jolt the markets out of their slumber. Even a speech by Janet Yellen failed to stimulate market interest.

Yellen's speech was basically just comments from recent Fed releases but there were some differences in inflection. While she warned again that the Fed stands ready to hike rates as the economy improves, she mentioned numerous reasons why it may not be soon.

She said the labor market was moving towards full employment but then spent several minutes explaining why labor was still weak. She complained about the number of part time workers, low labor force participation rate, a lack of skilled workers and the number of workers forced to work part time because there were no full time jobs.

She said inflation was moving towards their target of 2% but then complained about transitory issues that were holding it down and it could be "some time" before those factors faded.

She said the economy was recovering but then gave multiple reasons why the recovery was slow. The key point was her expectations for the recovery to be moderate with 2-2.5% growth for the next couple years. That is hardly an economy that can withstand a series of rate hikes. The Fed has almost never hiked rates with the GDP under 4.5% growth. We know this is a special circumstance but several of the FOMC members are very scared about hiking rates too soon and killing this weak recovery.

So the bottom line is that Yellen wants to raise rates but the Fed "must be confident that inflation will rise to our targets and that employment will continue to improve." In the context of her remarks the clear implication is that months must pass with good data before the Fed is going to pull the trigger on a rate hike. That means June is off the table for sure since the Consumer Price Index does not come out again until a week after the next FOMC meeting. There is a slim chance July could be on the table but September is now the analyst consensus for the first and only hike in 2015.

The market should have turned bullish after Yellen's dovish comments but there was nobody around to hear them. The majority of traders left early for the long weekend and for those still at their desks they probably did not want to risk money over holiday weekend.

The economics on Friday actually supported Yellen's rate hike case. The Consumer Price Index rose +0.1% for April with the core CPI rising +0.3%. That was the biggest jump in the core rate since January 2013. While the headline CPI is still flat at -0.1% on a trailing 12 month basis the core CPI is 1.8% and only slightly under the Fed's 2% target. The Fed's preferred inflation indicator is still about .4 tenths lower at 1.4% but moving in the right direction. The core rate excludes food and energy because they tend to be volatile.


The calendar for the holiday shortened week is busy only on Tuesday. The home sales and Richmond Fed will be the highlights for the day. Pending home sales on Thursday rounds out a week of housing reports.

The most critical report for the week is the GDP revision on Friday. Expectations are for a -0.8% contraction, down from a minor gain of +0.25% in the first report. Every economic report just keeps chipping away at the Q1 and Q2 estimates. The Atlanta Fed estimates are for only +0.7% growth in Q2.


If you don't like the GDP numbers just change the way you calculate them. This has been the government story for decades. Whenever a particular economic report is not favorable just change the calculation. That is why we measure unemployment today at 5.3% instead of the real rate at 10.8%. You just take out the economic numbers you don't like and suddenly the picture looks brighter.

The GDP has been low in Q1 for several years now so the Bureau of Economic Analysis (BEA) is making a series of adjustments to the way they calculate it. They are going to "seasonally adjust" the Q1 cycle to show what they believe it should be. They are blaming the need for this adjustment on "residual seasonality."

They have found out that government spending tends to be light in Q1 so they will just average it out. They are also going to adjust some inventory components to compensate for the buildup in Q1 after the holiday spending in Q4. They are going to sift through the other calculations to see if they can find any leftover biases that exist in the current methodology.

Now if I could just figure out how to seasonally adjust my brokerage statement to minimize losses and maximize gains I would be in good shape. If it works for the BEA it should work for us, right? I am afraid no matter how much I manipulate the numbers in my statement the bottom line of cash in my account would always be the same. I would bet the BEA is going to have the same problem. They can dummy up a pleasing GDP number from month to month but the actual economic growth will be whatever it is. Pencil pushers in Washington can't manufacture growth. They can only produce the appearance of growth.


There were no new stock splits announced this week. Link to Real Time Split Calendar


The earnings calendar is also light with only four stocks of note reporting next week. Costco, Michael Kors and Palo Alto Networks report on Wednesday and Abercrombie & Fitch on Thursday. This ends the Q1 reporting cycle.


We learned on Friday that it was Microsoft (MSFT) that was in talks to acquire Salesforce.com (CRM). You may remember that CRM spiked in late April and early May on rumors somebody was going to buy them. You can put down your Sherlock Holmes spyglass now because Microsoft was the suitor. Unfortunately Microsoft wanted to pay $55 billion and a 10% premium over CRM's $49 billion market cap but SalesForce wanted $70 billion. The talks started out near parity but as they progressed CEO Marc Benioff kept raising the price. As the CRM stock rallied he became harder to deal with and Microsoft finally broke off the talks.

It was reported that Microsoft would have used some of its $95 billion in cash to buy SalesForce but Benioff's 5.7% stake in CRM would have been rolled over into Microsoft stock. He would also have had a management role at Microsoft. Microsoft CEO Satya Nadella has only been CEO of Microsoft for 18 months and reportedly he was also shy about making such a large purchase so soon in his tenure.

There are rumors there were other companies sniffing around the SalesForce campus in recent weeks. Amazon (AMZN) keeps cropping up as a potential suitor in order to mate SalesForce with Amazon Web Services and that would make a powerful adversary for everyone else in the space. Amazon knows how to grow a business and they have plenty of capital to throw at it.


Time Warner Cable (TWC) is in talks about selling itself to either Altice SA or Charter Communications (CHTR). Time Warner has a market cap of $48 billion and would probably get about $55 billion in any deal. That makes it tough for Altice with a market cap of only $36 billion. However having them in the bidding keeps Charter honest. Altice just agreed to buy Suddenlink Communications for $9.1 billion. Suddenlink is the 7th largest cable operator in the USA. An Altice offer would also put the deal under the Committee on Foreign Investment in the US (CFIUS) and make it harder to complete. Reuters reported that Altice has already talked to banks about raising the money to buy Time Warner.

Reuters said late Thursday that Charter was readying an offer for TWC at more than $170 per share. The stock closed at $171 on Friday.


Ctrip.com (CTRP) rose to a record high at $85 after it purchased a 38% stake in Elong Inc from Expedia. Since both companies compete in the Chinese travel market the combination of the two suggests higher profits ahead. The companies will find ways to work together instead of competing for every sale. The combination should also give them more leverage with the airlines towards getting a better discount per seat. Both companies were struggling with profitability. Elong had not been profitable since 2011 and Ctrip margins fell to an 11 year low. Now the pair will control more than 75% of the market share for high-end hotel booking. It was a marriage everyone can love. Shares rallied +17% on the news.


Autobytel (ABTL) shares rallied +31% after the company said it had acquired Dealix Corporation and Autotegrity, wholly-owned subsidiaries of CDK Global (CDK), for $25 million. The company said the all cash deal will combined prominent leaders in the automotive industry to help dealers and manufacturers sell more cars. Dealiz provides new and used car leads to dealerships and is considered the top lead generator in the industry. They operate UsedCars.com. Autobytel operates Car.com. The acquisition adds about 900 dealers to the Autobytel network and brings their total to 4,954 dealers.


Nothing runs like a Deere (DE). The company reported earnings that declined -30% and predicted a -24% drop in demand from the agricultural industry in 2015. However, rising sales of construction equipment saw the company raise its guidance for net income in 2015 to $1.9 billion, up $100 million from a forecast it made in February. Earnings of $2.03 easily beat the consensus estimate for $1.57. Revenue of $7.4 billion missed estimates of $7.53 billion due in part to the strong dollar.


Foot Locker (FL) reported earnings of $1.29 that beat estimates for $1.22. Revenue of $1.92 billion matched estimates. Sales rose +3.7% after currency problems but would have been up more were it not for the strong dollar. Inventory declined -2.7%. Same store sales rose +7.9%. Shares spiked to $65.80 on the news then declined to close at $63.46 as the market rolled over. There were no issues in the earnings that would have triggered selling.


Intuit (INTU) reported earnings of $2.85 compared to estimates for $2.74. Revenue of $2.2 billion beat estimates for $2.15 billion. Subscribers to TurboTax Online rose +13%. QuickBooks Online subscribers rose +55% to 965,000. It was a good tax season but the outlook is negative. For Q2 the company is expecting a loss of 10-12 cents on revenue of $720-$745 million. Analysts were expecting a 4 cent loss on revenue of $728.4 million. Shares spiked anyway with a 2.5% gain.


Crude prices had a rocky week with the start at $60.18, drop to $57.09 on futures expiration on Tuesday and then rebound to $60.94 on Thursday before finishing down slightly on Friday. Futures rose on another -2.7 million barrel decline in crude inventories on Wednesday but faded on Friday when active rigs declined by only -3 for the week. Traders are worried that producers are going to put rigs back to work too fast and we will never see the decline in production everyone was expecting.

Oil production declined sharply last week with a drop of -112,000 bpd to 9.262 million barrels per day. That is -178,000 bpd off the peak of 9.44 mbpd on March 27th. A drop of -112,000 bpd is huge and I suspect there was a production or pipeline problem somewhere and we will see a rebound next week. The inventory numbers were for the week ended on the 15th so the California pipeline spill was not a factor.

