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Daily Newsletter, Wednesday, 12/2/2015

Table of Contents

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

Market Wrap

Bulls Get a Little Nervous

by Keene Little

Click here to email Keene Little
The stock market has been rallying, or holding up, into this week with the expectation it will receive good news about the employment picture and more QE from the ECB. Today there was some nervousness about those expectations.

Today's Market Stats

The stock market's rally in the past week was hardly inspiring (except for the relative strength in the small caps), especially after the strong rally off the November 16th lows, but there's been a clear expectation for some help from the ECB and positive employment data. But today's selling showed investors getting a little nervous in front of Thursday's ECB announcement. The market is also a little uncertain about what the reaction will be to Friday's nonfarm payrolls (NFP) report. There are a lot of mixed economic signals for the Fed to contemplate and their upcoming decision on a rate hike is at best only a 50/50 guess for the market.

Today's decline completely reversed yesterday's gains and the week is slightly negative after today but it's the next two days that could significantly move the market. Bullish sentiment is very high, which means we have a lot of traders who are not going to be scared off by a decline, at least not initially. Dip buying, including today's, is probably on the mind of most traders. But various measures of trader sentiment show a reason for caution as we head into the end of the week.

There are many ways to gauge market sentiment and we have plenty of surveys that tell us what percentage of traders are bullish, neutral or bearish and these are typically played from a contrarian perspective. When too many become bullish, as is the current situation, the market can simply run out of buyers to keep propelling the market higher. Another "sentiment" gauge comes from watching how traders are using the Rydex funds, which have a selection of bullish and bearish funds, straight and leveraged. One fund, the Nova fund, is for traders who feel bullish about the market and it seeks to leverage the gains in the S&P 500 by 150%. As always, the leverage can work against a trader, which is why using leverage is a sign of bullish enthusiasm.

Looking at the Rydex Nova fund assets, shown on the chart below, you can see that it has now pushed above where it was at the November 3rd market high. A lower price high is met with higher total assets in the leveraged bullish fund and that should be a warning flag for over-eager bulls. In a market decline, even if it's to be just a pullback, the leveraged fund will feel the pain to a greater degree. Note also on the chart that RSI for Nova has reached a level (above 70) where previous market highs have been found. This begs the question about whether or not the market has priced in expectations for what the ECB and Fed will do with their monetary policies. Buy the rumor, sell the news? That's certainly one possibility here.

Rydex Nova fund vs. SPX, Weekly chart

There are plenty of ways to look at the underlying strength of the market and I've shown several recently to point out the disparity between what the indexes are doing (rallying) vs. what most of the stocks are doing (underperforming). When the market's indexes are rallying but the number of participating stocks is dwindling it's usually a good signal the bull run is coming to an end. The chart below shows the NYSE Summation index (NYSI), which is essentially a running total of the McClellan Oscillator, which measures advancing issues minus declining issues. Like other oscillators, you look for divergences between the peaks and valleys of each and we're currently seeing divergences at two different peaks.

You can see the deterioration in the NYSI since the market in March, which led to the strong breakdown in the market in August. The rally back up into the year's trading range (prior to the August decline) has been met with a lower high in the NYSI. And now the rally from November 16th, which has SPX knocking on the door to new highs, the NYSI is showing significant bearish divergence. SPX has rallied back up on the backs of fewer stocks, which is a strong indication it's a counter-trend rally and not the start of something more bullish.

NYSE Summation index vs. SPX, Daily chart

Interestingly, as bullish sentiment about the stock market hits extreme levels and the stock market shows weakening participation in the rally, there's another sentiment indicator that comes from the bond market. Back in 2007, as the stock market was searching for a high (with the same weakening signals as shown above), I was watching the TED spread, especially since there were so many concerns about the sub-prime mortgage problem (well, Bernanke wasn't worried about it since the problem would be "contained"). The TED spread measures the difference between the perceived safety of 3-month U.S. Treasuries and Eurodollars futures, which reflects concerns about the credit ratings of corporate borrowers.

We know corporations have been binge borrowing for the past several years, thanks to the uber-cheap borrowing rates. They've been using the money to buy back stocks and enable more M&A activity but now they're starting to struggle to make payments. With corporate earnings in decline it has put the squeeze on the companies' ability to service their debt. This is especially true in the energy-related fields and many of the miners. The worry over their ability to repay their loans is causing the TED spread to start widening again, as can be seen on the chart below. The rise has been starting to accelerate higher and is now higher than it's been since late-2011 following the market scare that year. This rate rise should be of great concern to the market.

TED Spread

Another way to look at concerns about risk is to look at the LIBOR (London Interbank Offered Rate) rate, which is basically the interest charged on money lent between banks. There was little concern about risk after recovering from the 2008-2009 market crash until this past year, which is when the rate started to rise. It's another indication banks are getting nervous about lending money even to other banks and are starting to demand a higher rate of return for what they feel are higher risks. Whether they're failing corporate loans, student loans or sub-prime auto loans (worse today than the sub-prime mortgage fiasco back in 2006-2007), there's a lot of debt out there that's not going to get paid back. The big question of course is what the banks are seeing amongst themselves that warrants increasing concern. These rates have a long way to go before they're even close to where they were back in 2005-2006 but it's the relative change (about 50% higher in the past year) and the accelerating rise, especially in the longer-dated maturities, that's worth watching.

LIBOR rates, 2012 - November 2015

The above charts are not meant to be trading signals but instead they tell you whether or not you can relax about the long side here or should instead be vigilant about controlling risk. The use of leverage is inadvisable in this current climate and liquidating some inventory and going to cash is, in my opinion, highly advisable. Selecting some shorting candidates (e.g., in relatively weak sectors but nearer their highs than lows) as a hedge, if not for speculation, would be a good exercise to go through.

As always, timing is everything in the stock market and your trading horizon will determine when you decide to get in and out of trade positions. The month of December is typically bullish, though it has its ups and downs, so one could easily argue it's too early to be thinking short. The chart below shows the average December and while the 2nd week is typically weak, it usually sets up the Santa Claus rally. This is of course not guaranteed and as I'll cover in tonight's charts, I could argue that this December will not be bullish. Or if we do get a Santa Claus rally it will start from much lower and lead only to a lower high. Notice too the relative strength in the RUT -- this is likely one reason why the RUT has seen relative strength in the past week. Traders are front-running the normally bullish month. But as with the rally into what could be significant news this week, have traders gotten ahead of themselves?

