Hot town, summer in the city!
Something momentous occurred last week which many vacationers may have missed if they were sitting on the beach. For the first time this century, all 3 major averages, the Dow Jones Industrials, the Nasdaq tech index and the Standard and Poor’s 500 index all closed Thursday at record high levels! The Nasdaq had been the last of the major averages to set a new high surpassing the levels last seen at the height of the tech bubble. Finally now, in the heat of the summer, with volumes and volatility low, more than 16 years later those buy and hold investors who bought the top back in 1999 can finally be vindicated and “Party like its 1999” once again and scratch their trade without realizing a loss.
A July poor retail sales number caused the markets to retreat a bit on Friday but the summer rally appears set to continue Monday morning. Positive earnings releases in Macy’s (M) and Nordstroms (JWN) earlier in the week ran counter to the flat macro release reported for the prior month. This highlights certain flaws in looking at headline numbers and more importantly shows that in this economy there are pockets of strength in the consumer sectors. Auto sales showed a surge of 1.1% – again running counter to Ford (F) cautious release. Also gasoline spending is included in the macro report, which due to lower prices at the pump skewed the spending result lower. Lower prices for gas evidently put more money into consumer’s pockets which if my wife is the example was quickly spent at department stores in back to school shopping!
This week there are a trickle of earnings reports still to come – more retailers TJX Companies (TJX), Home Depot (HD), Target (TGT), Gap (GPS) and Dicks Sporting Goods (DKS)
But the focus for most traders will be on the release of the minutes from the July FOMC meeting. The tone of the meeting was decidedly more hawkish – implying another possible rate hike this year, and traders will be looking closely at the minutes to try to ascertain what justification the governors had for that change in tone. The minutes will be released at 2pm ET on Wednesday so be prepared for some possible gyrations around that time.
The coming days will see the summer Olympics end, college students making their way back to campus, and elementary and high schools also opening their doors once again. I feel that summer of low volatility may be coming to a close as well. Don’t be lulled into complacency with the long stock risk in your portfolio. It is always a tough situation to try to time any market with just long stock. Do you stay in at all-time highs? Do you get out locking in gains but possibly missing out on further potential upside? Option traders have an alternative. There is a strategy available which gives potential market appreciation upside with a downside hedge. A way to allow you to take some chips off the table. There are benefits and costs of course as with all option strategies, but I encourage stock investors to come and learn all about it at a webinar we are hosting tomorrow, Tuesday August 16th at 4:30pm ET. The session is called Long Calls as a Stock Replacement Strategy. The webinar is free, the strategy could elevate your trading to the next level. You can register at www.optionshouse/webinars
Hope to see you there!
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