• Daily Game Plan – Problem Solved(for now)

    by  • October 17, 2013 1:45 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch


    Markets are mostly higher today, on the the heels of last night’s Congressional vote to raise the debt ceiling and “Kick the can” down the road.  The U.S. has made good on its debts, and will now be able to pay its debt holders until at least early next year.  Stocks are enjoying this news, as the S&P 500 is right back near its all-time highs seen in mid-September.  Stocks are being led today by the Russell 2000, which is currently at a fresh all-time high and up about 0.6% for the day.  The relative laggard for the session is the Dow, down about 0.3%, which is largely the result of a weak earnings report from IBM.  Given that the Dow is a price-weighted index and IBM is a high-dollar name, the move lower by that stock has serious implications for the index as a whole.  Last night, the U.S. credit rating was downgraded by Dagong Global Credit Rating Company.  As a result, the U.S. dollar is plummeting today, and commodities are largely higher.  Gold and silver are soaring — each up by about 3%, while miners are up about 6% for the day.  In addition to the stock and commodity rally, bonds are also higher, as long-dated treasuries are up by about 0.8% for the session.



    Chevron Corp. (CVX) – The petroleum and energy corporation has been fairly strong this year, but shares are underperforming the broad market.  CVX recently broke the 120 level, site of support of much of this year, and is currently rallying back into it.  This price level could now act as resistance going forward.  Despite its relative underperformance, sentiment toward CVX remains bullish.  In fact, 10 of the 15 analysts covering the company have it rated a “buy,” without a single “sell” rating.  This opens the door for future downgrades, which could act as a headwind going forward.

    I like a bearish entry here with a stop on a close above 121.  I would initially target a move down to 115, with 105 as a stretch target.

    courtesy of stockcharts.com



    The rally back to all-time highs was much quicker than I expected, and the “Sell the news” trade from the debt-ceiling situation has yet to come to fruition.  I would expect at least some sort of pause here, as it’s not very likely that markets will just blast through previous record levels.  However, the bias remains to the upside as it appears stocks have been given the “all clear” through the end of the year.


    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.