December trading pattern

I came across a good interview with Milton Berg, the CEO of MB Advisors, who did a good job summarizing the issues facing us in the stock market. He talks about some of the things mentioned above and I like the way he pulled some fundamental and technical analysis together: Milton Berg on Bloomberg

Moving on to the regular charts, the SPX weekly chart shows it has stalled for nearly six weeks now at trendline resistance, which includes the broken uptrend line from October 2011 - October 2014 and the top of a parallel up-channel for the rally from 2009, both of which cross near 2098. The big question is whether it's been consolidating beneath resistance as it tries to gather some strength to bust out to the upside, in which case I can see the potential for a rally up to the 2170 area before year-end. That would likely be a blow-off move with lots of bearish divergences as a result of a reaction to the Fed perhaps. But it's vulnerable here and a turn back down, which would likely be strong and fast, is clearly a risk that must be respected by the bulls.

S&P 500, SPX, Weekly chart

The daily chart below shows the cycling around the broken uptrend line from 2011-2014 in late October and into the November 3rd high and how it's been resistance since coming back up to it on November 20th. I show a projection on the chart at 2145.86, which is where the 5th wave of the move up from August would achieve equality with the 1st wave. This bullish wave count calls the November 16th low the start of the 5th wave. The bearish wave count says the November 16th high was the completion of a 3-wave bounce correction resulting in a lower high relative to the July high. The bounce off the November 16th low is to another lower high and a drop below 2065 would be a strong clue that no more new highs are coming.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2117
- bearish below 2060

The choppy price action since November 20th could be a correction to the rally from November 16th, with today's sharp decline finishing the correction, and the bullish interpretation is that it will be followed by a strong rally, presumably in reaction to a bullish reaction to the ECB and maybe Friday's NFP report. A rally above this morning's high near 2104 would be a bullish move and short-term traders should abandon the short side if that happens. But if we get just a bounce correction to today's decline that's then followed by a drop below whatever low is found following today's decline, I would abandon the long side since the bearish interpretation of the pattern calls for a strong decline to follow, one that could quickly take SPX back down to at least the August low (1867) before the end of the month.

S&P 500, SPX, 60-min chart

The DOW has the same pattern as SPX and therefore the same setup -- bullish above this morning's high at 17901 (more bullish above its November 3rd high at 17978) and bearish below a projection near 17525 (below which I would have a difficult time interpreting the pullback pattern as bullish). It has been struggling with its broken uptrend line from October 2011 - October 2014 and its downtrend line from May-November, both of which cross today near 17900 and today's high. It could literally go either way from here and it's very likely going to be this week's news events that propel the move. Be careful of the whipsaws in between the key levels but follow the break of one of them.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,978
- bearish below 17,525

The techs were the stronger indexes this morning but the selling brought them back down and into the red and although the candles are small on the Nasdaq daily chart, one could argue the two bearish engulfing candlesticks this week (Monday and today) are telling us rallies are being used to sell into. The bearish divergences evident on the oscillators as the November 3rd highs are tested provide another warning. I see upside potential for the Nasdaq to the 5300 area but only if the market gets a strong positive reaction to this week's news. A drop below its November 24th low at 5050 would be a strong sign the top is already in place.

Nasdaq Composite, COMPQ, Daily chart

Key Levels for COMPQ:
- bullish above 5163
- bearish below 5050

The RUT has been the more bullish index since the November 16th low (after languishing for much of the bounce off the August low) and as mentioned earlier, it appears traders were front-running the expected December rally (playing the seasonal pattern). But like its big brothers, it has been struggling with its broken uptrend line from October 2011 - October 2014. In fact its struggle the past four trading days is its 3rd attempt since September to get through the trend line. One could argue we now have a topping pattern referred to as a 3-drives-to-a-high pattern (September, November and now). If it can break through resistance, which includes today's high at 1205 and then price-level S/R near 1213 and its 200-dma at 1214, we'd have a bullish breakout. But at the moment it's a bearish setup for a topping pattern that would be confirmed with a drop below its November 16th low near 1150. Watch the whipsaws in between.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1215
- bearish below 1150

Watching the Treasury market, in an attempt to learn what the bond market thinks central banks will or will not do and what that could mean to buying/selling in Treasuries. This whole year has really been nothing more than a big, but contracting, sideways consolidation and that might not change for another month or two. The TNX (10-year yield) daily chart below shows the possibility for a continuation into January in a sideways triangle before heading lower early next year. This sideways triangle is within a longer-term downtrend and therefore fits as a continuation pattern. If TNX drops below 2% I'll turn more bearish sooner whereas a rally above its November 9th high at 2.377% would turn me bullish. At the moment it has found support at its 50- and 200-dma's, at 2.15% and 2.16% resp., but I think it will head down to the bottom of its triangle, which is the uptrend line from January-August and is currently near 2.04%.

10-year Yield, TNX, Daily chart

Following up on last week's update on the TRAN, I had mentioned the high on November 20th was a good fit for the completion of an ascending triangle for the bounce correction off its August low. The little throw-over above the top of the triangle, followed by a close inside the triangle, produced a sell signal. That signal would be confirmed with a drop below the bottom of the triangle, which is the uptrend line from August 24th and today it poked below it but closed above it, currently near today's closing price at 8030. Trendline support will probably be good for at least a bounce and then watch for what follows. Another rally above the November 20th high at 8358 would be a bullish breakout but a bounce and then drop below today's low at 7994 would be bearish, confirmed with a break below its November 16th low at 7921. It has been weaker than the DOW for a long time and it could be the canary index if it continues lower.

Transportation Index, TRAN, Daily chart

The U.S. dollar popped up this morning and made another new high, coming very close to its March high at 100.78 with a high at 100.54. I have a price projection for the 3-wave move up from August at 100.48, which is where the 2nd leg up is 162% of the 1st leg. That projection was achieved today and the rally since November 12th has been very choppy, forming a small rising wedge as shown on the daily chart below. This is typically an ending pattern and with the achievement of the price target followed by a strong intraday reversal I think there's a good chance the dollar is now ready to reverse back down. The intermediate pattern calls for a decline back down to its August low as part of a larger sideways consolidation pattern into 2016 (before heading higher). The more immediate bullish pattern calls for a multi-week choppy consolidation before pressing higher in January. Both patterns suggest a pullback but depending on which larger pattern is playing out we're looking for either a choppy consolidation or something a little stronger to the downside. Each suggests the dollar is not going to rally following either the ECB announcement tomorrow or expected Fed action, which suggests the market has either already priced in an ECB QE increase or the ECB will disappoint. The euro is heavily shorted right now and it could be ready for a short squeeze.

