Year-end rally: Week nine and counting
Last week the market again ended up just about where it began, and the weekly trend picture of the major indices followed suit – almost perfectly mirroring last week’s overall positive reading (and, if anything, improving on it a bit). Obviously this can’t go on indefinitely, but until the market’s action indicates otherwise – either through a strong sell-off or a deterioration across a broad spectrum of trend periods in the weekly trend picture – the current intermediate uptrend must be viewed as intact.
Last week I did initiate some new put positions on a couple of familiar names. I sold some January 17.5 puts on General Motors (GM) and some January 25 puts on Lear Corp. (LEA) as the auto sector continued to demonstrate weakness.
GM has been going down relentlessly (most recently on news that investor Kirk Kerkorian was selling part of his stake in the company), and is now close to what appears to be another support level at around 17 to 18. Technically, it’s also still displaying a positive divergence on the price chart, but if the stock price falls much further this will be negated.
Last Monday I also tried to sell January 60 calls against my long position in Exxon (XOM). My limit order price on the options turned out to be the high for the day, and although some options traded at that price my order wasn’t filled, and the stock has been trading down since. If it trades back up to 58 or above I’ll look to try again, but otherwise I’m content to watch and wait on the stock.
Meanwhile, as I wait for a pull-back in the stronger performing stocks on my watchlists, I’m getting closer to pulling the trigger again on a number of other currently out-of-favor candidates. These include stocks in the media sector (like Gannett (GCI) and Time Warner (TWX)), healthcare stocks (like Health Management Associates (HMA) and Triad Hospitals (TRI)), food stocks (like J.M. Smucker (SJM) and Kraft (KFT)), and, of course, large pharmaceuticals (like Merck (MRK) and Pfizer (PFE)). I’ve also added two new stocks to my watchlists: Eastman Kodak (EK) and Albertson’s (ABS).
