Written by Dan Micovic
A somewhat of a boring week but one that could prove very beneficial in the months to come. The Dow Jones gained 7.1% during the month of July, which was its biggest monthly gain in a year. We needed the market to digest the move so consolidation was to be expected and the fact that we didn’t sell-off to the extreme has to be viewed as a positive. The S&P 500 Index and the Nasdaq Composite locked in monthly gains to the tune of 6.9%.
There is still a lot of money sitting on the sidelines this summer and that buying power is something to keep an eye on as we enter the final few months of summer. The volume has been lower this summer than in the past few. Also, there are several indicators that are showing institutions are being to buy stock more regularly and as we know, institutions move ahead of the retail investor. We could be setting up for a very nice August and September.
We have been highlighting the 1113-1120 area on the SPX the past few weeks as an important level for the SPX that it needs to grind through. That range holds the 200-day, 160-day and 80-day moving averages. We don’t think we’ll see a power move through this level but rather a choppy, grinding move that will test investors will. To the downside we’re looking at 1100, 1085 and ultimately back to the 1045-1055 support. We don’t think we’ll see 1055 again soon and the closer we get to the end of summer the more this market should heat up. August has historically been a solid month for the market.
We remain bullish.
Weekly Economic Calendar:
Monday
- The Commerce Department will release its construction spending report for June.. We’ll also get a look at the Institute for Supply Management (ISM) Index for June. Humana Inc. (HUM), Loews Corp. (L), MannKind Corp. (MNKD), Aflac Inc. (AFL), Evergreen Solar Inc. (ESLR), General Cable Corp. (BGC), SBA Communications Corp. (SBAC), and Verisign Inc. (VRSN) will release their quarterly earnings reports.
Tuesday
- The Commerce Department will report on personal income, personal spending and factory orders for June. We’ll learn about July auto sales in the afternoon. Archer Daniels Midland Co. (ADM), ArvinMeritor Inc. (ARM), Coach Inc. (COH), D.R. Horton Inc. (DHI), Duke Energy Corp. (DUK), The Dow Chemical Co. (DOW), Marathon Oil Corp. (MRO), MasterCard Inc. (MA), MGM Resorts International (MGM), Molson Coors Brewing Co. (TAP), OfficeMax Inc. (OMX), Pfizer Inc. (PFE), The Procter & Gamble Co. (PG), Rowan Companies Inc. (RDC), Solarfun Power Holdings Co. Ltd. (SOLF), Tenet Healthcare Corp. (THC), Anadarko Petroleum Corp. (APC), AvalonBay Communities Inc. (AVB), CBS Corp. (CBS), Force Protection Inc. (FRPT), Leap Wireless International Inc. (LEAP), Novatel Wireless Inc. (NVTL), priceline.com Inc. (PCLN), STEC Inc. (STEC), True Religion Apparel Inc. (TRLG), and Whole Foods Market Inc. (WFMI) are scheduled to report earnings.
Wednesday
- The market will get the weekly report on U.S. petroleum supplies along with the ISM services index and we will get the ADP report on private sector employment, the first of three days worth of employment data. Agrium Inc. (AGU), AOL Inc. (AOL), Garmin Ltd. (GRMN), IntercontinentalExchange Inc. (ICE ), Polo Ralph Lauren Corp. (RL), Qwest Communications International Inc. (Q), Sirius XM Radio Inc. (SIRI), Time Warner Inc. (TWX), TRS Automotive Holdings Corp. (TRW), Transocean Ltd. (RIG), and Yamana Gold Inc. (AUY) will post their quarterly results.
Thursday
- The weekly report on initial jobless claims will be released. Beazer Homes USA Inc. (BZH), Diana Shipping Inc. (DSX), DIRECTV (DTV), Fuel Systems Solutions Inc. (FSYS), Hyatt Hotels Corp. (H), Liz Claiborne Inc. (LIZ), Playboy Enterprises Inc. (PLA), Time Warner Cable Inc. (TWC), Activision Blizzard Inc. (ATVI) and Kraft Foods Inc. (KFT) will report earnings.
Friday
- On Friday, the Labor Department will release nonfarm payrolls and unemployment reports. Reporting earnings will be China Sunergy Co. Ltd. (CSUN) and Dynegy Inc. (DYN).
New Trade Idea:
Buy Green Mountain Coffee Roasters (GMCR) August 30 Calls @ $1.65 or better:
We closed a nice winner in GMCR recently and since the stock has consolidated and is making another run towards new highs. We should see a nice move higher this week. Use $3.00 as a target and $1.00 as a mental stop-loss to eh downside.
Buy Baidu (BIDU) August 80 Calls @ $4.00 or better:
Similar story with BIDU as with GMCR. The stock spent some time consolidating and is now ready for higher prices. We could see an explosive move this week. Use $8.00 as a target and $2.00 for a mental stop-loss.
Open Positions:
American International Group (AIG) August 40 Calls @ $1.90:
AIG has continued to perform well even while the market consolidates and digests the recent rally. When this market is ready to move again, AIG should be ready to run. $40 may prove to be a bit of resistance. Use $4.00 as a target and $0.90 as a mental stop loss.
Manitowoc (MTW) August 10 Calls @ $0.95:
We came close to our target early in the week. The company reported good earnings and the stock has a consolidated a bit but did bounce off of key support twice.. Continue to hold. Use $1.55 as a target and $0.45 as a mental stop-loss.
NetApp (NTAP) August 43 Calls @ $1.90:
Stock is consolidating after a nice run-up. Tested support and bounced which is very healthy. Continue to hold and use $3.00 as a target and $0.90 as a mental stop-loss.
TEN Exclusive: Options Update – 8/1/10 is an article from: 