U.S. Dollar contract, DX, Daily chart

The euro shows a high concentration of shorts while the U.S. dollar is just the opposite. If the dollar is ready for at least a pullback we should see the commodities finally bottom and start at least a bounce. That includes gold and as I've been saying for the past couple of weeks, while I'm bearish longer-term for gold I think it's setting up for a bounce before it heads lower. And the COT (Commitment of Traders) report shows it's likely ready for a bounce. The chart below was put together by Tom McClellan (he does a great job showing comparisons) and it clearly shows when you don't want to be trading against the big commercial gold traders. They are almost always on the other end of hedge funds and retail traders (which includes most fund managers).

Gold COT vs. gold price, Weekly chart courtesy mcoscillator.com

The chart shows how short the commercial traders have been during past rallies and I suspect we'll see the same thing again. But by the same token, they get less short (they're almost always hedged somewhat) when gold has been sold off, as it is currently. At the moment these traders at the least net short than they've been in the past two years. Gold looks ripe for a bounce (to another lower high is what I'm projecting). I show an expected rally on my weekly chart, perhaps up to price-level S/R near 1142 where it crosses the top of its down-channel in mid-January. We could see a little more downside, maybe 1140-1145, but I think betting on the downside in gold right now is a risky bet. I'd rather start looking to nibble on some long positions for the expected bounce. Trading the gold miners, or the GDX, could get an even better return.

Gold continuous contract, GC, Weekly chart

Oil continues to struggle to get off the $40 mat and it could drop down to test its November 20th low at 39 but with bullish divergence and an expectation for the dollar to start a pullback/decline I think there's a good chance oil will finally be able to get off the mat and rally up to the $52 area as part of a larger bearish consolidation pattern.

Oil continuous contract, CL, Daily chart

Today's ADP employment report showed +217K jobs added, vs the 185K the market expected and an improvement over November's 196K (revised higher from 182K). This has some speculating that Friday's NFP report will come in stronger than the expect 208K, which would be a decline from November's 271K. We still have a busy week ahead of us for economic reports but in reality the only two things the market is interested in are the ECB QE announcement on Thursday and the NFP report Friday morning. It could produce some wild swings in the market.

Economic reports

Conclusion

The stock market has been rallying recently in anticipation of more drug money from the ECB and Mario Draghi's promise to do more of "whatever it takes," whatever that means. We'll find out tomorrow and any further money printing from the ECB could ignite a continuation of the rally. The one thing to be careful about is the possibility that the anticipatory rally might have already been baked into the cake and now it's time to eat it. Buy the rumor, sell the news.

Friday's NFP report could have just as large an impact on the market but the problem there is trying to figure out how the Fed might react and then how the market might react to the Fed's reaction. It makes my head hurt so I'll simply lie low and react to the market's moves, take my little bit of cheese while avoiding the cat and then scurry back into my hole. And if there are too many cats running around I'll just stay in my hole and wait for it to quiet down. The beauty of what we do is that the market is always there and we're not forced to trade when we don't want to. Wait for the next bus with a prettier bus driver (or a hunkier one for you ladies) to come by and pick you up. It could get wild in the next couple of days so trade safe or stand aside and let the dust settle.

Be sure to take advantage of the end-of-year special for subscription renewals. I firmly believe we are going to have a wild year ahead of us and while I'm bearish for 2016, there will be plenty of trading opportunities in both directions. By the same token, being on the wrong side of a wild swing can make for a very bad day (e.g., bear market rallies can destroy your account if you're on the wrong side). One good trade, or a save from a significant loss, will more than cover the cost of a subscription and often it's just good to read opinions to help you form your own. That's the beauty of the educational effort made by the various OIN writers. We might not be right in our calls but hopefully we give you some things to think about. A second (third, fourth) set of eyeballs watching the market with you can be extremely valuable.

Annual End of Year Subscription Special

It is that time of year again when we offer the best prices of the year on a package of our top newsletters. If you have been a subscriber for several years you know this is the best price and best deal of the year.

Please follow the link below to see for yourself the EOY subscription special for 2016. You will not be disappointed!

Good luck in the coming days and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Plays

Bullish Breakout In Progress

by James Brown

Click here to email James Brown


NEW BULLISH Plays

Netgear Inc. - NTGR - close: 45.11 change: +0.43

Stop Loss: 43.25
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 02, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 468 thousand
New Positions: Yes, see below

Company Description

Trade Description:
Shares of NTGR have delivered an impressive reversal in the last couple of months. Analysts believe the company is poised to carve out its niche of the Internet of Things (IoT). Meanwhile new products have helped NTGR's retail business soar.

NTGR is in the technology sector. According to the company, "NETGEAR is a global networking company that delivers innovative products to consumers, businesses and service providers. The Company's products are built on a variety of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-use. The product line consists of wired and wireless devices that enable networking, broadband access and network connectivity. These products are available in multiple configurations to address the needs of the end-users in each geographic region in which the Company's products are sold. NETGEAR products are sold in approximately 39,000 retail locations around the globe, and through approximately 31,000 value-added resellers. The company's headquarters are in San Jose, Calif., with additional offices in approximately 25 countries."

Shares of NTGR are up +57% from their 2015 lows near $28.50. Most of that was thanks to a +40% surge in the month of October. That was due to a strong Q3 earnings report.

Wall Street was expecting Q3 earnings of $0.51 a share on revenues of $322 million. NTGR beat estimates on both counts. Earnings were $0.67 a share. Revenues fell -3.2% but came in at $342 million. Their operating margin surged from 7.1% in Q2 to 10.3% in Q3.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented, "Our financial results for the third quarter of 2015 exceeded expectations, driven by strength in North America and a robust back-to-school season. Our revenue in Q3 was further augmented by higher than normal demand from our service provider customers. The Retail Business Unit had an all-time record quarter in sales, powered by our fast-growing Arlo and Nighthawk product lines. The success of both product lines continued to drive up average selling prices for NETGEAR retail products, and led to a healthy 24.9% year-over-year increase in revenue for the Retail Business Unit for Q3. We were also pleased with the sequential growth shown by the Commercial Business Unit, which was led by our switching products. With many new products in the pipeline, we see the momentum of our switching products rolling into the coming quarters. Meanwhile, we continued to closely manage the Service Provider Business Unit with a focus on profitability."

Wall Street analysts have been raising estimates since NTGR's Q3 report. The big move in the stock has generated a huge buy signal on the point & figure chart, which is now forecasting a long-term target at $77. The last few weeks have seen NTGR consolidate sideways under the $45.00 area. This is significant since $45.00 (actually $45.31) was the all-time high from July 2011. A breakout past resistance at $45.00 is in progress. Today's intraday high was $45.38. Tonight we are suggesting a trigger to launch bullish positions at $45.55.