On the bright side U.S. gasoline prices heading into the Memorial Day weekend are the lowest for this time of year since 2009. On May 18th the national average was $2.74 per gallon. That is almost $1 below prices over the 2014 holiday.


Baker Hughes said active oil rigs declined only -1 to 659, gas rigs declined -1 to 222 and miscellaneous rigs dropped -1 to 4. The big change came in offshore rigs with a decline of -5 to 29, down from 60 in early January. That is better than a 50% decline.

At this point the odds are good we are going to see the rig count rise over the next couple of weeks but I don't expect it to shoot up. We are probably going to see it hold near the current levels until oil is over $65, which should happen over the summer.


Markets

No volume, no validation, no volatility. Those three Vs pretty well sums up the week. Volume was very low with Friday failing to even reach 5 billion shares. That was not surprising given the holiday weekend. The major indexes flirted with new highs all week but pulled away as the week progressed. There is still no conviction at the highs.

However, the number of individual new 52-week highs is stronger than expected. Some stocks are being bought despite the weakness in the broader indexes.


Merrill Lynch was out with their fund survey last week and found that cash allocations are the highest since June 2009. That means fund managers are just as confused about where the market is going as individual investors. They are prepared for a dip and are likely sitting on the fence trying to decide what to do if that dip does not appear.

The AAII Investor Sentiment Survey grew even more neutral last week with a whopping 49.8% of respondents now neutral. The bullish respondents declined -1.5% to 25.2% and the bearish respondents declined -1.4% to 25.0%. While this would appear to be somewhat negative because everyone is sitting on the fence there was some good news.


AAII Editor Charles Rotbiut did some analysis on times when neutral sentiment was strong for a long period of time. Charles found that when neutral sentiment was high for an extended period the S&P outperformed over the following six and twelve month periods 80% of the time. That is pretty strong correlation. Since neutral sentiment has now been over 45% (the average is 30.5%) for a record six weeks and still rising it would suggest we are setting up for a decent market move higher over the long term. Obviously there are a lot of exceptions to the rule and 20% of the time the market did move lower. However, we don't know what the headlines were that broke the pattern of high neutral readings in the past.

I know I cautioned everyone last week that the markets were showing no conviction but I continued to recommended remaining cautiously long until proven wrong. While a failure to liftoff above the old resistance highs is frustrating we still have not seen any material signs of a selloff.

Here is one theory on why nobody is selling. The U.S. market has $14 trillion invested. More than $8.5 trillion is index funds so those investments don't change. The majority of the rest is hedge funds and institutions. They also have low turnover. That leaves very few shares that actually trade. For instance the average daily dollar volume on the NYSE was about $40 billion in April, the most current numbers available. NYSE Dollar Volume

The dollar volume on the Nasdaq Composite on Thursday was $65 billion and that appears to be about average. Nasdaq Dollar Volume

Adding those together we see that recent daily volume is roughly $105 billion out of a market cap of $14 trillion. The markets are being moved around by roughly 0.7% of the dollars invested in the market. Everyone else is holding their positions and is either watching the market action from a distance or totally unconcerned.

The 99.3% are just along for the ride unless something happens to wake them from their slumber. When that happens the 0.7% of dollar volume that is trading spikes dramatically and the market goes directional at a high rate of speed.

The problem we have today is the lack of a catalyst. Fund managers are probably chewing their fingernails off wondering which way the market is going. We are rapidly heading into June and the end of the first six months of the year. The Dow is up +2.3% and the S&P +3.3%. That is not going to win any awards or any new customers when their midyear statements come out. That also assumes they actually achieved those gains.

If the market begins to move higher next week I would not be surprised to see those fund managers begin to throw their excess cash at the winners in an early version of window dressing. Nobody wants to be left behind if the market takes off and for the same reason nobody is selling.

Reportedly fund managers are storing their excess cash in ETFs just in case a market spike appears unexpectedly.

It all boils down to the lack of a catalyst to move us higher. Earnings are over, the Fed is on hold until September unless something changes and the economy is in a rut. The dollar index rebounded +4% for the week and the first weekly gain since early April. That means more pain for international companies and more headwinds for U.S. manufacturers. All of this is already priced into the market.

In theory there is nothing keeping us from moving higher except that everyone is scared there is a correction ahead. I think the worry over the potential for a rate hike is weighing on investors. Most don't believe there will be a hike in June but they are not willing to bet against it. Thank you Janet for filling the market with uncertainty. The weak economics are interspersed by a random number that is strong like the CPI on Friday or the payroll report for April. There is just enough good news to offset the bad but not enough to power the market higher.

For those that either were not around in June 2004 or have forgotten the last Fed rate hike reaction let me refresh your memory. In June 2004 the Fed funds rate was 1% and we had 4.5% GDP growth. The FOMC voted unanimously to raise it to 1.25% and the S&P lost -7.3% over the next 6 weeks. The prior two months had been choppy after the S&P rebounded +47% from the 2003 lows at 788. Worries over the potential for a rate hike had slowed the market gains and produced two short term declines. We are having those worries now and the S&P has rebounded from 666 to 2129 (+219%) since 2009. We have gone more than 3 years without even a simple 10% correction. This is why investors are worried today and lack conviction to buy stock at the highs.


Here is one possible scenario for the next several weeks. For all practical purposes a June rate hike is off the table. July is possible but September is likely. Janet was as dovish as possible in her Friday speech by spelling out in multiple ways why the Fed targets would probably not be met for "several months." Fund managers wanting to dress up their portfolios for the first half of 2015 could begin to add to stock positions and reducing their cash if the market were to make a new high. This could make June a decent month for the market but it depends on somebody having enough conviction to get us back to the highs. Managers can bulk up for June statements and then bail back into cash in July to avoid the summer doldrums and the normal Sept/Oct declines.

Obviously this is a fiction story or maybe just a fairy tale that has a decent chance of coming true. However, the charts for the internals have worsened over the last week. The A/D lines for the Dow, S&P and Nasdaq began to turn down on Monday. That may not be as important because of the very low volume and the desire to take profits and be out of the market before the long weekend. I can't correlate that with prior years. There was a decline in May 2014 but from May 12th-20th and the week before the holiday was up. Of course there were no Fed fears then either.


The Dow has been especially impacted by the uncertainty. Since March the Dow has traded in the lowest range in years. Last week was the lowest range since November. Since January it has been the lowest half year range in 100 years. This suggests the spring is coiled very tightly but there was no breakout last week. The longer this narrow range lasts the greater the explosive power when the tension is released.


The Dow rallied to a new high on Tuesday to close at 18,312. It was all downhill from there but the moves were minor. Friday's selloff into the close was the biggest move of the week. In theory prior resistance at 18,200 should now be support followed by 18,100 and 18,050.

Sometimes when trying to determine the health of the market it is beneficial to look at each of the individual stocks in the Dow to determine their direction. I was surprised to find that only 7 Dow stocks were in a downtrend. Several more were fading from recent highs but could not be considered a down trend yet. The ones with a negative trend are DD, WMT, VZ, TRV, PG, CVX and XOM. While it is not impossible for the Dow to decline with roughly 20 of its 30 stocks in an uptrend it would require a serious change in sentiment. I was encouraged to see that many making a positive move. There were some losses over the last several days but they were minimal.



The S&P closed at 2130.82 on Thursday for a new closing high. The -5 point decline on Friday was minimal and still above the 2125 support from earlier in the week. If the market is going lower the S&P is definitely not the culprit. I view Friday's decline as just fear of the weekend and not a material event.

If we were to see some selling appear the logical stopping point would be 2100 followed by 2070. If we were to actually see a 10% correction that would knock us all the way back to 1917 and I definitely don't see that over the next five weeks given the underlying support for June that I described above. Once we are past June all bets are off.


The Nasdaq closed within 3 points of its 5092.08 closing high from April 24th. Like the S&P it is struggling to move over its high but it has traded over that level intraday for the last three days. At this point it would appear that any gains on Tuesday will trigger a breakout but there is never a guarantee. With the dead stop at 5100 intraday for the last three days there are clearly some sellers waiting. Whether they have the firepower to blunt a post holiday relief rally is unknown.

Typically investors come back from a long holiday where the market was weak in the days before and they buy the Friday dip assuming there have been no negative headlines over the weekend.

Resistance is 5100, support 5050.



The Russell 2000 ran into trouble early in the week at 1260 and could not make it over. The high on Monday was 1259 and the index traded in the 1250-1260 range all week to close at 1252. Real resistance starts at 1267-1275 and the index never even came close. The recent market gains have been in the big caps because fund managers are scared of summer. They want to be in the highly liquid names in case they need to exit in a hurry. Any further small cap weakness and a decline below 1250 would be a warning sign for the broader market.


The Dow Transports closed at the low for the week and that is also not a good sign for future broad market gains. While there are some specific reasons why the various sectors in the transports are weak the overall view of a declining transport index is negative for the market. They have clearly broken support and it could be a long drop.


The last several weeks I have been in the "cautiously long until proven wrong" camp and I am not changing my view. If anything the markets actually look slightly stronger than they have over the last 2-3 weeks. The S&P broke out and held its gains. The Nasdaq is on the verge of a breakout and the majority of the Dow stocks have charts showing an uptrend.

