Intel and Chase Will Set The Tone For the Rest Of The Week. Momentum Favors A Rally.

October 13, 2009
Author: Peter Stolcers, Founder of OneOption

There isn't much news to push prices either way and the path of least resistance is up. Bears won't stand in the way and that means that we will inch higher each day. We are right at the highs of the year and earnings will be the next catalyst. Johnson & Johnson posted better-than-expected results, but revenues missed. The stock is down in early trading this morning. After the close, CSX and Intel will release earnings. Transportation has been gradually recovering and earnings will be a little light. However, I expect improving guidance and the stock has a good chance of rallying from the middle of its two-month range. Intel will influence the entire tech sector. Traders will be watching server sales and they want to see a rebound in business spending. The stock is near its 52-week high and we'll see if it has any "gas left in the tank". Tech stocks will get a boost from the news that CSCO is buying Star Networks today. It shows that tech stocks have attractive valuations at the current level. Tomorrow, J.P. Morgan Chase will post results. It has been one of the strongest banks throughout this financial crisis and I am expecting excellent results. I believe this sector will fuel the final leg of this rally. Retail sales and the FOMC minutes will be released tomorrow. The late Labor Day holiday will help back-to-school sales and the results should be decent. This has already been factored in after last week's same-store sales numbers and we might not see much action after the release. The Fed is committed to keeping interest rates low and that should be reflected in their comments. This should be positive for the market. I believe prices will head higher before tomorrow's close. Traders will not short heading into earnings from Goldman, Google and IBM. Option expiration should also have a positive influence. Decliners outnumber advancers by a two to one margin and I would not be surprised to see a little nervousness ahead of Intel's number. However, I expect the lows from this morning to hold. I am short out of the money put credit spreads that expire Friday and I am not adding to positions until I can evaluate the market's reaction to earnings releases. If the market continues to head higher, I will sell out of the money puts in November towards the end of the week. Stick with the positions you have, place stops and be ready to take profits. image

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