Trigger @ $45.55

- Suggested Positions -

Buy NTGR stock @ $45.55

- (or for more adventurous traders, try this option) -

Buy the JAN $45 CALL (NTGR160115C45) current ask $1.65
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 Retreat On Weak Oil And Economic Data

by James Brown

Click here to email James Brown

Editor's Note:
A second day of weak economic data combined with another drop in crude oil pressured the stock market on Wednesday. All of the major U.S. indices posted losses.


Current Portfolio:


BULLISH Play Updates

Autodesk, Inc. - ADSK - close: 64.55 change: -0.17

Stop Loss: 61.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 01, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 3.5 million
New Positions: Yes, see below

Comments:
12/02/15: ADSK quietly traded sideways beneath resistance near $65.00. I don't see any changes from last night's new play description. Our suggested entry trigger is $65.25.

Trade Description: December 1, 2015:
It has been a bumpy ride for ADSK investors this year. The company is in the middle of a transition from selling perpetual software licenses to selling subscriptions. It's a move that mirrors larger rival Adobe Systems's (ADBE) transition to a subscription model.

If you're not familiar with ADSK they are in the technology sector. According to the company, "Autodesk, Inc., is a leader in 3D design, engineering and entertainment software. Since its introduction of AutoCAD software in 1982, Autodesk continues to develop the broadest portfolio of 3D software for global markets. Customers across the manufacturing, architecture, building, construction, and media and entertainment industries-including the last 19 Academy Award winners for Best Visual Effects-use Autodesk software to design, visualize, and simulate their ideas before they're ever built or created. From blockbuster visual effects and buildings that create their own energy, to electric cars and the batteries that power them, the work of our 3D software customers is everywhere you look."

Year to date the stock is up +7.7%. Yet ADSK is up +53% from its October 2015 low. What's driving the rally? It's certainly not revenue growth. The company tends to beat Wall Street's bottom line earnings estimates but revenues have been soft. The company has lowered their guidance multiple times this year.

Their most recent earnings report was November 19th. ADSK reported Q3 results of $0.14 a share. That beat expectations. Revenues fell -2.9% to $600 million. Management lowered their Q4 guidance. Yet they raised their 2016 outlook for the first time in several months. The improved 2016 outlook certainly helped. There was a brief sell-off in the stock (Nov. 20th) but ADSK quickly recovered.

One of the main reasons ADSK has performed so well lately is the market's hope that two major activists investors will do something to unlock more value. Eminence Capital owns a 5.8% stake in ADSK. Sachem Head Capital recently disclosed at 5.7% stake. The two activist funds have teamed up together (a combined stake of 11.5%). Expectations that these activists will drive change in ADSK has fueled a significant rally.

Today shares of ADSK have rallied toward major resistance at the $65.00 level. A breakout here would reaffirm that the bullish trend is still intact. The point & figure chart is bullish and forecasting a long-term target at $103. We want to hop on board if ADSK can break through the $65.00 level. Tonight we are suggesting a trigger to launch positions at $65.25. The stock can be somewhat volatile so I am suggesting small positions to limit risk.

Trigger @ $65.25 *small positions to limit risk*

- Suggested Positions -

Buy ADSK stock @ $65.25

- (or for more adventurous traders, try this option) -

Buy the JAN $67.5 CALL (ADSK160115C67.5)

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


Eaton Corp. - ETN - close: 57.13 change: -1.32

Stop Loss: 56.55
Target(s): To Be Determined
Current Gain/Loss: -1.6%
Entry on November 25 at $58.05
Listed on November 24, 2015
Time Frame: Exit prior to earnings in February
(option traders exit prior to January expiration)
Average Daily Volume = 3.8 million
New Positions: see below

Comments:
12/02/15: Ouch! ETN erased the prior week's worth of gains with a -2.25% decline today. Shares dipped toward $57.00 before starting to pare their losses.

No new positions at this time.

Trade Description: November 24, 2015:
It has been a challenging year for ETN. Yet the action in the stock over the last few months is starting to look like a significant bottom.

ETN is in the industrial goods sector. 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 99,000 employees and sells products to customers in more than 175 countries."

The company has lowered its guidance multiple times this year. ETN is dealing with weaker demand overseas. The strong U.S. dollar makes this worse. The company is forecasting at -5% hit to revenues due to negative currency headwinds.

ETN's most recent earnings report was October 30th. They missed the bottom line estimate by a penny. Revenues fell -9% to $5.2 billion, also below estimates. The company's CEO commented on their outlook, "As we begin to plan for 2016, it is apparent that markets are likely to remain soft. To deal with such weak markets, we will be expanding our 2016 restructuring program. We had been planning on this second restructuring program, in addition to the $145 million program we announced in the second quarter of 2015, to be on the order of $50 million to $60 million, but in light of current market weakness we are expanding the program to between $90 million and $100 million."

These restructuring efforts are expected to generate almost $330 million in cost savings over the 2015-2016 time frame. The stock rallied on this earnings report and news about its restructuring plans. After plunging from the mid $70s in May to the $50 level this past fall shares seem to have found a bottom.

The market is always looking forward. It appears investors believe the worst may already be behind ETN. That could explain why investors have begun buying the dips. Shares now have a bullish pattern of higher lows and higher highs. The point & figure chart has turned positive and is forecasting at $69.00 target. ETN does have short-term resistance in the $57.80 area. We want to buy a breakout. Use a trigger to launch bullish positions at $58.05.

- Suggested Positions -

Long ETN stock @ $58.05

- (or for more adventurous traders, try this option) -

Long JAN $60 CALL (ETN160115C60) entry $0.90

12/01/15 new stop @ 56.55
11/25/15 triggered @ $58.05
Option Format: symbol-year-month-day-call-strike


FMC Corp. - FMC - close: 41.14 change: -0.83

Stop Loss: 39.85
Target(s): To Be Determined
Current Gain/Loss: -4.4%
Entry on November 25 at $43.05
Listed on November 18, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 1.6 million
New Positions: see below

Comments:
12/02/15: Our FMC trade could be in trouble. The stock lost another -1.9% today. The two-day decline has erased the prior week and a half worth of gains. Shares look headed for the $40.00 level.

No new positions at this time.

Trade Description: November 18, 2015:
Shares of FMC have been struggling for a couple of years. The stock peaked near $83.00 in early 2014. Since then FMC traded at a low near $32.60 in late September this year. FMC's performance over the last couple of months looks like the stock has bottomed.

FMC is in the basic materials sector. According to the company, "For more than a century, FMC Corporation has served the global agricultural, industrial and consumer markets with innovative solutions, applications and quality products. FMC acquired Cheminova in April of 2015. Pro forma revenue totaled approximately $4.5 billion in 2014. FMC employs approximately 6,600 people throughout the world and operates its businesses in three segments: FMC Agricultural Solutions, FMC Health and Nutrition and FMC Lithium."

