• Daily Game Plan – ECB Cuts, Market Rips

    by  • May 2, 2013 1:33 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    All eyes were on the European Central Bank this morning, and they certainly didn’t disappoint.  European regulators decided to cut interest rates for the eurozone by 25 basis points to a base line rate of 0.5%.  Markets spiked initially, sold off, but have rallied fiercely since the cash market open at 9:30 today.  Presently, stocks are near their highs of the day, and the S&P 500 looks poised to break into the 1600 range.  We’re being led higher today by small caps, with the Russell 2000 up 1.7% on the day.  Technology is strong yet again, up 1.4% on the session, while the S&P 500 and Dow are each about 0.8% higher.  Despite another strong day in equities, bonds continue to hold their recent bid.  For the day, fixed income securities are about 0.3% lower.  Gold and silver are moderately higher, while volatility is being hit.

     

    CHART OF THE DAY

    CREE, Inc. (CREE) – The LED lighting company has been very strong, up 60% year-to-date.  The shares recently broke to new multiyear highs and have since consolidated, offering a nice entry from the long side.  Despite its strength, sentiment toward CREE remains mixed.  Short interest still sits at 12% of the company’s float, and the analyst configuration has about as many “buy” ratings as “sells.”  This creates the potential for future upgrades and/or short covering, which could propel the shares higher going forward.

    I like a long entry here with a stop on a close below 55.  I would initially target a move to 60, with 70 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Assuming we don’t get an abysmal jobs report tomorrow, I’m looking for a move up through 1600 on the S&P 500.  Markets are reacting very well to the highly-telegraphed rate cut that we saw today, and the pain trade still appears to be higher from here.  It’s tough buying stocks with markets where they are at the present time, but plays on the bearish side have to be virtually perfect on the entry/exit in order to make money in this environment.  That said, I would be willing to flip the switch in a hurry should we see some sort of outside reversal day or week.

    About

    Bryan Sapp is a Senior Trading Analyst at Schaeffer’s Investment Research, where he has specialized in volatility-based options trading since early 2010. With Bryan at the helm, Schaeffer’s Volatility Trader generated a 2012 portfolio return of 70% for subscribers. This real-time option recommendation service exclusively trades short-term straddles. Prior to joining the research team at Schaeffer’s, Bryan honed his skills as a speculator by trading his own account, and playing poker professionally to pay his way through college. Bryan attended the University of Louisville, where he received his Bachelors in Economics and an MBA with an Entrepreneurship focus.

    http://www.schaeffersresearch.com/

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