The Fed is on hold, Europe is improving, China has cut rates three times in six months and Japan is pouring hundreds of billions into equities because treasuries have no yield. Even Greece may be on the verge of a solution with May 29th the new deadline.

The only thing that worries me is that there are no obvious negatives on the short term horizon. Typically when everything starts looking up that is when the market surprises to the downside. Remember, the market needs reasons to rally but it never needs a reason to move lower. When enough investors decide to take profits at the top and a mini correction is born.

If you like the market commentary you have been receiving and you are on a free trial then now is the time to subscribe. Don't wait until you miss a newsletter to decide you want to take the plunge.

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Random Thoughts

Stock buybacks are losing their luster according to a report from Bank of America. In a report issued last week the bank showed that the impact of buybacks is slowing. In the past a company that bought back stock found it easier to make their earnings estimates because they reduced the number of outstanding shares each quarter. With earnings shrinking in the current economy the corporations have to buy back even more shares to continue that trend. At the same time reducing the share count theoretically makes the remaining shares more valuable and that pushes up the share count.

BofA said these benefits are fading. Stock prices are not going up as they have in the past for companies with big buybacks. The stocks gaining in price are the ones that are putting their capital to work in building the business and those turning to M&A to expand their business.

Goldman Sachs has also pointed out that buybacks are no longer producing higher stock prices. Buybacks Losing Luster


The sharp jump in the Consumer Price Index last week had a lot to do with rising medical costs. Despite the passage and implementation of the Affordable Car Act (ACA or otherwise known as Obamacare) the cost of healthcare is rising. In April medical costs rose +0.9% in the CPI. To make matters worse Obamacare premiums are about to explode higher. For instance New Mexico is asking for a 51% increase in premiums. Tennessee has requested a 36% increase. Maryland wants a +30.4% increase and Oregon 25%. All cite high medical costs incurred by people enrolled under the ACA.

Now that the ACA has been in force for two years the insurers have a full year of claims data and the health needs of the enrolled population. With the aging population requiring more services and the price of drugs skyrocketing the costs to the insurers is soaring.

Over the first two years of the ACA the administration guaranteed profitability to the insurers in order to get them to go along with the program. The government is making large cash payments to insurers to cover their losses for the first 2 years.

New plans next year are expected to see a huge increase in premiums plus even larger deductibles. Source

Analysts wonder what happened to the U.S. consumer and why retail sales are so week this year. The answer is medical care costs that have become a huge drag on the U.S. consumer. It is only going to get worse from here.


According to U.S. Representative Frank Wolf, in a speech he gave on the House floor on March 28th, the Congressional Budget Office predicts the country will be broke by 2025. According to the CBO by 2025 every penny of revenue going into the federal budget will go to pay interest on the debt, Social Security, Medicare and Medicaid. There will be no money for national defense, homeland security, government workers, etc. The report he was citing came from a 2011 forecast from the CBO.

In 2010 President Obama appointed a bipartisan commission to recommend ways to reduce the national debt. The final report of the National Commission on Fiscal Responsibility and Reform said "By 2025 federal revenue will be able to finance only interest payments, Medicare, Medicaid and Social Security." Different committee and different priorities but they came up with the same answer as the CBO. They also said, "Every other federal government activity, from national defense and homeland security to transportation and energy, will have to be paid for with borrowed money."

Jason Peuquet, research director at the centrist Committee for a Responsible Federal Budget, said his organization has run its own numbers and concluded that entitlement and debt interest will outpace revenues in 2026.

Josh Gordon, policy director at the centrist Concord Coalition, a group that urges deficit reduction, pointed to a March 2012 report from the General Accounting Office that shows at some point between 2020 and 2030, the amount of spending on entitlements and interest will outpace all federal revenues going into the budget under the more pessimistic scenario.

The "pessimistic scenario" assumes the Bush tax cuts remain in place, no new taxes are added, no material cuts to Social Security and Medicare and interest rates return to normal levels.

The federal debt is roughly $18 trillion. The "unfunded liabilities" that is money the government is going to owe for things like Social Security, Medicare, retirement accounts and pensions add another $58 trillion in debt. There is no mathematical way the U.S. will ever be able to pay its debt. We can continue selling treasuries to China and Japan to raise cash but eventually they will stop buying once they realize there is no possibility of payment.

Source 1 Source 2


Goldman Sachs said don't get too excited about the new highs on the S&P because the market is going nowhere from here. Goldman's strategist David Kostin said the market may move a little higher to 2,150 in the next couple of months but then drift back down to close the year at 2,100. Kostin says the threat of a fed rate hike plus the weak economy will mean that most market gains over the next 10 years will come from dividends. The S&P is currently trading at a PE of 18.2 that puts it in the 99th percentile historically. There is not much upside from here before investors begin to take profits and move into dividend stocks to wait out the next several years. Dividends are expected to expand 7% to $400 billion in 2015 while buybacks are expected to rise 18% to $600 billion. U.S. companies increased their dividends by 14.8% in Q1 to a record $99.4 billion.

Goldman - Market Going Nowhere

Signs Market is Running Out of Steam

BofA: Wall Street Too Scared to Take Risks


Scott Krisiloff, CIO a Avondale Asset Management, said counting the Q1 earnings cycle the GAAP earnings for the S&P for the last 12 months was just $99.18. That is down -6.4% from peak earnings for the 12 months that ended in September 2014 and it means that earnings have not actually grown since January 2014. Despite no earnings growth for more than a year the S&P has moved up from a PE of 18.5 to 21.5. The difference between Scott's PE and the Goldman PE above is the accounting for stock buybacks.

Trailing 12 month earnings are expected to remain at the $99 level through Q3 and then jump to $106.54 in Q4. You may remember 6-9 months ago analysts were expecting earnings of $125-$135 in 2015.

Operating earnings are currently $111 and expected to jump to $116 by year end. However, that implies a 31% jump in GAAP earnings and 18% jump in operating earnings in Q4 alone.

With stock appreciation far outpacing earnings growth the market is at risk of a decline.

Divergent Prices


Stock prices continue to rise despite an outflow of funds from the market. I have written about this several times in recent weeks. Fund outflows are continuing despite the new market highs. Investors withdrew another $1.8 billion in the week ended on Wednesday. There have been outflows in 17 of the last 20 weeks totaling $107 billion. Funds Leaving, Stocks Rising

What is wrong with this picture?


JP Morgan says something has gone wrong with the global consumer. Senior global economist Joseph Lupton said, "It would be difficult to overstate the recent downside surprise in global consumer spending." U.S. retail sales have missed expectations for five consecutive months. Strong global equity markets, strong employment growth and a 50% decline in oil prices should have set the stage for an uptick in retail sales volume. Instead the three-month growth rate has decelerated substantially. JP Morgan's model for retail sales, which incorporates all those factors, has not been this far off the market in over a decade, with the exception of the financial crisis. The next few months will be crucial for determining if the reason is secular stagnation, continued deleveraging, etc. Something Wrong with Consumers


Is that Marijuana in my coffee? A company in Seattle Washington is now selling K-Cups called Catapult that contain 10 mg of THC along with the coffee. The weed-infused K-Cups sell for roughly $6.25 each and are said to combine well with the caffeine in the coffee to give you a "nice energetic high." Another product is a cold soda drink called Legal that is packed with 22 mg of THC. The sugar and THC are said to combine to give drinkers a high. Apparently pot-preneurs have plans to put marijuana into everything including THC pills. Source


After your THC spiked K-Cup you need something to watch your Monty Python reruns on. If you have a few bucks there is a new TV technology called 4K Ultra HDTV with four times the resolution of regular HDTVs. You can now get them 110 inches wide. Of course now you are going to need a bigger room to put it in. 4K Ultra HDTV 110 Inches


 

Enter passively and exit aggressively!

Jim Brown

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"The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil."

Sheik Ahmed Zaki Yamani - Saudi oil minister 1962-1986

 

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Index Wrap

Break Out or LID On?

by Leigh Stevens

Click here to email Leigh Stevens
THE BOTTOM LINE:

The S&P and the Dow have seen two weeks of Closes above prior multimonth trading ranges but the tech heavy Nasdaq may see a lid on much further upside. A mixed technical picture between tech and the rest of the market.

Moreover, as you may have noticed yourself or heard from some market analyst(s), the Dow Transportation Average (TRAN) did not match the Dow Industrials (INDU) in a new monthly Closing high in February. Since then TRAN has been declining versus a higher trending INDU. This pattern is an initial bearish divergence in terms of Dow Theory. The Dow transports can rebound of course over time and 'match' the Dow 30 in its own new monthly highs but the current pattern does warn of the possibility of an economic slowing ahead.

Dow Theory suggests that a weakening TRAN suggests that shipments of goods may be slowing, although manufacturing and sales output may still be steady. If this pattern leads to a buildup of inventory, INDU earnings will also slow ahead. Mostly we have seen more or less steady economic growth but Dow Theory advocates have long held that very early bearish warnings on earnings have been predicted by diverging patterns of TRAN versus INDU and vice versa.