The earnings picture has been disappointing over the last several months. The company reported its Q1 results on May 5th and missed on both the top and bottom line. Management lowered their guidance. FMC's Q2 results were not much better with the company missing analysts' estimates on both the top and bottom line again.

On October 12th FMC warned that Q3 earnings would take a hit due to currency weakness in Brazil. Here's an excerpt from the company's press release, "FMC Corporation (FMC) today announced that, due to the recent rapid devaluation of the Brazilian real, the company is reducing third-quarter and full-year outlook for its Agricultural Solutions segment... A rapid devaluation of the Brazilian real, which depreciated over 50 percent versus the U.S. dollar in the past 12 months, and over 25 percent versus the U.S. dollar during the third quarter alone, has created significant headwinds that will continue to impact Agricultural Solutions segment earnings in the second half of 2015."

Shares of FMC plunged on this news from $37.50 to $35.00 but investors bought the dip. Earnings came out on October 28th. After warning in mid October their final results were above expectations. Q3 earnings fell from 72 cents a year ago to 42 cents but that beat the 38-cent estimate. Revenues were up +1.4% to $830.7 million, which was also above estimates. FMC rallied on this report.

Investors bought the recent dip (last week) and since then FMC has been showing relative strength. The rally has produced a triple-top breakout buy signal on FMC's point & figure chart, which now projects a $57.00 target. The relative strength continued today with a +2.6% gain and a breakout past short-term resistance at $43.00 and its 100-dma.

It's starting to look like all the bad news has been priced in and investors are betting on a turnaround in the company. The stock's recent rallies have been fueled with strong volume, which is normally a good sign. Tonight we are suggesting a trigger to launch bullish positions at $43.55. (Note: FMC is up five days in a row. Patient investors may want to wait for a dip before initiating new positions instead of our trigger at $43.55).

- Suggested Positions -

Long FMC stock @ $43.05

- (or for more adventurous traders, try this option) -

Long JAN $45 CALL (FMC160115C45) entry $1.20

11/25/15 triggered @ $43.05
11/24/15 adjust entry trigger from $43.55 to $43.05
Option Format: symbol-year-month-day-call-strike


Microsoft Inc. - MSFT - close: 55.21 change: -0.01

Stop Loss: 53.20
Target(s): To Be Determined
Current Gain/Loss: +1.1%
Entry on November 04 at $54.60
Listed on November 03, 2015
Time Frame: 6 to 8 weeks.
Average Daily Volume = 35.4 million
New Positions: see below

Comments:
12/02/15: MSFT rallied to new highs and almost tagged the $56.00 level before giving back all of its intraday gains. Shares settled virtually unchanged today.

No new positions at this time. Let's see if broken resistance at $55.00 will hold as new support.

Trade Description: November 3, 2015:
MSFT is more than just a software company. MSFT is in the technology sector. It is considered part of the business software industry. According to the company, "Microsoft is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more."

The company is run under three segments. They have their productivity and business processes segment. This includes commercial office software, personal office software, and more. One of their fastest growing segments is MSFT's Intelligent Cloud business, which includes their server software and enterprise services. Then they have their "More Personal Computing" segment. This includes their Windows operating software, MSN display advertising, Windows phones, smartphones, tablets, PC accessories, Internet search, and their Xbox platform.

The stock has been dead money for almost a year. MSFT peaked near round-number resistance at $50.00 back in November 2014. Shares channeled sideways between support at $40 and resistance at $50 for months. That changed last month.

MSFT reported its 2016 Q1 results on October 22nd. Analysts were expecting a profit of $0.59 a share on revenues of $21.04 billion. MSFT beat both estimates with a profit of $0.67 a share. Revenues came in at $21.66 billion. Their Intelligent Cloud segment saw sales rise +8% but it was actually +14% on a constant currency basis.

Shares of MSFT soared the next day with a surge to 15-year highs. The big rally is based on investors' belief that MSFT and its relatively new management is successfully transitioning away from declining PC sales and moving quickly towards the cloud (and mobile).

Normally I would hesitate to buy a stock like MSFT after a big gap higher. Too often stocks tend to fill the gap. However, shares of MSFT have been able to levitate sideways in the $52.50-54.50 zone as traders keep buying the dips. Odds are growing we could see MSFT rally toward its all-time highs near $60.00 a share from December 1999. The big gain in October produced a buy signal on the point & figure chart, which is now forecasting a long-term target of $82.00. Tonight we are suggesting a trigger to launch bullish positions at $54.60.

- Suggested Positions -

Long MSFT stock @ $54.60

- (or for more adventurous traders, try this option) -

Long 2016 JAN $55 CALL (MSFT160115C55) entry $1.54

12/01/15 new stop @ $53.20
11/04/15 triggered @ $54.60
Option Format: symbol-year-month-day-call-strike


Paychex, Inc. - PAYX - close: 53.91 change: -0.24

Stop Loss: 52.45
Target(s): To Be Determined
Current Gain/Loss: +1.4%
Entry on November 11 at $53.15
Listed on November 09, 2015
Time Frame: Exit PRIOR to earnings in mid December
Average Daily Volume = 2.3 million
New Positions: see below

Comments:
12/02/15: This morning PAYX announced they had acquired Advance Partners, "a leading provider of integrated financial, operational, and strategic services to support independent staffing firms." Terms were not disclosed.

Shares of PAYX saw a midday rally but the stock gave back all of its gains by the close and settled with a -0.4% decline on the day.

More conservative traders may want to raise their stop loss closer to the 20-dma near $53.50. No new positions at this time.

Trade Description: November 9, 2015:
Last week the Bureau of Labor Statistics announced that the nonfarm payroll (jobs) report for October showed a gain of +271,000. That was way above expectations. The separate household survey showed a gain of +320,000 jobs. This pushed the unemployment rate down to 5.0%, the lowest reading since early 2008. Many believe that the U.S. has now reached full employment. Do you know what that means? It means more Americans working. That means more paychecks to be delivered and more HR services to be handled.

PAYX is in the services sector. According to the company, "Paychex, Inc. (PAYX) is a leading provider of integrated human capital management solutions for payroll, HR, retirement, and insurance services. By combining its innovative software-as-a-service technology and mobility platform with dedicated, personal service, Paychex empowers small- and medium-sized business owners to focus on the growth and management of their business. Backed by more than 40 years of industry expertise, Paychex serves approximately 590,000 payroll clients across 100 locations and pays one out of every 15 American private sector employees."

PAYX earnings have been slowly and consistently creeping higher. Revenues have been rising about 8% the last couple of quarters. This company's most recent earnings report was September 30th. They beat estimates on both the top and bottom line, which helped fuel another rally in the stock.

