My stock and option intraday comments for today focus on market direction and a handful of stocks. The weakness today in the stock markets is to be expected after yesterday’s posturing by both the President and the House. With no news on the fiscal cliff, the stock markets had to look elsewhere for market direction. The GDP came in better than expected to an annualized pace of 3.1 percent. The last revision on GDP had it pegged at 2.7 percent so this was good news.
Home sales jumped again but a lot of investors were thinking about Robert Shiller’s comments yesterday. Shiller a Yale University professor and co-creator of the Case-Shiller home-price index indicated yesterday that housing could see another downturn in 2013. Shiller appeared uneasy in the interview regarding any sustainable housing price rises into 2013 and beyond. He appeared unsure whether the bottom in the housing crisis had been reached. This weighed on investors and his comments impact could be seen yesterday and again today in the XHB ETF which is an index of home builders. The Index has had an incredible year starting the year at $17.37 and rising to $27.05 this week for a gain of 55.7%.
Initial Weekly Unemployment Claims
For those investor who follow the USA Initial Weekly Unemployment Insurance Claim market timing system, which you can read about through this link, initial claims were higher this week rising to 361,000 from 344,000 from last week. This could, as we have seen in the past, lead to some volatility in the stock markets but I do not think it is up enough this week to push the market direction lower. This has been a very accurate market timing system.
YUM Stock and McDonalds Stock
Yum Stock and McDonalds Stock were both impacted by the news out of China this morning. Two farms were closed for health concerns. These farms supplied chicken to both Yum Brands and McDonalds restaurants. I did Put Selling this morning on YUM Stock and I am waiting to see if McDonalds Stock will fall further before selling puts.
I have watched PepsiCo Stock this morning as it continues to pull back. Put premiums are not high enough to warrant Put Selling against the stock but any continued weakness will lead to some excellent opportunities.
Home Depot Stock
I am watching Home Depot Stock eagerly as I anticipate some good trades coming soon. The stock continues to cling to the Lower Bollinger Band and it is heavily oversold. Home Depot Stock has been one of the stocks I have used this year for my Put Selling With Margin Only strategy. It has been excellent.
Market Direction Portfolio
The Market Direction Portfolio is now up 12.6%. This portfolio being managed by Doug Harris using the market direction predictions to buy and sell the Ultra ETFs. The Market Direction Portfolio was started in September so 12.6% is an exceptional return. Speaking with Doug this morning, he indicated he saw no reason to believe the Market Direction Portfolio would not continue to provide the same return if it had been started in January. If it had started in January and the present returns were repeated, the Market Direction Portfolio would be up over 37%. An amazing return for a strategy largely based on after hours review of the market and minimal trading. This is a FullyInformed Members portfolio which Members can review here. To stay updated I suggest reviewing his comments each evening. When trades occur they are published to my twitter account and followed up later in the evening with FullyInformed Email updates.
Market Direction Outlook and Santa
I do not see any reason to be concerned that the market direction could take a turn for the worst. The market direction breakout of December 11 was confirmed on December 18. The overall market direction is higher and I expect we will see a Santa Claus Rally shortly to end the year. That said, remember that I am rarely 100 percent invested as I keep 30% of my entire portfolio available in cash for opportunities as they develop.
The market direction will definitely jump on any news that the fiscal cliff has been resolved but whether that can happen before the end of the year is still questionable.