• Daily Game Plan – Market Eyes Record Highs

    by  • April 29, 2013 1:47 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    The selloff from two weeks ago is now a forgotten event, as bulls have once again stepped in a retaken the reins from eager bears.  As a matter of fact, the S&P 500 is now only slightly below the new all-time highs set near the beginning of May.  Presently, stocks are trading near their highs of the day, as the Nasdaq leads markets higher, up about 1.1%.  The Russell 2000, Dow, and S&P 500 are each up about 0.7% on the session.  While stocks appear poised to blast through the previously-set record levels, bonds have surprisingly held their bid very well.  Despite stocks being significantly higher on the year, bonds are also higher, up about 2% since January.  Today is no exception, as the fixed-income securities are trading near breakeven, despite strength in equities.  The recent bounce in metals continues, with gold and silver each about 1% higher for the day.

     

    CHART OF THE DAY

    YUM Brands (YUM) – Despite growing skepticism toward China, YUM has weathered the recent storm and appears to be headed higher from here.  The equity recently gapped higher on better-than-expected earnings, and has since consolidated lower.  The shares are currently perched above their 80-day moving average, a trendline that has been a good guide for YUM since late 2012.  In addition to this technical support, YUM is currently trading above heavy put open interest at the May 65-strike.  Those short these options have an incentive to keep shares of YUM propped up into the monthly options expiration, and this could provide an additional layer of support for the equity.

    I like a long entry here with a stop on a close below 65.  I would initially target a move back to 72, with 75 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    A move through 1600 on the S&P 500 in the very near future.  There are a few forces at work right now, including month-end markups and also a Fed meeting that is set to begin tomorrow.  Historically, these two events are very bullish, and should be able to give the market some thrust over the next two days.  Beyond that, there is a ton of important economic data to be released this week, so pay close attention to how markets react to those releases, whether it may be viewed as positive or negative for equities.  These events include an ECB rate decision(in which the market has somewhat priced in a rate cut already), two ISM surveys, and Friday’s jobs report.

    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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