The S&P 500 and 100, plus the Dow 30 have had upside moves that have carried the indices to Closes above the top end of a prior 13 week trading range. These upside breakouts have not yet been substantial and sustained moves. This doesn't of course negate these bullish charts but it's early to tell if the Nasdaq will break out.

The Nas Composite (COMP) and big cap Nasdaq 100 (NDX) are at or near fairly major upside resistance implied by the top end of uptrend price channels (weekly and monthly charts) and continue to trade below their all time intraday highs dating back to March 2000.

The S&P 500 Volatility Index (VIX):

The S&P 500 (VIX) volatility index has been hovering around 12 which is about as low as it tends to go without a countertrend price move, which is a mildly bearish omen. The timing of a rebound in VIX is tricky however. A low VIX could suggest downward pressure ahead on stocks as we enter a period of several weeks with limited input on earnings.

Those wanting to hedge downside pressures that might develop ahead in their stock portfolios might wish to buy VIX calls at 12 and on dips below such as toward 11. Speculators could consider this also but taking a call (or put) position in VIX options are not for the feint of heart and upside moves are hard to predict in terms of timing and longevity of a thrust higher. The options are actively traded by fund managers.

MAJOR STOCK INDEX TECHNICAL COMMENTARIES

S&P 500 (SPX) DAILY CHART:

The S&P 500 (SPX) is bullish in its pattern. As noted above in my initial 'bottom line' comments, the S&P 500 (and big cap 100) has had an upside move that carried SPX to a Close above the top end of its prior 13 week trading-range. This upside breakout hasn't yet been especially sizable and sustained.

Caution here regarding no major move higher as of yet doesn't negate the bullish chart. It's not uncommon for a breakout move to be followed by a pullback to a prior line of resistance to test this area as new support. In fact I'm more trusting so to speak of a pattern that completes a successful show of support at the top resistance end of a prior trading range, especially one of many weeks duration.

I mentioned initially also that it's hard to 'trust' in a new up leg in SPX without a similar move to new highs in the Nasdaq and that consideration continues to give me caution in assuming that SPX will see a big new up leg; e.g., to 2200.

Key near support in SPX is highlighted in the 2120 area, extending to 2100. 2180 looks to offer a next pivotal chart support. Near resistance is at 2132-2135, extending to 2140 as highlighted and then on up to 2160.

The 13-day RSI momentum indicator remains below a typical 'overbought' extreme and my CPRATIO sentiment indicator has been in a neutral range, although there's been a slide toward a more bearish outlook.

S&P 100 (OEX) INDEX; DAILY CHART

The S&P 100 (OEX) is bullish in the same manner as the broader S&P 500 in the breakout above its prior multimonth trading range as highlighted below. Prior resistance, at 930-932, will 'become' a new and key support if the latest advance is not a false (unsustainable) breakout into a new up leg.

Near support is noted at 932, extending to the area of the 21-day moving average in the 927 area, then to 923-920. Near resistance is projected at 940, on up to 946, perhaps extending to 950.

Longer-term chart resistance, at the top end of a broad weekly uptrend channel comes in at 958-960, but that's another story in case a sustained next up leg develops.

Based on the OEX chart alone, without consideration of the lackluster tech/Nasdaq performance of late, the chart pattern alone warrants a bullish stance until proven otherwise; more so on a rally extension ahead and/or if buying/support is seen with OEX on pullbacks and rebounding from the 930-932 area.

THE DOW 30 INDUSTRIAL AVERAGE (INDU); DAILY CHART:

DEVELOPMENTS RE DOW THEORY:

An implied bearish aspect implied by Dow Theory relating to prospects for the longer term trend for stocks and for the economy in general I wrote about in my initial 'bottom line' commentary above which I'll repeat here: "... you may have noticed yourself or heard from some analyst(s), that the Dow Transportation Average (TRAN) did not match the Dow Industrials (INDU) in a new monthly Closing high in February. Since then TRAN has been declining versus a higher trending INDU. This pattern is an initial bearish divergence in terms of Dow Theory. The Dow transports can rebound of course over time and also 'match' the Dow 30 in new monthly peaks but the CURRENT pattern does warn of the possibility of an economic slowing ahead."

"Dow Theory suggests that a weakening TRAN suggests that shipments of goods may be slowing, although manufacturing and sales output may still be steady. If this pattern leads to a buildup of inventory, INDU earnings will also slow ahead and the economy with it. That's the theory and its proven true many times in the past, but not always especially when the lagging Average catches up. Mostly the U.S. has seen more or less steady economic growth but Dow Theory adherents have long held that EARLY bearish economic/earnings warnings have been predicted by diverging patterns of TRAN versus INDU and vice versa."

CURRENT DOW CHART PICTURE:

The Dow 30 (INDU) formed a bullish 'symmetrical triangle' that I noticed on the last low in the 17800 area and wrote about in my Trader's Corner (5/7/15) article and the markup of the INDU daily chart is reproduced below. The only thing that's changed (from 5/7) is subsequent price action AND anticipated current support and resistance levels as seen below.

Anticipated resistance is suggested at the prior 18350 high, then next in the 18460 area. Technical/chart support is suggested at 18050, at the current intersection of what was resistance implied by the down trendline. Next INDU support is highlighted in the 17950 area.

The move in the Dow from the 17800 area to above 18300 was a good-sized rebound but typically expectations implied by the triangle pattern seen here would be for a further prolonged advance beyond the recent high. A pullback to 18200 or so doesn't change an expectation of a move above the highs for the recent rally. That said a decline to below 18050 for a couple of days running would be more bearish than what I'd expect from the chart. Long range resistance isn't seen until the 18760-18800 area. Stay tuned.



NASDAQ COMPOSITE (COMP) INDEX; DAILY CHART:

The Nasdaq Composite (COMP) is bullish in that it remains in an uptrend as defined by the past pattern of higher highs and higher pullback lows. Making the pattern currently 'mixed' is that COMP has yet to see a move to a new high above 5120 from late-April. A couple of Closes, preferably consecutive back to back such Closes at new highs, would tend to confirm a continued bull trend. If new highs get made, something further to look for is a possible re-test of the prior 5120 peak followed by a subsequent rebound that 'establishes' a new support base.

The ability OR inability for COMP to go to new highs above 5100 is technically (and psychologically) significant as COMP is in the territory of its all-time (intraday) high of 5132 dating back to March, 2000. Many if not most traders and fund managers are well aware of the possibility of a double top and a possible pullback from recent COMP highs and are reluctant to bid up COMP stocks from current levels. 'You first' or 'after you' kind of thing! Of course, COMP has also had a tremendous run up over recent years as COMP went from the 1500 area in early-2009 to over 5000 in 2015! P/E ratios in tech stocks are quite 'elastic' in growth periods but enough may be 'enough' for now. Stay tuned on that!!

COMP support is highlighted in the 5040 area of the 21-day moving average with next support at the milestone 5000 level.

NASDAQ 100 (NDX); DAILY CHART:

The big cap Nas 100 (NDX) chart has the similar pattern to the broad Composite as it nears a possible test of its prior intraday peak at 4562. NDX is well under (further away than COMP to ITS all-time high) its prior intraday top of 4816 in March 2000.

A possible bullish impediment technically or chart wise is that NDX is bumping up again implied resistance at the upper end of its broad long-term uptrend channel, at 4546-4550 currently (not shown here). This matches the resistance seen already in NDX and potential resistance for the current move. I've noted resistance basis the daily chart below at the 4562 prior high, then at 4600.

Support is highlighted at the 4482 and the 21-day average, with support extending to 4450. Fairly strong technical support is implied by the NDX's up trendline intersecting currently at 4378.

Lastly, NDX, like COMP, on a long-term chart basis has been at an overbought extreme for some weeks now. This isn't to say that the big cap Nas 100 Index can't and won't continue to move higher but, on the other hand, it's not for 'nothing' that Nasdaq is lagging the S&P in a move to new highs.

The NASDAQ 100 ETF STOCK (QQQ); DAILY CHART:

The Nasdaq 100 ETF tracking stock (QQQ) looks to be poised to re-test and possibly break out to new highs above 111.16. Next resistance is suggested, at the top end of an uptrend price channel, in the 113 area.

QQQ support is highlighted in the 109.5 area, then at the lower end of the same broad uptrend channel and intersecting currently around 107.7

As is common on rallies BUT not on the last move to the 111 area, daily volume has been relatively low on the most recent advance. And as usual, On Balance Volume or OBV is tracking higher. If this was a typical (company) stock technically we'd say that the volume trend was not 'confirming' the most recent advance. This may be so but volume doesn't often 'expand' and get bigger on rallies.

There's caution on this rally due to the prior top looming as possible resistance. I have no strong conviction that the Q's will achieve a decisive upside penetration of the prior top and go on into a new up leg. I don't have a strong conviction that they won't either! I would like to play the short side at the TOP end of the channel accompanied by an overbought RSI extreme in NDX. I like the 'extremes'!

RUSSELL 2000 (RUT); DAILY CHART:

The Russell 2000 (RUT) is mixed in its pattern and hasn't of course matched new highs for the current move seen in the S&P and Dow. RUT is consistent with the Nasdaq and the medium to small cap stocks as a Market segment is no longer leading the tech stocks higher as it was into mid-April. RUT tends to be stronger in the first Quarter and a little beyond in terms of a seasonal influence.

