Weekender for 7/30
1. Market Analysis
- Stocks surge across the board then roll over hard … except the PHLX Semiconductor Sector (SOX).
- Big intraday reversals after new breaks higher — some of the poorest upside action you can get.
- Gross Domestic Product (GDP) beats, durables beat, pending home sales fall again.
- 10-year bond yield screams higher as yield curves flatten significantly.
- Overstretched stocks start to pull back with some sharp reversals.
- Is the credit bubble starting to come home? Even if it does, the Fed will buy it off.
- Personal Consumption Expenditures (PCE) can play the spoiler … either way.
- Regardless of the data, the Fed is likely not at the point it will let the stock market fall and bond yields blast higher.
Earlier in the week, I opined the PCE release would market the point the market started to pull back from this sharp rally. DJ30 took off 200+ points, Nasdaq 200+ points on a stronger GDP with a lower PCE component, solid durables orders, passable pending home sales (really? Down 24 of 25 months?), and Meta’s earnings propelled futures higher and into the regular session open. Another good move then stocks faded to test the move into mid-morning. No issues as futures held with a short double bottom and rallied into early afternoon.
NOTE: The figures and information above are from the 7/27 report.
MARKET VIDEOS
MARKET SUMMARY
TECHNICAL SUMMARY/NEXT SESSION
NOTE: The videos are from the 7/26 report.
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2. Targets Hit
Investment House Daily:
As the market upside continued and the indices became more stretched, we were banking gains. As is often the case after strong moves, as an index or stock becomes extended on the move, you note changes. The rally turns from a solid burst higher followed by steady rises and falls over near support (typically the 10-day and 20-day exponential moving average (EMA)), to larger individual surges higher along with sharp individual drops.
The moves can be large up .. and growing on the downside. What does that show? The sellers are starting to enter the move with some profit-taking, along with the short term short sellers taking advantage of an extended move.
This past week, we saw that with DJ30 putting in an impressive 13 upside sessions before it was hit with a loss. Stocks surged Wednesday then were monkey-hammered Thursday as bond yields surged — but not before surging early in the session. A huge day of intraday volatility as well as day-to-day volatility. Central banks got the word out, the BOJ “tweaked” its yield curve control in a non-hawkish manner, bond yields fell, stocks surged again.
Well, as noted, we anticipate that increased volatility by knowing how far the indices and stocks can rally based upon the number of bounces up from the short term support following a breakout. With many of the early moves extended, we were banking gains as we did the week before.
That way, when stocks peak out a move, you are already lighter in your positions, having taking partial profits on the way up at logical resistance points after one of the upside bounces in the rally.
Kohl’s Corporation (NYSE: KSS): We banked a 15% gain in the stock, 49% gain in the options
Oceaneering International, Inc. (NYSE: OII): Banked a 10% gain in the stock, 30% gain in the options
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Rapid Profits Stock Trader:
Oil States International Inc. (NYSE: OIS): After a peak in March, OIS fell into a base, marked at the lows from May through June by an inverted head and shoulders pattern. Ever since 2009 and that low, the pullback to an inverted head and shoulders has led to strong gains for us. It still works to this day because … even as the Fed’s quantitative tightening (QT) continues, it makes liquidity available, most currently using the “emergency” banking facility.
In any event, we saw this pattern set up and OIS broke upside through the 200-day simple moving average (SMA) in late June. OIS, as if typical, faded to test that break. When the stock came up off that test we were ready.
We issued the alert via email and test to enter OIS stock when it was trading at $8.21 on the ask. From there, the stock proceeded to rebound, rallying to our target, hitting it on July 24. We issued the alert to sell the position with the stock bidding $8.98, a solid 9.38% gain. All we did was capture the move from a pullback to test the breakout from the inverted head and shoulders.
As it turned out, as anticipated, that peak high on July 24 was the top of that particular rally leg as OIS faded off that peak then gapped lower Thursday on earnings.
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3. Covered Call Options Play
Travelzoo Inc. (NYSE: TZOO) — Travelzoo Inc. is currently trading at $6.96. The Aug. 18 $7.50 calls (TZOO20230818C00007500) are currently trading at $0.10. That provides a return of about 14% if TZOO is above $7.50 by the expiration.
