The Fed did exactly as I expected with no new stimulus but the market held its gains.

Editor's Note:

The Fed pulled the switcheroo in their statements to increase expectations for future stimulus.

In the June statement the Fed said:

The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

In today's statement they said:

The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

While those statements may look the same they took out the "closely monitor" statement and changed the text to "committee is prepared" to take further action.

For the average person that context change would be meaningless. For analysts that make a living deciphering Fed statements they believe the Fed is preparing to take immediate action, possibly as soon as Friday.

I know, that sounds like a stretch of the imagination but look at it this way. The ECB "may" pull out the big guns when they meet on Thursday. The Fed did not want to waste one of its remaining bullets if the ECB is about to use a cannon. Secondly, if the Nonfarm Payroll report on Friday shows a strong uptick in jobs then the Fed would have acted too soon and wasted that bullet.

By waiting until Friday, or more likely Monday, they get to see the ECB moves and market reaction. They also get to see the payroll report and market reaction. Then they can deliberate over the weekend, decide if action is needed and announce something on Monday when it is unexpected by most traders.

Obviously this is just analyst speculation but it was enough to keep the market from selling off after the announcement today.

I updated the stop losses on three plays and highlighted the new stops in yellow in the portfolio graphic.

Current Portfolio:


CALL Play Updates

Health Care REIT - HCN - close: 61.67 change: -0.31

Stop Loss: 61.20 (new)
Target(s): 64.75
Time Frame: exit prior to the Aug 6th earnings
New Positions: see below

Comments:
08/01/12 update: The weak market translated into a minor decline on HCN and I am going to take that as a warning and raise the stop loss to $61.20. If the ECB disappoints and the markets begin an August decline that higher stop will take us out without much damage.

FYI: The Point & Figure chart for HCN is bullish with a $70 target.

- Suggested Positions -

Long Aug $60 call (HCN1218H60) entry $1.55

Entry on July 24 at $61.15
Earnings Date 08/06/12 (confirmed)
Average Daily Volume = 1.5 million
Listed on July 23, 2012


Hess Corp. - HES - close: 47.81 change: +.64

Stop Loss: 45.35
Target(s): 49.85
Time Frame: 3 to 6 weeks
New Positions: see below

Comments:
08/01/12 update: Hess rose with crude prices as expected. We need to see a move over 48.50 to trigger new buying.

- Suggested Positions -

Long AUG $47.50 call (HES1218H47.5) Entry $1.05

- or -

Long SEP $47.50 call (HES1222I47.5) Entry $2.02

07/26/12 triggered on gap open higher at $46.65

Entry on July 26 at $46.65
Earnings Date 07/25/12
Average Daily Volume = 4.3 million
Listed on July 25, 2012


PUT Play Updates

United Rentals, Inc. - URI - close: 27.77 change: -1.13

Stop Loss: 30.55 (new)
Target(s): 23.00
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description
Comments:
08/01/12 update: We got a nice decline today as that initial support at 28.85 broke. The next challenge will be support at $27.00.

I lowered the stop loss to $30.55 and just over prior resistance.

FYI: The Point & Figure chart for URI is bearish with a long-term $17 target.

Trigger: None

Positions

Long Sep $26 PUT (URI1222U26) @ $1.25

Entry on July 30 at $ 29.70
Earnings Date 07/17/12
Average Daily Volume = 4.4 million
Listed on July 26, 2012


iShares Russell 2000 ETF - IWM - close: 78.41 change: -0.70

Stop Loss: 79.50 (new)
Target(s): 75.75
Time Frame: 2-4 weeks
New Positions: Yes, see below

Company Description
Comments:
08/01/12 update: Excellent decline as the IWM went into free fall at the close. If the ECB disappoints we could see our $75 target very quickly. Our put is now in the money.

The target is a decline to the June support at $75.

Trigger: IWM at $78.85, hit at 11:40 AM on July 39th

Positions

Long Oct $78 PUT (IWM1220V78) @ $3.26, Stop $81.25 on IWM

Entry on July 30 at $ 78.85
Average Daily Volume = 60.0 million
Listed on July 28, 2012


Akamai Technologies - AKAM - close: 35.14 change: -.05

Stop Loss: 36.75
Target(s): 32.00
Time Frame: 2-4 weeks
New Positions: Yes, see below

Company Description
Comments:
08/01/12 update: Akamai has not yet been opened. The entry trigger is a trade at $34.85. AKAM closed within 29 cents of that trigger so we are poised perfectly for a down market.

Why We Like It:
Akamai reported earnings of 43 cents last week that beat the street and raised guidance. The stock soared +25% on the news. That was on Thursday. Friday's market short squeeze failed to add any material gains to that spike BUT Monday's lackluster market also failed to produce a material decline in AKAM.

After a 25% spike well above the consolidation range of the last three months you would expect the spike to fade and profit taking appear. The raised guidance is probably what is holding shares up. However, if the Nasdaq begins to roll over on less than expected help from the ECB/Fed then profit taking could begin with a vengeance.

This is a high risk play. If we do get a dip to trigger our put entry and the market turns around the dip in AKAM could be seen as a buying opportunity.

I am looking for AKAM to retrace about half of its gains from last week if profit taking appears.

I am recommending we buy the Sept $34 put in anticipation of a possible decline to the June support at $32.

Trigger: Enter only with an AKAM trade at $34.85

- Suggested Positions -

Position: Long Sept $34 PUT (AKAM1222U34), currently $1.19

Entry on UNOPENED xx at $ xx.xx
Average Daily Volume = 3.3 million
Listed on July 30, 2012


CLOSED BULLISH PLAYS

No Closed Calls


CLOSED BEARISH PLAYS

No closed puts