PAYX management has been very consistent about paying a dividend. PAYX now sports a dividend yield of 3.7%. That could draw more and more income investors looking for a safe company to buy.

A recent article on Forbes.com, by Brett Owens, noted that "demand for payroll outsourcing (60% of Paychex's latest quarterly revenue) will grow at a 3.9% compound annual rate between 2013 and 2018. HR outsourcing (40% of revenue) is on a stronger tear, with a projected 12.3% yearly gain in the same period" (source)

We like PAYX's relative strength. Shares are up +14.2% year to date. That compares to a +1.0% gain in the S&P 500 and a +7.6% rally in the NASDAQ. The NASDAQ composite is up +18% from its August low but PAYX is up +26.7%. The rally in PAYX has produced a buy signal on the point & figure chart, which is also forecasting a long-term target at $72.00.

On Friday PAYX found short-term support near $53.00. Tonight we are suggesting a trigger to launch bullish positions at $53.15.

- Suggested Positions -

Long PAYX stock @ $53.15

- (or for more adventurous traders, try this option) -

Long JAN $55 CALL (PAYX160115C55) entry $0.80

11/11/15 triggered @ $53.15
Option Format: symbol-year-month-day-call-strike


U.S. Silica Holdings - SLCA - close: 21.99 change: +0.06

Stop Loss: 19.20
Target(s): To Be Determined
Current Gain/Loss: +2.0%
Entry on December 01 at $21.55
Listed on November 30, 2015
Time Frame: 8 to 12 weeks
(option traders exit prior to January expiration)
Average Daily Volume = 2.2 million
New Positions: see below

Comments:
12/02/15: Wednesday proved to be a bumpy session for SLCA. Shares saw a lot of back and forth but managed to eke out a gain (+0.2%) versus the market's widespread decline.

I would still consider new positions at current levels.

Trade Description: November 30, 2015:
The crash in oil prices to six year lows has crushed the oil and gas industry. It has been especially hard on some of the oil service stocks. SLCA is in that group but the company and the stock is showing signs of a bottom.

SLCA is in the basic materials sector. According to the company, "U.S. Silica Holdings, Inc., a member of the Russell 2000, is a leading producer of commercial silica used in the oil and gas industry, and in a wide range of industrial applications. Over its 115-year history, U.S. Silica has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 260 products to customers across our end markets. The Company currently operates nine industrial sand production plants and eight oil and gas sand production plants. The Company is headquartered in Frederick, Maryland and also has offices located in Chicago, Illinois, Houston, Texas and Shanghai, China."

What's great about SLCA versus many of its peers is SLCA's diversity. They do sell a lot of fracking sand to the oil and gas industry but they also sell to a wide range of industries. The company also has one of the strongest balance sheets among its peers.

Year over year results have been rough. SLCA last reported earnings on October 27th. Q3 results were a loss of ($0.03) a share. That was a penny worse than expected. Revenues were down -35% to $155.4 million, which was just below the $155.7 million estimate.

It looks like an ugly earnings report and yet shares of SLCA soared more than 20% the next day. The company said their overall tons of sand sold was down -12% from a year ago but up +16% from the second quarter. Furthermore SLCA management said they were selling more sand to the oil and gas business and essentially stealing market share from competitors.

The outlook for crude oil is still muddy but it looks like shares of SLCA have found a bottom. The last few weeks have developed a trend of higher lows. The point & figure chart is still bearish but a rally above $22.00 would generate a new triple-top breakout buy signal. Plus a breakout past resistance could see some serious short covering. The most recent data listed short interest at 37% of the 49.4 million share float.

SLCA is going to present at the Cowen & Co. Energy Conference on December 1st and again at the Wells Fargo Energy Symposium on December 9th. If investors like what they hear these events could be a catalyst to spark the next leg higher.

Currently shares of SLCA appear to have short-term resistance in the $21.40 area. Tonight we are suggesting a trigger to launch bullish positions at $21.55.

- Suggested Positions -

Long SLCA stock @ $21.55

- (or for more adventurous traders, try this option) -

Long JAN $22.50 CALL (SLCA160115C22.5) current ask $1.65

12/01/15 triggered @ $21.55
Option Format: symbol-year-month-day-call-strike


Total System Services, Inc. - TSS - close: 55.98 change: -0.39

Stop Loss: 54.85
Target(s): To Be Determined
Current Gain/Loss: +1.5%
Entry on November 21 at $55.15
Listed on November 19, 2015
Time Frame: 6 to 9 weeks
Average Daily Volume = 1.4 million
New Positions: see below

Comments:
12/02/15: TSS followed the market lower this afternoon and essentially erased yesterday's gains. If this dip continues I'd look for support near $55.00.

No new positions at this time.

Trade Description: November 19, 2015:
TSS must be doing something right. Earnings and revenues have grown every quarter for the last four quarters. The stock has shown significant relative strength with TSS up +60% year to date.

TSS is part of the financial sector. According to the company, "As one of the world's largest payment solutions and services companies, TSYS® believes payments should revolve around people, not the other way around. Since we got our start in the payments space more than 30 years ago, we have evolved from a supporting role servicing several hundred bank card issuers and bank acquirers to directly touching hundreds of thousands of merchants and millions of consumers.

TSYS is a global, publicly traded company with operations in more than 80 countries, including many of the world's most high-growth emerging markets. We provide electronic payment services to financial institutions and companies around the globe with a broad range of issuing and acquiring payment technologies, including consumer, credit, debit, healthcare, loyalty, prepaid, chip and mobile payments."

As I mentioned earlier the earnings picture has been very healthy. TSS has beaten Wall Street's earnings and revenue estimate the last four quarters in a row. Earlier in the year they announced a 20 million share stock buyback. Plus management has raised guidance the last two quarters in a row.

TSS' most recent earnings report was October 27th. Wall Street was expecting a profit of $0.59 a share on revenues of $668 million. TSS announced that earnings were up +40% from a year ago to $0.78 a share. Revenues were up +15% to $708 million. The company management said, "we are raising our guidance range for revenues before reimbursables to 12-13%, up from the previous range of 10-12%, and our adjusted earnings per share (EPS) guidance range to 24-26%, up from the previous range of 15-17%."

You can see how the stock surged the next day on its strong results and bullish outlook. Since then shares of TSS have been consolidating sideways but it looks like that consolidation is almost over. Shares have rallied back toward round-number resistance at $55.00. Currently the point & figure chart is bullish and forecasting at $65.00 target. Tonight we are suggesting a trigger to launch bullish positions at $55.15.