A minor top in the 1260 is apparent on the daily chart. Resistance is obvious at both 1260 and then at the prior double top in the 1275 area.

On the bullish side, the Index is trading above its 21-day moving average and support is seen accordingly in the 1240 area. Chart/technical support extends to 1230.

RUT's longer-range chart pattern (not shown) traced out multimonth (mid-October to late-April uptrend channel, which RUT has fallen out of and hasn't regained. This past week's high stopped AT the low end of this channel.

I anticipate that RUT may trend basically sideways ahead, in a 1220-1230 to 1260-1270 trading range.


GOOD TRADING SUCCESS!




New Option Plays

Out Of Energy

by James Brown

Click here to email James Brown


NEW DIRECTIONAL PUT PLAYS

Norfolk Southern Corp. - NSC - close: 95.53 change: -1.58

Stop Loss: 100.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.2 million
Entry on May -- at $---.--
Listed on May 23, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The combination of weak fuel prices, lower global demand for fuel, and rising exports from other countries has been hurting U.S. coal exports. The U.S. Energy Information Administration expects U.S. coal exports to fall throughout 2015 before leveling off in 2016. Less exports means less coal that needs to be moved by railroad.

NSC is in the services sector. They're a major player in the railroad industry. According to the company, "Norfolk Southern Corporation (NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products."

Falling coal shipments is not the only problem for the railroads. Crude oil's decline from last year's highs and the massive slowdown in the amount of fracking in the U.S. has also hurt the railroad business. Less drilling means fewer rail cars of oil pipe and drilling equipment to be shipped. Less fracking means less fracking sand and other proppants to be shipped. Less drilling also means less oil produced and thus less oil to be transported by rails.

It's not just NSC that's suffering. In March 2015 railroad company Kansas City Southern (KSU) dramatically reduced their guidance. Two months later (about May 14th) KSU actually revoked its guidance altogether. Management sees no visibility due to so much uncertainty surrounding the energy market. KSU's energy-related business is down -50% from a year ago and carloads are down -38% in Q2 2015. Their utility coal shipments are down -68%.

Another company, Union Pacific (UNP), painted a similar picture of lower shipments and falling demand. The industry is facing difficult year over year comparisons. They have seen 11 weeks of negative rail volume. Industry wide coal shipments are down -15% from a year ago (UNP's was down -25%). Shipments of crude oil are down. Shipments of agriculture products are down.

It could be months before the oil industry in the U.S. recovers. Coal isn't expected to recover this year. That doesn't paint a very rosy picture for the railroads.

On April 13, 2015 NSC issued an earnings warning. They guided their Q1 results to $1.00 per share on revenues of $2.6 billion. That's a -15% drop in earnings from a year ago. Wall Street was expecting $1.29 per share on revenues of $2.68 billion. Shares of NSC crashed on this news and then rebounded but the bounce failed at technical resistance and shares have accelerated lower. NSC has broke down under major support near the $100 level.

Technical traders could argue that NSC has created a giant head-and-shoulders pattern (with two right shoulders) over the last nine months. This H&S pattern would suggest a downside target in the $80-85 region. Tonight we are suggesting a trigger to buy puts at $94.85. We will start this trade with a stop loss at $100.25. More conservative traders may want to use a stop around $98.30 as an alternative.

Trigger @ $94.85

- Suggested Positions -

Buy the SEP $90 PUT (NSC150918P90) current ask $2.50
option price is a current quote and not a suggested entry price.

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

Daily Chart:

Weekly Chart:



In Play Updates and Reviews

Stocks Wander Into The Long Weekend

by James Brown

Click here to email James Brown

Editor's Note:

A bored market was focused on Fed Chairman Yellen's speech on Friday. She didn't say anything new. That left stocks to meander sideways as traders started packing up ahead of the long, holiday weekend.

Our plan was to exit the OCR trade on Friday. CSL and MLM have been removed. Neither trade was opened.


Current Portfolio:


CALL Play Updates

Adobe Systems - ADBE - close: 80.04 change: -0.52

Stop Loss: 77.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.2 million
Entry on May -- at $---.--
Listed on May 21, 2015
Time Frame: 3 to 4 weeks, exit PRIOR to earnings in mid June
New Positions: Yes, see below

Comments:
05/23/15: ADBE did not see any follow through on Thursday's bullish breakout higher. Shares slowly faded back toward $80.00, which as previous round-number resistance should now become support.

I don't see any changes from Thursday's new play description. Our suggested entry point to buy calls is $80.85.

Trade Description: May 21, 2015:
ADBE appears to have successfully completed its transition from a traditional pay up front software sales model to a subscription based pay-as-you-go model for its industry leading creative software.

ADBE is in the technology sector. They are part of the software industry. According to the company, "Adobe is changing the world through digital experiences. Content built and optimized with Adobe products is everywhere you look — from websites, video games, and smartphones to televisions, tablets, and beyond. Adobe® Creative Cloud® software offers the most innovative tools for creating digital media, while Adobe Marketing Cloud delivers groundbreaking solutions for data-driven marketing. Our leadership in these two emerging categories, Digital Media and Digital Marketing, provides our customers with a real competitive advantage, positioning Adobe for continued growth well into the future. As one of the largest software companies in the world, Adobe achieved revenue of more than US$4 billion in 2013."

The company's most recent earnings report was March 17th. ADBE said its Q1 earnings soared +46% to $0.44 a share . It was ADBE's best quarterly earnings growth in four years. Analysts were expecting a profit of $0.39. Revenues rose +10.9% to $1.11 billion, which was above ADBE's estimate of $1.05-1.10 billion. Wall Street was forecasting $1.08 billion.

ADBE said a record 70 percent of their Q1 revenues came from recurring sources, compared to 52 percent in Q1 fiscal 2014. They added 517 thousand customers to their creative cloud subscriptions. That is up +28% from a year ago. Unfortunately this missed expectations. Analysts were hoping for +573K.

ADBE's guidance was a little bit soft. The combination of the new subscription miss and the lackluster guidance sparked some profit taking. Fortunately for shareholders the sell-off didn't last long. Investors have been buying the dips and ADBE's long-term up trend remains in place.

It would appear that any post-earnings bearishness has vanished. JP Morgan recently started coverage on ADBE with an "overweight" and a $91 target. ADBE's point & figure chart is bullish and forecasting at $92. Technically shares of ADBE have rallied to resistance near $80.00 and its 2015 highs. After consolidating below $80 the last few days the stock finally broke out today. The intraday high today was $80.74. We're suggesting a trigger to buy calls at $80.85.

Trigger @ $80.85

- Suggested Positions -

Buy the JUL $85 CALL (ADBE150717C85) current ask $1.35

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

chart:


Anthem, Inc. - ANTM - close: 164.19 change: -0.43

Stop Loss: 154.85
Target(s): To Be Determined
Current Option Gain/Loss: +12.5%
Average Daily Volume = 1.8 million
Entry on May 18 at $162.00
Listed on May 16, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/23/15: ANTM churned sideways inside a $2.00 range on Friday. The late morning rally attempt past $165.00 didn't make it very far. If shares dip the 10-dma could be support near $162.00. Otherwise I'd look for a dip toward $160.00. More conservative traders may want to raise their stop closer to the $160 area.

Trade Description: May 16, 2015:
One in nine Americans is covered through one of Anthem's affiliated medical plans. The company is only getting bigger. Previously known as Wellpoint (WLP) they officially changed their name to Anthem (ANTM) in December 2014.

Initially both Wall Street and the healthcare industry were worried about Obamacare. Yet the Affordable Care Act has been a strong tailwind for many of the large healthcare insurers adding millions of new customers. Now that the major players have ironed out a lot of the wrinkles any negative impact from the ACA seems to be fading.

If you're not familiar with ANTM they are in the healthcare sector. According to the company, "Anthem is working to transform health care with trusted and caring solutions. Our health plan companies deliver quality products and services that give their members access to the care they need. With nearly 71 million people served by its affiliated companies, including more than 38 million enrolled in its family of health plans, Anthem is one of the nation’s leading health benefits companies."

Looking ANTM's earnings over the past year the company's results have been a little hit or miss. Yet one thing they have consistently done is raise guidance. Since the stock market is always looking forward this bullish outlook from ANTM has helped drive the stock to new all-time highs.

Their most recent earnings report was April 29th. ANTM reported their 2015 Q1 results. Wall Street was looking for $2.69 per share on revenues of $19.28 billion. The company delivered $3.14 per share, which is a +29.8% improvement from a year ago. Revenues were up +6.8% to $18.85 billion (a miss). Management raised their guidance above analysts' estimates for the fourth quarter in a row.

The company has an active stock buyback program. In the first quarter they spent $774 million buying back 5.7 million shares. As of March 31st, 2015 they still had about $4.9 billion left on their board-approved share repurchase program.

Technically the stock has been churning sideways in the $150-160 zone for the last several weeks. ANTM threatened to breakdown under support near its 50-dma and the $150 level in late April but managed to reverse course and now it's breaking out past resistance in the $160 area. Tonight we are suggesting a trigger to buy calls at $161.65.

