• Daily Game Plan – Election Holding Pattern

    by  • November 5, 2012 2:04 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Indexes are currently slightly higher, with the Russell 2000 leading the charge, currently up about 0.5%. The S&P 500 is flat on the day, with the Nasdaq up about 0.2%.  One piece of bullish news was the better-than-expected iPad mini sales over the weekend.  Expectations were for sales of about 2 million units, but the company reported weekend sales of 3 million new iPads being sold.  Although these results were fundamentally strong, the market isn’t impressed.  AAPL is currently only slightly higher on the day, up about 0.5% and well off the highs.  It appears that everything is “on hold” for the election.  We’ve been stuck in a pretty volatile range since 10/22, and I’d be shocked if this gets resolved prior to Wednesday.  One thing that’s particularly interesting today is that all major asset classes are higher.  Last week, there were two days where bonds, stocks, and commodities all sold off in unison.  The opposite is taking place today–whether this is a shift in correlation or short-term asset reallocation remains to be seen.  However, if correlations on all assets is trending toward 1, that is very troublesome for markets.  Keep a close eye on this relationship going forward.

     

    CHART OF THE DAY

    Smith & Wesson Holding Corp. (SWHC) – S&W is a gun maker, specializing in personal defense and sporting guns.  The chart of this company continues to look very constructive.  At the beginning of September, SWHC reported blowout earnings, and the stock gapped significantly higher.  Since then, it has drifted sideways to slightly lower, and currently resides near the 9 level, site of the previous earnings gap.  This level should provide some support for the equity.  SWHC has more than doubled since the beginning of the year, yet there continues to be some skepticism toward it.  Currently, about 13 percent of SWHC’s float is sold short, which creates the potential for future short-covering rallies.  Current short interest sits at about 8 million shares, only slightly down from the all-time high short interest reading of 9.6 million shares on 9/1.  The last two months’ covering could be the beginning of something much bigger.  SWHC is set to report its quarterly earnings on 12/6.

    courtesy of stockcharts.com

     

    WHAT I’M LOOKING FOR

    Until Wednesday, not a whole lot.  Outside of some European PMI numbers, there is no major economic data to be released overnight or tomorrow.  Everything in on hold until the election is over.    My bias remains to the upside so long as the S&P 500 holds 1400 on a closing basis.  This can change in a hurry – an adverse reaction post-election could be a signal that the primary trend has shifted downward.

    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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