Finally the month of May has come to an end.  There really isn’t too many good things to say about May as we witnessed an unprecedented flash crash, still to be explained, and several rallies and sell-offs in excess of 250-points.  The Dow did give up over 1000 points in May but it did manage to hold on to the 10,000 level.  One thing that we find encouraging is that the February lows held during the recent sell-offs and that could be evidence that we have seen the lows for the short-term. The chart looks like a nice double-bottom from which we may soon see a relief rally.

In the end, the S&P 500 Index (SPX) dropped 8.2%, to mark the worst monthly return since the 11% drop in February 2009. It was also the worst May for the Dow since 1940.

We remain slightly bearish but we wouldn’t be surprised if we saw a market rally later this week.  Don’t fight the trend.  The market seems to be able to sell-off much more easily than it can rally at this stage, so as investors we must be quick and agile. That’s the beauty of options, they allow you to play both directions with quickness and not much capital outlay.

Options 5.30

Weekly Economic Calendar:

Monday

  • The market is closed on Monday due to the Memorial Day holiday.

Tuesday

  • April’s construction spending and May’s Institute for Supply Management (ISM) manufacturing index will be released. Collective Brands Inc. (PSS) and Shanda Interactive Entertainment Ltd. (SNDA) are scheduled to release their quarterly reports.

Wednesday

  • Wednesday brings the weekly report on U.S. petroleum supplies, as well as April’s pending homes sales and May’s auto sales. Canadian Solar Inc. (CSIQ), Daktronics Inc. (DAKT), Shoe Carnival Inc. (SCVL), Coldwater Creek Inc. (CWTR), and Hovnanian Enterprises Inc. (HOV) will all release earnings reports.

Thursday

  • Weekly initial jobless claims will be released, followed the ADP employment report for May, the revised first-quarter productivity report, April’s factory orders, and the ISM services index for May. Charming Shoppes Inc. (CHRS), Joy Global Inc. (JOYG), Suntech Power Holdings Co. Ltd. (STP), and The Cooper Companies Inc. (COO) are scheduled to report earnings.

Friday

  • Friday closes the week with May’s nonfarm payrolls report and May’s unemployment rate. Finally, Blyth Inc. (BTH) and American Woodmark Corp. (AMWD) will report earnings.

New Trade Idea:

There will be no new trade due to the market being closed in observation of the Memorial Day holiday.  We will have new free trades on Wednesday.

Open Positions:

Buy Wells Fargo June 29 Put @ $1.95 or Better:

Continue to hold.  Use $3.00 as a target and $0.80 as a mental stop loss.

Sony (SNE) June 30 puts @ .90:

The stock is in a clear decline now and we should see a test of $30 again soon.  Continue to hold.  Use $1.80 as a target to the upside and $0.45 as a mental stop-loss.