- Suggested Positions -

Long SEP $170 CALL (ANTM150918C170) entry $4.40

05/18/15 triggered on gap open at $162.00, trigger was $161.65
Option Format: symbol-year-month-day-call-strike

chart:


Caterpillar Inc. - CAT - close: 88.63 change: -0.70

Stop Loss: 86.45
Target(s): To Be Determined
Current Option Gain/Loss: -21.0%
Average Daily Volume = 6.2 million
Entry on May 05 at $88.10
Listed on May 02, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/23/15: On Friday morning Deere & Co (DE) reported earnings well above estimates and management upgraded their guidance slightly above estimates. This sent shares of DE soaring with a +4.3% gain and a new 2015 high. Sadly this bullish earnings news did not rub off on shares of CAT. CAT actually traded lower and underperformed the market's major indices with a -0.78% decline.

No new positions at this time.

Trade Description: May 2, 2015:
Have shares of CAT found a bottom? It's starting to look that way. CAT is still down -21% from its 2014 highs but it's up +12% from its Q1 lows with a steady trend of higher lows as traders buy the dips.

CAT is in the industrial goods sector. According to the company, "For 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2014 sales and revenues of $55.184 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three product segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment."

Earnings results and guidance has been a moving target for CAT. The combination of a slowing global economy, volatile currency fluctuations, and weakness in commodities have generated big swings in their business. In July 2014 CAT lowered guidance. Three months later they raised guidance. The next quarter they lowered guidance. Today the company has raised guidance again.

CAT's most recent earnings report was April 23rd. They announced a Q1 profit of $1.72 a share. That was +16% higher than a year ago and almost +40% above Wall Street estimates. Revenues fell -4% from a year ago but sales of $12.7 billion were still above analysts' expectations.

CAT's Q1 results were all about North America, which saw gains almost across the board. Overall construction sales for CAT in North America were up +9% from a year ago. Unfortunately, this was overshadowed by declines everywhere else. Asia, Europe, Latin America - just about every other region CAT does business saw double-digit sales declines. Yet it appears that investors seem to be willing to look past this weakness.

CAT's CEO commented on their 2015 outlook, "We had a solid first quarter, which led to raising the profit outlook for 2015. However, we continue to face headwinds and uncertainty in 2015, and our outlook for the year reflects that. We expect sales and profit in each of the remaining three quarters of 2015 to be lower than the first quarter. We expect sales for oil applications to decline starting in the second quarter, and from a profit perspective, the first quarter included the gain on the sale of our remaining interest in the logistics business and that won't repeat. The first quarter is usually the most seasonally favorable of the year for costs, and we don't expect the rest of the year to be as favorable."

Most of the major oil and gas companies have reduced their capex spending plans for 2015 and this should be negative for CAT. The stock's reaction is suggesting all the bad news is already priced in.

CAT's management raised their 2015 guidance and adjusted their estimate from $4.65 to $4.75, excluding their restructuring costs they raised their estimate from $4.75 to $5.00. Wall Street's estimate was $4.75 per share. CAT reaffirmed their sales estimate for $50 billion this year.

A couple of analysts with Stifel are bullish on CAT. They believe the combination of the company's big stock buy back program (about $10 billion), a strong dividend (more than 3%), and a healthy North American construction market will buoy CAT's stock while investors wait for a turnaround in commodities.

Technically the stock has been showing relative strength the last few weeks. The point & figure chart has turned bullish and is currently forecasting a long-term target of $108.00. Today CAT is hovering below potential resistance near $88.00. We are suggesting a trigger to buy calls at $88.10.

- Suggested Positions -

Long JUL $90 CALL (CAT150717C90) entry $2.00

05/19/15 new stop @ 86.45
05/12/15 new stop @ 85.75
05/05/15 triggered @ 88.10
Option Format: symbol-year-month-day-call-strike

chart:


Electronic Arts - EA - close: 62.56 change: -0.13

Stop Loss: 59.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.5 million
Entry on May -- at $---.--
Listed on May 18, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
05/23/15: EA tried to rally on Friday morning but shares stalled near $63.13 for about 30 minutes before fading lower. We are waiting for a new relative high. Our suggested entry point to buy calls is $63.65.

Trade Description: May 18, 2015:
Video game stocks are hitting high scores this year. The two biggest players in this industry are ATVI and EA. Shares of ATVI are at all-time highs while EA is nearing a new 10-year high.

EA is considered part of the technology sector. According to the company, "Electronic Arts ( EA ) is a global leader in digital interactive entertainment. The Company delivers games, content and online services for Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 300 million registered players around the world. In fiscal year 2015, EA posted GAAP net revenue of $4.5 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality blockbuster brands such as The Sims, Madden NFL, EA SPORTS FIFA, Battlefield, Dragon Age and Plants vs. Zombies."

Shares of EA popped above major resistance near the $60.00 level earlier this month after reporting better than expected Q4 2015 results. Wall Street was looking for EA to deliver a profit of $0.26 a share on revenues of $852.9 million. EA announced a profit of $0.39 a share. Revenues were down -2.0% from a year ago but came in at $896 million, well above estimates.

Their full year results were impressive. EA's net revenues were up almost $1 billion to $4.5 billion. The company's net income soared from $8 million in 2014 to $875 million in 2015. Shares of EA have benefitted from the company's turnaround. The stock is up more than +100% in the last 12 months.

EA's guidance was mixed. They issued bearish guidance for their Q1 2016 (current quarter) and see EPS about flat ($0.00) when Wall Street was expecting $0.19 per share. EA is forecasting Q1 revenues significantly below expectations. However, they raised their fiscal year 2016 profit estimate to $2.75 per share when analysts were only expecting $2.63.

Last quarter EA spent $95 million buying back 1.8 million shares of their stock. When they reported earnings on May 5th they also announced a new $1 billion stock buyback program that expires on May 31, 2017.

EA management sounds pretty optimistic. Here's an excerpt from their earnings press release:

With a clear focus on putting our players first, FY15 was an exceptional year for Electronic Arts. We introduced award-winning games, delivered enduring entertainment in our live services, and forged deeper relationships with a growing global audience across consoles, mobile devices and PC, said Chief Executive Officer Andrew Wilson. EA continues to sharpen our focus and speed, and in the year ahead we will engage more players on more platforms with new experiences like Star Wars Battlefront, FIFA 16, Minions Paradise and more.

Two years ago, we discussed a three-year plan to double non-GAAP operating margins to 20%, said Chief Financial Officer Blake Jorgensen. Today, Im happy to announce that we exceeded our goal a full year ahead of schedule. Looking forward, we anticipate continued earnings growth driven by our strong portfolio, investment in new IP, the market shift to digital, and on-going cost discipline.

Wall Street's analyst community seems bullish on EA as well. Several firms reiterated their bullish ratings and raised price targets.

Shares of EA have been building on a bullish trend of higher lows. The current rally has produced a buy signal on the point & figure chart that is forecasting a long-term target of $110.00. On a short-term basis EA seems to be coiling for a breakout past resistance near $63.50. Tonight we're suggesting a trigger to buy calls at $63.65.

Trigger @ $63.65

- Suggested Positions -

Buy the SEP $70 CALL (EA150918C70)

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

chart:


Euronet Worldwide - EEFT - close: 60.17 change: -1.04

Stop Loss: 59.75
Target(s): To Be Determined
Current Option Gain/Loss: -40.0%
Average Daily Volume = 335 thousand
Entry on May 21 at $62.25
Listed on May 20, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/23/15: Our EEFT trade is not off to a very good start. We were triggered on Thursday's spike above resistance near $62.00. That rally reversed and now EEFT is testing what should be round-number support at $60.00. If EEFT doesn't bounce here we'll see the stock hit our stop loss at $59.75.

No new positions at this time.

Trade Description: May 20, 2015:
The main driver behind share price appreciation is supposed to be earnings growth. That isn't always the case in the stock market but for EEFT they are delivering on the earnings front. EEFT is in the services sector.

According to the company, "Euronet Worldwide is an industry leader in processing secure electronic financial transactions. The Company offers payment and transaction processing solutions to financial institutions, retailers, service providers and individual consumers. These services include comprehensive ATM, POS and card outsourcing services, card issuing and merchant acquiring services, software solutions, cash-based and online-initiated consumer-to-consumer and business-to-business money transfer services, and electronic distribution of prepaid mobile phone time and other prepaid products.

Euronet's global payment network is extensive - including 20,364 ATMs, approximately 69,000 EFT POS terminals and a growing portfolio of outsourced debit and credit card services which are under management in 47 countries; card software solutions; a prepaid processing network of approximately 681,000 POS terminals at approximately 306,000 retailer locations in 33 countries; and a consumer-to-consumer money transfer network of approximately 243,000 locations serving 134 countries. With corporate headquarters in Leawood, Kansas, USA, and 54 worldwide offices, Euronet serves clients in approximately 160 countries."

EEFT's earnings history has been strong. They have beaten Wall Street's earnings estimates on both the top and bottom line three out of the last four quarters. It would have been four quarters in a row but their most recent report missed analysts' revenue estimate.

