While holding all open positions, consider selling to close half of the ZUMZ August 25 calls. The underlying stock is just beginning to claw its way out of oversold conditions.
Even though MCD (put option) and QCOM (put option) did exactly what we thought they would do – fall – the options failed to pan out well. Close both positions by tomorrow. We still hold the MCD August 97.50 call.
As for new positions, consider a position in Coach (COH).
Money Flow has increased significantly here… and the stock has some catching up to do. MACD and RSI are also on the floor telling me we could see a respectable move well off the lows with some patience.
Consider buying to open the COH January 2016 36 call up to $2.90.
After closing many, many wins over the years, the markets have lost their minds. There’s no reason for the markets to be anywhere near all time highs, given economic instability, a wacky Federal Reserve that can’t make up its mind, oh… and who can forget about Greece?
What’s Happening on Wall Street?
After breaking to new high of 2130, the S&P 500 found heavy resistance, as persistent economic fears and worries of a 2015 rate hike gave way to selling pressure. We knew that if the 50-day was broken to the downside, the next area of support was 2075.
That’s exactly where it found support over the last few days, testing triple bottom support dating back to early May 2015. If 2075 fails to hold near-term, we could easily test April 2015 support of 2060, and quite possibly March 2015 support at 2040.
Of course, that’s worst-case scenario.
I’m not so sure today’s 19 point move on the beloved index is sustainable, given Fed, Greece and underlying economic concerns.
At the same time, we don’t believe we’ll see a September rate hike, as many fear. Even Goldman Sachs, which we rarely agree with, has said there are “persuasive” reasons for the Fed to wait until 2016.
A September rate hike “remains a close call,” they note. That’s because there’s a great deal of economic uncertainty. And there’s no real danger of the Fed being behind the curve of inflation. The Fed also knows it runs the risk of crashing the markets.
The smart money isn’t betting on a rate hike either.
It all depends on the health of the economy. We also have to consider that a September hike makes no sense politically, given budget wars and a potential government shutdown.
Again, it’s all a wait-and-see. I’ve never seen a market this disconnected from reality… and I’ve been a trader for 16 years.
It is what it is… and we’ll find our way through.
Have a great rest of the week.
Ian