Market uptrend intact, but is top approaching?

The market trend picture is once again mostly positive, but the Financial and Healthcare sectors are still negative/mixed at best and the sentiment picture has continued to deteriorate. So, while the market uptrend remains intact for now, the possibility of a topping scenario like that mentioned in last week’s post appears to have increased.

New positions
No new positions were initiated this week.

Options Expiration Results

• Alcoa (AA) – The May 37.5-strike covered calls I sold on 4/03/08 against my long position in AA (purchased 8/17/07) expired in-the-money (ITM) and my shares were called for a ten-month net return of about 13.9% (including four covered-call trades and three dividend payments).
• Altria Group (MO) – The May 20-strike puts I sold against MO on 4/29/08 expired out-of-the-money (OTM) for a 3-week net return of about 1.2%.*
• Astoria Financial (AF) – The May 22.5-strike puts I sold against AF on 4/21/08 expired OTM for a 4-week net return of about 3.5%.*
• Gannett (GCI) – The May 25-strike puts I sold against GCI on 4/23/08 expired OTM for a 4-week net return of about 2.9%.*
• General Electric (GE) – The May 30-strike puts I sold against GE on 4/11/08 expired OTM for a 5-week net return of about 1.6%.*
• Hartford Financial Services Group (HIG) – The May 65-strike puts I sold against HIG on 4/23/08 expired OTM for a 3 1/2-week net return of about 1.5%.*
• Huaneng Power (HNP) – The May 25-strike puts I sold against HNP on 4/16/08 expired OTM for a 4 1/2-week net return of about 4.2%.*
• Kraft Foods KFT – The May 30-strike puts I sold against KFT on 4/22/08 expired OTM for a 3 1/2-week net return of about 1.2%.*
• Microsoft (MSFT) – The May 32-strike covered calls I sold on 4/24/08 against my long position in MSFT (purchased 2/18/08) expired OTM for a 3-week net return on the position of about 4.1%.
• Precision Drilling Trust (PDS) – The May 25-strike puts I sold against PDS on 4/23/08 expired OTM for a 3 1/2-week net return of about 3.5%.*
• Whole Foods Market (WFMI) – The May 32-strike covered calls I sold on 4/29/08 against my long position in WFMI (purchased 3/22/08) expired OTM for a 3-week net return on the position of about 4.5%.

Watchlists
Stocks of interest showing up on this week’s “upside strength” scans include Alcoa (AA), BP plc (BP), Canadian National Railway (CNI), Cemex (CX), Diana Shipping (DSX), Disney (DIS), Heinz (HNZ), Intel (INTC), and Weyerhaeuser (WY).

“Oversold” candidates of interest this week include American International Group (AIG), Barclays (BCS), Eli Lilly (LLY), and General Electric (GE).

* As always, the return on “cash secured” put sales was based on the premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for the possible assignment of the stock.

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