EEFT delivered its 2015 Q1 results on April 28th. Analysts were expecting a profit of $0.54 a share on revenues of $403.75 million. EEFT results saw earnings per share rise +22% from a year ago to $0.56. Revenues were up +12% to $395.2 million. It's worth noting that 70% of EEFT's revenues are outside the U.S. The rise of the dollar last quarter was significant. On a constant currency basis EEFT's revenues were up +25%.

Here's an excerpt from EEFT's earnings press release:

"For the first quarter, we delivered 55% constant currency operating income growth and 22% adjusted cash EPS growth - the ninth consecutive quarter we have achieved double-digit, year-over-year adjusted cash earnings per share growth," stated Michael J. Brown, Euronet's Chairman, Chief Executive Officer and President. "Each segment delivered strong constant currency operating results. Money transfer had another outstanding quarter benefiting from continued organic growth, the launch of the Walmart-2-Walmart product and the acquisition of HiFX. epay contributed double-digit operating income growth for the second consecutive quarter driven by continued expansion of non-mobile content. And, EFT further expanded its ATM and POS networks across Europe and India."
The stock has been building on a bullish trend of higher lows. Today shares are poised to breakout past resistance at $62.00. The point & figure chart is bullish and forecasting at $75.00 target. Tonight we are suggesting a trigger to open bullish positions at $62.25.

- Suggested Positions -

Long AUG $65 CALL (EEFT150821C65) entry $2.50

05/21/15 triggered @ 62.25
Option Format: symbol-year-month-day-call-strike

chart:


Eaton Corp. - ETN - close: 73.09 change: -0.31

Stop Loss: 69.75
Target(s): To Be Determined
Current Option Gain/Loss: +0.0%
Average Daily Volume = 2.6 million
Entry on May 13 at $72.75
Listed on May 09, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/23/15: ETN did not see any follow through on Thursday's bounce. Shares spent most of Friday's session churning sideways inside a 25-cent range. Last week's performance snapped a three-week winning streak for ETN. You could argue that the last few days looks like a bull-flag consolidation pattern. More conservative traders may want to bump their stop closer to $72.

Trade Description: May 9, 2015:
ETN is in the industrial goods sector. The company makes products for a wide variety of industries including: aerospace, electrical equipment, filtration systems, hydraulics, plastic extrusion, industrial clutches and brakes, and vehicles.

According to the company, "Eaton is a power management company with 2014 sales of $22.6 billion. Eaton provides energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton has approximately 102,000 employees and sells products to customers in more than 175 countries."

When the market ignores negative earnings news it could be a signal that all the bad news is priced in to a stock and the path of least resistance is higher. That appears to be the case for ETN.

In July 2014 the stock was crushed after the company reported earnings that were only in-line with estimates and the management lowered their 2014 Q3 guidance. Three months later ETN reported its Q3 results that missed expectations on both the top and bottom line. What did the stock do? It rallied.

Fast forward another few months and in early February ETN reported better than expected earnings but revenues were just a hair below estimates. Management lowered their 2015 Q1 estimates due to currency headwinds. They were expecting a -4% impact do to the strong dollar in 2015. What did the stock do on this negative forecast? It rallied.

Several days ago ETN reported its Q1 results on April 29th. Earnings were 3 cents better than expected even as revenues fell -5% to $5.22 billion. This was a result of +1% organic growth offset by -6% decline due to currency translation.

The company's management readjusted their forecast and now expect a -5% impact due to currency headwinds for 2015. With this adjustment they lowered their Q2 and 2015 guidance. Since this earnings report the stock has rallied. Last week shares were upgraded by J.P.Morgan from neutral to overweight who adjusted their ETN price target from $70 to $84. The point & figure chart is even more optimistic and forecasting an $89 target.

If investors are going to be this forgiving then we think there might be an opportunity here. The recent rally in ETN has pushed shares toward resistance near its February highs around $72.50(ish). We are suggesting a trigger to buy calls at $72.75.

- Suggested Positions -

Long JUL $75 CALL (ETN150717C75) entry $1.10

05/13/15 triggered @ 72.75
Option Format: symbol-year-month-day-call-strike

chart:


FactSet Research - FDS - close: 166.59 change: -1.11

Stop Loss: 163.85
Target(s): To Be Determined
Current Option Gain/Loss: +28.9%
Average Daily Volume = 302 thousand
Entry on May 13 at $162.25
Listed on May 11, 2015
Time Frame: Exit PRIOR to FDS earnings in late June or plan on exiting prior to JUNE option expiration on June 19th
New Positions: see below

Comments:
05/23/15: FDS experienced some profit taking on Friday. Shares tried to rally but failed at $168.00. By the closing bell FDS was down -0.66%. The stock did manage a gain for the week marking its third weekly advance in a row.

I am not suggesting new positions at this time. If FDS continues to dip the closet level that could be support is $165.00.

Trade Description: May 11, 2015:
FDS has provided data, analytics and research to the Wall Street crowd for more than 35 years. Today their software provides a host of services for investment managers, hedge funds, bankers, wealth managers, private equity, buy-side traders, sell-side traders, and more.

FDS is considered part of the technology sector. According to the company, "FactSet, a leading provider of financial information and analytics, helps the world's best investment professionals outperform. More than 50,000 users stay ahead of global market trends, access extensive company and industry intelligence, and monitor performance with FactSet's desktop analytics, mobile applications, and comprehensive data feeds."

The company has been delivering pretty consistent sales growth around +9% every quarter. They raised guidance back in December with their Q1 report. FDS' most recent earnings report was March 17th. The company announced their Q2 results of $1.39 per share, which was up +13.9% from a year ago. Unfortunately that missed analysts' estimates by two cents. Revenues grew +9.2% and kept the trend alive of FDS delivering revenues just above expectations.

The company has an active stock buyback program. Management boosted their repurchase program back in December by $300 million. At the time that meant their buyback program was almost $339 million. Keep in mind that FDS only has 41.7 million shares outstanding.

Following FDS' March 17th Q2 report the company raised their guidance for Q3. They now estimate earnings will grow +12.8% into the $1.40-1.42 per share range. This is above Wall Street estimates. Shares of FDS rallied on this report but they've spent the last several weeks consolidating sideways on either side of $160.00. The good news is that FDS is building a bullish trend of higher lows. Today the stock is poised to breakout past resistance and hit new record highs. We are suggesting a trigger to buy calls at $162.25.

- Suggested Positions -

Long JUN $165 CALL (FDS150619C165) entry $3.80

05/19/15 new stop @ 163.85
05/13/15 triggered @ 162.25
Option Format: symbol-year-month-day-call-strike

chart:


F5 Networks - FFIV - close: 126.77 change: -0.13

Stop Loss: 121.40
Target(s): To Be Determined
Current Option Gain/Loss: -13.2%
Average Daily Volume = 1.2 million
Entry on May 08 at $125.15
Listed on May 07, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/23/15: It was a frustrating week for FFIV. The stock went nowhere. Shares spent the whole week consolidating sideways in a narrowing range. It's worth noting that FFIV had been up six week in a row and was probably due for a dip. I wouldn't be surprised to see a dip toward the $125.00 level.

No new positions at this time.

Trade Description: May 7, 2015:
It has become a hostile world for corporations and their biggest weakness is online security. It feels like every day we hear about another company getting hacked. In recent years there have been a number of high-profile hacking attacks like Target (TGT), Home Depot (HD), and Sony (SNE). Fortunately for FFIV all of this plays to their strength as more corporations seek to beef up their cyber security.

According to company marketing, "F5 provides solutions for an application world. F5 helps organizations seamlessly scale cloud, data center, and software defined networking (SDN) deployments to successfully deliver applications to anyone, anywhere, at any time. F5 solutions broaden the reach of IT through an open, extensible framework and a rich partner ecosystem of leading technology and data center orchestration vendors. This approach lets customers pursue the infrastructure model that best fits their needs over time. The world's largest businesses, service providers, government entities, and consumer brands rely on F5 to stay ahead of cloud, security, and mobility trends."

After strong earnings and sales growth in 2014 the company hiccupped in Q1 2015 (which was the last quarter of 2014). FFIV beat estimates on the bottom line but management guided lower for Q2. You can see how the market reacted to this news with the big gap down in mid January.

Their most recent earnings report was April 22nd. FFIV reported their 2015 Q2 results of $1.59 per share. That was nine cents better than expected. Revenues were up +12.4% to $472.1 million, just above estimates. Wall Street's biggest concerns following these results are the impact of currency headwinds (thanks to the strong dollar) and FFIV's falling revenue growth. They're still growing but momentum seems to be slowing a bit.

The stock rallied on its earnings news and burst through major resistance near $120 and several key moving averages. The last couple of weeks have looked like a consolidation period where FFIV digested its post-earnings pop. Now FFIV is poised for the next leg higher. The point & figure chart is very bullish and forecasting a long-term target of $193.00. Tonight we're suggesting a trigger to buy calls at $125.15.

- Suggested Positions -

Long JUL $130 CALL (FFIV150717C130) entry $3.25

05/08/15 triggered @ 125.15
Option Format: symbol-year-month-day-call-strike

chart:


Northern Trust Corp. - NTRS - close: 75.56 change: -0.47

Stop Loss: 73.45
Target(s): To Be Determined
Current Option Gain/Loss: -9.3%
Average Daily Volume = 1.1 million
Entry on May 05 at $75.05
Listed on May 04, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/23/15: NTRS almost erased its gains for the week with Friday's -0.6% decline. If this pullback continues I'd watch the 20-dma, near $74.70, as potential support.

