Considering there were two days last week with triple digit Dow declines I am very happy about our positions and profitability. We have had a dry spell thanks to the choppy market over the last month.
We lost two positions last week for minor losses. The Prudential position was stopped out on Thursday for -28 cents when PRU dipped at the open to $62.43 with our stop at $62.45. That was the low for the week. Sometimes we see stocks zero in on stops like they had homing beacons and sometimes we see them miss a stop by only a couple cents. It is the nature of trading.
ATI hit the stop at $68.50 on Wednesday when it fell -4.60 in sympathy with the crash in the energy sector. We lost 38-cents on that position.
I am concerned we could see some further market weakness in the week ahead. I waited to write this until the futures opened on Sunday and they are down -4.50 at the open. The Eurozone debt problems escalated this weekend with protests in Greece and Spain over austerity measures. Greece will eventually restructure and Spain is too big for the EU to bail out under the current rules and loan commitments. Trouble in the EU is only going to get worse in the months ahead as Ireland, Portugal and Spain follow Greece down the austerity path.
The U.S. economy also appears to be weakening and investors are growing less interested in buying what could be the top of the market if that economic decline continues. Fed's Lockhart was out this weekend saying the economy is too weak for the Fed to end its stimulus programs. The Fed just cut its GDP forecasts and raised its inflation expectations so the term stagflation is starting to come back into use again. We are not there yet but early signs are appearing.
The earnings cycle has turned negative with the optimism and outstanding results from the early reporters turning into pessimism and lowered guidance as the stragglers line up to face the music with earnings lower than expected.
We are in that period on the calendar where there is a lack of a good reason to buy equities. All the spring enthusiasm has faded, what there was of it, and investors are looking forward to the summer doldrums and trying to decide if they want to be in stocks or in cash given all the factors in play.
Trying to find something to play this weekend is tough with oil futures expiring this week and likely to produce more volatility in the energy sector. Metals have been rocky and gold is down hard on Sunday night. I am still going to add two plays just in case the market turns around but no entries unless the qualifications are met. All new recommendations remain active unless cancelled.
Check the stops in the portfolio graphic because some have changed.
Current Position Changes
WTW - Weight Watchers $82.781 (Short Put)
WTW reported earnings last week and soared to a new high on Monday. Despite the ugly market it continued to rise and closed at a new high on Friday. This excitement has to end soon but this could be seen as a defensive play by some investors and actually find more buyers even in a weak market.
Do not enter this position unless WTW and the S&P are both positive.
Sell short WTW June $75.00 Put, currently $1.25, stop loss $77.95
Chart of WTW
LO - Lorillard Inc $111.45 (Short Put)
Lorillard posted strong earnings on April 29th then benefited from some positive court decisions in the following week. They held an investor day last week and the stock is on fire with new highs every day. The outlook for LO is great and investors appear to like the story. This is definitely a defensive stock that should continue to benefit from a weak market.
Do not enter this position unless LO and the S&P are both positive.
Sell short LO June $105.00 Put, currently $1.47, stop loss $107.50
Chart of LO
New Long Term Recommendations
New Aggressive Recommendations