- Suggested Positions -

Long TSS stock @ $55.15

- (or for more adventurous traders, try this option) -

Long FEB $55 CALL (TSS160219C55) entry $2.60

12/01/15 new stop @ 54.85
11/20/15 triggered @ $55.15
Option Format: symbol-year-month-day-call-strike


Yelp Inc. - YELP - close: 31.39 change: +1.08

Stop Loss: 27.90
Target(s): To Be Determined
Current Gain/Loss: +13.1%
Entry on November 18 at $27.75
Listed on November 17, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 3.5 million
New Positions: see below

Comments:
12/02/15: YELP shot higher this morning. Shares managed to ignore most of the market's weakness today and YELP outperformed by closing with a +3.5% gain on the session.

Readers may want to raise their stop loss. No new positions at this time.

Trade Description: November 17, 2015:
It has been a rough ride for YELP investors. The stock is down -50% year to date and off -72% from its all-time highs set in 2014. Yet the action lately is starting to look like all the bad news is priced in.

YELP is considered part of the technology sector. According to the company, "Yelp Inc. (http://www.yelp.com) connects people with great local businesses. Yelp was founded in San Francisco in July 2004. Since then, Yelp communities have taken hold in major metros across 31 countries. Approximately 83 million unique visitors visited Yelp via their mobile device1, including approximately 18 million unique devices accessing the Yelp app2, and approximately 79 million unique visitors visited Yelp via a desktop computer3 on a monthly average basis during the second quarter of 2015. By the end of the same quarter, Yelpers had written approximately 83 million rich, local reviews, making Yelp the leading local guide for real word-of-mouth on everything from boutiques and mechanics to restaurants and dentists."

The earnings picture has struggled this year. YELP's Q1 and Q2 reports both missed analysts' estimates. YELP also guided lower each time. Then there was news in July that YELP had given up on trying to sell itself because they couldn't find a buyer.

The revenue picture improved in the third quarter. YELP reported its Q3 results on October 28th. Earnings of $0.03 a share missed estimates of $0.06. Yet revenues were up +40% to $143.6 million, which was better than expected. Management then raised their 2015 guidance.

On November 13th shares of YELP received a big upgrade from RBC Capital Markets who raised their outlook to "outperform" and upped their price target from $34 to $42. Meanwhile recent news that InterActiveCorp (IACI) had offered to buy Angie's List (ANGI) might restart the M&A speculation on YELP since ANGI and YELP are in similar businesses.

Technically shares of YELP definitely appear to have formed a bottom over the last three months. The rally from its October lows has generated a buy signal on the point & figure chart that is forecasting a long-term target of $37.00. Right now YELP is flirting with a breakout past its early August peak. A breakout could spark some short covering. The most recent data listed short interest at 22% of the 60.8 million share float.

We are listing YELP as an aggressive, higher-risk bullish trade. The stock can be volatile so readers may want to limit their position size. Tonight we are suggesting a trigger to launch positions at $27.75.

*small positions to limit risk*- Suggested Positions -

Long YELP stock @ $27.75

- (or for more adventurous traders, try this option) -

Long 2016 JAN $30 CALL (YELP160115C30) entry $1.47

11/21/15 new stop @ 27.90
11/18/15 triggered @ $27.75
Option Format: symbol-year-month-day-call-strike




BEARISH Play Updates

Bed Bath & Beyond Inc. - BBBY - close: 53.74 change: -0.14

Stop Loss: 56.15
Target(s): To Be Determined
Current Gain/Loss: -2.7%
Entry on November 24 at $52.35
Listed on November 23, 2015
Time Frame: Exit PRIOR to earnings in January
Average Daily Volume = 2.2 million
New Positions: see below

Comments:
12/02/15: I couldn't find any news to explain the gap higher in shares of BBBY this morning. Fortunately the rally faded beneath the $55 level and shares closed back in the red.

No new positions at this time.

Trade Description: November 23, 2015:
Retail stocks have had a rough time this year. Wall Street has been concerned about consumer spending. Plus there is the constant pressure from online rivals chipping away at margins and traffic from brick and mortar stores. The XRT retail ETF is down -7.1% year to date but it's off -12.4% from its 2015 highs. BBBY has underperformed its peers. This stock is down -30% year to date and down -33% from its 2015 highs. Tonight the bear market in BBBY looks ready to accelerate lower.

BBBY is in the services sector. According to the company, "Founded in 1971, Bed Bath & Beyond Inc. and subsidiaries (the 'Company') is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in-store, online or through a mobile device. The Company has the developing ability to have customer purchases picked up in-store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. In addition, the Company operates Of a Kind, an e-commerce website that features specially commissioned, limited edition items from emerging fashion and home designers. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, healthcare and other industries. Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond."

The earnings outlook has been challenging for BBBY. In April 2015 they reported their Q4 results. Earnings were inline but revenues missed estimates and management guided lower for Q1. Jump to June and BBBY reported earnings that missed estimates (even after guiding lower). Revenues were only up +3% and management guided lower again.

The company reported their Q2 results on September 24th. Earnings were up +3.4% from a year ago to $1.21 a share. That was in-line with Wall Street's lowered expectations. Revenues only rose +1.7% and missed estimates. Comparable store sales fell from +2.2% in Q1 to +0.7% in Q2. Management offered another soft outlook for current quarter. BBBY tried to soften the bad news by announcing an additional $2.5 billion stock buyback to follow their current buyback program, which had dwindled to $305 million.

Technically it looked like BBBY had broken out past its multi-month bearish trend in early November. Shares had rallied above some key resistance trend lines and above resistance at the 50-dma and the $60.00 level. Unfortunately for bullish investors this proved to be a trap. A few days later BBBY broke down again. Shares plunged to new multi-year lows. The point & figure chart is now forecasting at $45.00 target.

Multiple analysts have suggested that consumer spending this holiday season will disappoint. It looks like BBBY traders are not sticking around to find out if Wall Street's sour outlook is correct or not. We think BBBY's bearish momentum continues. The stock currently has short-term support near $52.50. We are suggesting a trigger to launch bearish positions at $52.35.

- Suggested Positions -

Short BBBY stock @ $52.35

- (or for more adventurous traders, try this option) -

Long JAN $50 PUT (BBBY160115P50) entry $1.68

11/24/15 triggered @ $52.35
Option Format: symbol-year-month-day-call-strike


Leucadia National Corp. - LUK - close: 18.00 change: +0.26

Stop Loss: 18.75
Target(s): To Be Determined
Current Gain/Loss: -1.7%
Entry on November 30 at $17.70
Listed on November 28, 2015
Time Frame: 6 to 9 weeks
Average Daily Volume = 2.1 million
New Positions: see below

Comments:
12/02/15: This morning Bloomberg.com published an article discussing Oppenheimer's LUK upgrade from yesterday. This might be the catalyst behind today's spike higher in LUK at the open. Shares traded up to $18.18 before settled on the $18.00 level.