I'm not suggesting new positions at this time. I would be tempted to inch the stop loss closer to the $74.00 level.

Trade Description: May 4, 2015:
NTRS has been around for 125 years. The company looks pretty good for its age. Shares are outperforming the broader market and its peers. Currently NTRS is up +10% in 2015 versus a -0.6% decline in the financial sector.

According to the company, "Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has offices in the United States in 19 states and Washington, D.C., and 20 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2015, Northern Trust had assets under custody of US$6.1 trillion, and assets under management of US$960.1 billion. For 125 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation."

The last couple of earnings reports have been healthy. Their Q4 report in January came in better than expected on both the top and bottom line. NTRS' most recent report was its 2015 Q1 results on April 21st. Wall Street was looking for a profit of $0.87 a share on revenues of $1.12 billion. NTRS said their earnings rose +25% from a year ago to $0.94 and revenues were up +9.0% to $1.13 billion.

NTRS' Chairman and CEO Frederick Waddell commented on his company's performance, "We are pleased with our financial performance in the first quarter of 2015, which reflects continued growth in our business serving personal and institutional clients. Trust, investment and other servicing fees, which represent two-thirds of our revenue, increased 7% compared to last year. New business and higher equity markets contributed to growth in assets under custody and under management of 6% and 5%, respectively. Total revenue grew 9% and we maintained a disciplined focus on expenses, which increased 3%, producing meaningful operating leverage. As a result, our pre-tax profit margin improved to 31.2% in the first quarter and our return on equity was within our target range of 10-15%. We also look forward to returning capital to our stockholders in the year ahead as the Federal Reserve did not object to the proposed capital actions in our 2015 Capital Plan. Our Capital Plan and proposed capital distributions demonstrate the strength of Northern Trust's focused business model, financial position and commitment to stockholders."

Shares of NTRS popped to new multi-year highs on its Q1 report. Instead of giving back its gains the stock has been able to consolidate at these highs. Shares displayed relative strength again with today's +1.1% gain. Today's move is also a bullish breakout past resistance near $74.00. The point & figure chart is bullish and forecasting a long-term target of $86.00. Tonight we're suggesting a trigger to buy calls at $75.05.

- Suggested Positions -

Long JUL $75 CALL (NTRS150717C75) entry $2.15

05/12/15 new stop @ 73.45
05/05/15 triggered @ 75.05
Option Format: symbol-year-month-day-call-strike

chart:


Roper Technologies - ROP - close: 177.15 change: -0.05

Stop Loss: 173.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 441 thousand
Entry on May -- at $---.--
Listed on May 20, 2015
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Comments:
05/23/15: Friday was a relatively quiet session for ROP. The stock ended the week near its highs but shares failed to hit our suggested entry point. The plan is buy calls when ROP trades at $177.75. Any follow through higher next week should trigger this play.

Trade Description: May 20, 2015:
2015 is shaping up to be a record-setting year for ROP with profits on track for a new high. Investors have pushed the stock to new highs as well. ROP is up +12.8% year to date versus a +3.3% gain in the S&P 500.

ROP is in the industrial goods sector. The company just recently changed their name from Roper Industries to Roper Technologies.

According to the company, "Roper Technologies is a diversified technology company and is a constituent of the S&P 500, Fortune 1000, and the Russell 1000 indices. Roper provides engineered products and solutions for global niche markets, including software information networks, medical, water, energy, and transportation."

Their most recent earnings report was April 27th. ROP reported its 2015 Q1 results. Earnings per share rose 5% from a year ago to $1.55. Analysts were expecting $1.52. Revenues were up +3.7% to $865 million. That actually missed estimates of $873 million but the market didn't seem to care. ROP said their adjusted gross margin hit a new high, rising 140 basis points to 60.0%.

Management did lower their Q2 guidance but they raised their full year 2015 guidance. Again, traders seemed to look past the short-term lowered guidance in favor of the long view. ROP is forecasting 2015 earnings in the $6.75-6.95 range, up from $6.40 per share in 2014.

Barclays reiterated their overweight rating on the stock and raised their price target to $193.00. The point & figure chart is even more optimistic and currently forecasting at $209.00 target.

Shares of ROP hit new highs last week and have managed to hover there in the $175.00 region. The stock looks poised to push higher and we want to buy calls if ROP can trade at $177.75.

Trigger @ $177.75

- Suggested Positions -

Buy the AUG $180 CALL (ROP150821C180)

Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.

Option Format: symbol-year-month-day-call-strike

chart:


Snap-on Inc. - SNA - close: 157.39 change: -0.35

Stop Loss: 152.25
Target(s): To Be Determined
Current Option Gain/Loss: +49.0%
Average Daily Volume = 346 thousand
Entry on May 07 at $153.50
Listed on May 06, 2015
Time Frame: exit PRIOR to June option expiration
New Positions: see below

Comments:
05/23/15: SNA also ended the week near all-time highs. Shares look like they are building up steam for a breakout past short-term resistance near $158.00.

No new positions at this time.

Trade Description: May 6, 2015:
Steady earnings growth, a consistent dividend, and a positive outlook are three things investors like to see. SNA delivers on all three counts. The company is in the industrial goods sector.

According to the company, "Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Snap-on also derives income from various financing programs to facilitate the sales of its products. Products and services are sold through the company’s franchisee, company-direct, distributor and internet channels. Founded in 1920, Snap-on is a $3.3 billion, S&P 500 company headquartered in Kenosha, Wisconsin."

SNA has been consistently beating analysts expectations. Prior to their Q1 report the company was delivering results above estimates on both the top and bottom line. That changed with the April 23rd announcement of its Q1 results. Earnings rose +15.4% from a year ago to $1.87 per share. This was above Wall Street estimates and the eight consecutive quarter in a row that SNA has beaten analysts' expectations. Unfortunately, revenues only rose +5.1% to $827.8 million and that missed estimates of $834.4 million.

The market's didn't seem to care. Shares of SNA rallied anyway in spite of the earnings miss. Management said their Q1 2015 saw strong organic growth in sales of +9.9%. One analyst raised their price target on SNA to $180 per share. The point & figure chart is even more optimistic and forecasting at $191 target.

SNA has also announced another dividend. Here's a quick excerpt from the company press release, SNA has declared a "quarterly common stock dividend of $0.53 per share payable June 10, 2015 to shareholders of record on May 20, 2015. Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939."

Technically shares of SNA look bullish with a strong pattern of higher lows. It's currently poised to breakthrough short-term resistance near $153.25 soon. We are suggesting at rigger to buy calls at $153.50.

- Suggested Positions -

Long JUN $155 CALL (SNA150619C155) entry $2.55

05/14/15 new stop @ 152.25
05/07/15 triggered @ 153.50
Option Format: symbol-year-month-day-call-strike

chart:




PUT Play Updates


Currently we do not have any active put trades.




CLOSED BULLISH PLAYS

Carlisle Companies - CSL - close: 98.06 change: -0.35

Stop Loss: 97.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 417 thousand
Entry on May -- at $---.--
Listed on May 19, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/23/15: CSL just erased a good chunk of its mid-May gains with a three-day reversal lower. Our trade has not opened. The plan was to buy calls at $101.00 but CSL isn't cooperating. We are removing CSL as an active candidate.

Trade did not open.

05/23/15 removed from the newsletter, suggested entry was $101.00

chart:


Martin Marietta Materials - MLM - close: 152.30 change: -2.28

Stop Loss: 149.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 809 thousand
Entry on May -- at $---.--
Listed on May 14, 2015
Time Frame: 8 to 12 weeks
New Positions: see below

Comments:
05/23/15: MLM displayed relative weakness on Friday with a -1.47% decline. The stock's weekly loss snapped a three-week rally. We are removing MLM as a candidate. The trade never opened.

Trade did not open.

05/23/15 removed from the newsletter, suggested entry was $156.00

chart:


Omincare Inc. - OCR - close: 96.12 change: -0.14

Stop Loss: 90.45
Target(s): To Be Determined
Current Option Gain/Loss: -29.8%
Average Daily Volume = 921 thousand
Entry on May 06 at $90.35
Listed on May 05, 2015
Time Frame: Exit prior to June option expiration
New Positions: see below

Comments:
05/23/15: OCR was a big story this week with CVS offering $12.7 billion to buy the company. Shares are at new highs. Unfortunately the acquisition news and $98.00 per share buyout offer killed any time value on our option. Our plan was to exit this trade on Friday morning.

- Suggested Positions -

Long JUN $95 CALL (OCR150619C95) entry $2.28 exit $1.60 (-29.8%)

05/22/15 planned exit
05/21/15 prepare to exit tomorrow morning, CVS offers $98/share for OCR
05/20/15 After hours, OCR spikes toward $100 on news it is in talks with CVS
05/19/15 new stop @ 90.45
05/06/15 triggered @ 90.35
Option Format: symbol-year-month-day-call-strike

chart: