(October 27, 2012)
The U.S. stock market peaked six weeks ago in mid September. Since then it's been a bumpy ride lower. This past week just produced a breakdown under intermediate support levels for the major indices. Now the S&P 500 is hovering above what should be stronger support at the 1400 level. Traders are trying to figure out if stocks will bounce off the 1400 level or will they breakdown?
Earnings season has peaked but we still have two or three busy weeks of corporate reports yet to announce. Meanwhile investor focus will turn back to economic data, the troubles in Europe, and the fast approaching U.S. presidential election. I suspect there is a good chance we see stocks churn sideways this week but the current trend, both short-term and intermediate, is down for stocks.
Thus with stocks on the decline and poised to potentially break support I am not eager to launch new positions now. We did add two new candidates to our watch list (CREE & SCCO). I am also updating my radar screen tonight (see below).
I would keep an eye on coal stock, ANR. It looks like ANR may have bottomed but I am reluctant to open positions ahead of its earnings report on November 2nd, which might produce some unexpected volatility. I've also got my eye on CLB because odds are most of the bad news has been priced in with the big drop from early October. I'm waiting to see what sort of entry point CLB might provide. Another stock I noticed this weekend was AMCX. Shares of AMCX hit new all-time highs this week. Unfortunately, AMCX does not have LEAPS options. Investors might want to speculate on some 2013 June $50 calls although I might wait for a close over $47.50.
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself:
RYL, BTU, OPEN, VMC, KSU, JNJ, RCL, FSLR, HFC, ARLP, EMN, TGT, TXN, CI, AKAM, LRCX, F, ODFL