This display of relative strength is ill timed for our bearish play. No new positions at this time.

Trade Description: November 28, 2015:
Investors appear to have soured on shares of LUK. The stock is down -20% year to date but it's off -29% from its July 2015 highs. LUK just ended the week at new five-year lows.

LUK is considered part of the financial sector. One of their biggest businesses is their Jefferies Group investment brokerage. Jefferies is only one in a long list of companies that LUK owns. You could argue LUK is more of a holding company or a conglomerate and a very diverse one at that.

Here's a list of some of LUK's businesses:
Berkadia, a full-service mortgage bank
FXCM, an online foreign exchange trading platform (NYSE:FXCM)
HomeFed, a real estate developer (65% owned by LUK)
Foursight Capital, an Auto loan originator and servicer
Leucadia Asset Management, a diversified alternative asset management platform
Folger Hill, a multi-manager discretionary long/short equity hedge fund platform
Topwater Capital, a highly-scalable multi-manager and multi-strategy liquid securities fund
Jefferies, a leading, client-focused global investment banking firm
Jefferies LoanCore, a joint venture between Jefferies and GIC Private Ltd (f.k.a. Government of Singapore Investment Corporation), is a finance company focused on originating and securitizing commercial mortgage loans
National Beef, a beef processing company that processes ~3 million fed cattle per year representing ~12.5% market share
HRG Group, a diversifed holiday company (NYSE: HRG) that operates in four business segments: consumer products - Spectrum Brands (NYSE: SPB, ~58% ownership); insurance - Fidelity & Guaranty Life (NYSE: FGL, ~81% ownership (1)); FrontStreet Re (100% ownership); Energy - Compass Production (~100% ownership); Asset Management (de minimis net book value).
Garcadia, 26 auto dealerships
Vitesse Energy
Juneau Energy
Linkem, a fixed wireless broadband internet provider in Italy
Conwed, a leading manufacturer of extruded, oriented and knitted plastic netting
Idaho Timber
Golden Queen (gold and silver mine)
(more details about LUK company .pdf
The earnings picture for LUK has taken a drastic turn for the worse. Their Q1 report, announced March 17th, showed earnings of $11.7 million versus $112 million a year ago. Q1 revenues were down -34%. LUK delivered similar results with their Q2 earnings, announced August 5th. Earnings per share were $0.11 compared to $1.12 a year ago. Revenues were flat at $2.84 billion. Their most recent earnings report was November 5th, 2015. LUK reported their Q3 results, which was a loss of ($0.47) a share versus a profit of $0.14 a year ago. Revenues plunged -21% to $2.36 billion. You can see why investors might be selling the stock.

Management has been trying to take advantage of their low stock price with an aggressive stock buyback program but it's not making much difference. Technically shares of LUK are in a bear market and showing significant relative weakness.

The point & figure chart is very bearish and forecasting an $11.00 target. The last few days LUK has been trying to hold short-term support near $18.00 but that appears to have failed. Tonight we are suggesting a trigger to launch bearish positions at $17.70.

- Suggested Positions -

Short LUK stock @ $17.70

- (or for more adventurous traders, try this option) -

Long MAR $18 PUT (LUK160318P18) entry $1.20

11/30/15 triggered @ $17.70
Option Format: symbol-year-month-day-call-strike


iPath S&P500 VIX Futures ETN - VXX - close: 18.68 change: +0.70

Stop Loss: None, no stop at this time.
Target(s): $16.65
Current Gain/Loss: +14.4%
2nd position Gain/Loss: +35.6%
Entry on August 25 at $21.82
2nd position: September 2nd at $29.01
Listed on August 24, 2015
Time Frame: to be determined
Average Daily Volume = 50 million
New Positions: see below

Comments:
12/02/15: The VXX dipped toward its early November lows and bounced. More conservative investors may want to take profits now.

Currently our exit target is $16.65.

No new positions at this time.

Trade Description: August 24, 2015
The U.S. stock market's sell-off in the last three days has been extreme. Most of the major indices have collapsed into correction territory (-10% from their highs). The volatile moves in the market have investors panicking for protection. This drives up demand for put options and this fuels a rally in the CBOE volatility index (the VIX).

You can see on this long-term weekly chart that the VIX spiked up to levels not seen since the 2008 bear market during the financial crisis. Moves like this do not happen very often. The VIX rarely stays this high very long.

(see VIX chart from the August 24th play description)

How do we trade the VIX? One way is the VXX, which is an ETN but trades like a stock.

Here is an explanation from the product website:

The iPath® S&P 500 VIX Short-Term Futures® ETNs (the "ETNs") are designed to provide exposure to the S&P 500 VIX Short-Term FuturesTM Index Total Return (the "Index"). The ETNs are riskier than ordinary unsecured debt securities and have no principal protection. The ETNs are unsecured debt obligations of the issuer, Barclays Bank PLC, and are not, either directly or indirectly, an obligation of or guaranteed by any third party. Any payment to be made on the ETNs, including any payment at maturity or upon redemption, depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due. An investment in the ETNs involves significant risks, including possible loss of principal and may not be suitable for all investors.

The Index is designed to provide access to equity market volatility through CBOE Volatility Index® (the "VIX Index") futures. The Index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects market participants' views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the Index. Owning the ETNs is not the same as owning interests in the index components included in the Index or a security directly linked to the performance of the Index.

I encourage readers to check out a long-term chart of the VXX. This thing has been a consistent loser. One market pundit said the VXX is where money goes to die - if you're buying it. We do not want to buy it. We want to short it. Shorting rallies seems to be a winning strategy on the VXX with a constant trend of lower highs.

Today the VXX spiked up to four-month highs near $28.00 before fading. We are suggesting bearish positions at the opening bell tomorrow. The market volatility is probably not done yet so we are not listing a stop loss yet. Our time frame is two or three weeks (or less).

- Suggested Positions -

Short the VXX @ $21.82

Sept. 2nd - 2nd position (Double Down On The September 1st Spike)

Short the VXX @ $29.01

11/07/15 adjust exit target to $16.65
11/02/15 adjust exit target to $16.50
10/19/15 add an exit target at $16.25
10/15/15 planned exit for the October puts
10/14/15 if you own the options, prepare to exit tomorrow at the close
09/02/15 2nd position begins. VXX gapped down at $29.01
09/01/15 Double down on this trade with the VXX's spike to 6-month highs
08/25/15 trade begins. VXX gaps down at $21.82
Option Format: symbol-year-month-day-call-strike