Originaly presented by Richard Cox.
The S&P closed higher for the week (even with the declines seen Friday), and is now within striking distance of the all-time highs at 1592. Most of the positive investor sentiment has come from stronger-than-expected corporate earnings and consistent pledges from central banks around the world to implement stimulus measures to support the global recovery. So far this earnings season, 270 companies have reported quarterly results and roughly 75% of those companies improved on analyst estimates. The true strength of these results remains questionable, however, as a significant portion of this performance has come from cost-cutting strategies rather than true profit growth.
is showing some signs of failure ahead of the psychological 100 level, with a double top now showing just 10 ticks below. This weakness sent prices through support at 98.40. The next level of support is now seen at the 95.80 spike lows, so there should be an opportunity to get back in in the low 96s before we see another bounce. This week, I will look to enter into weekly CALL options in the USD/JPY at 96.20
. This number might be revised, however, as potential volatility in the pair is high.
For stock trades, I will look to play off of the earnings miss in 3M (MMM)
. The stock is trading just under 16 times earnings and just below its 52-week high at 110. First quarter earnings came in at $1.59 per share (consensus estimates were higher at $1.65), with sales revenues of $7.63 billion (estimates were calling for $7.81 billion). The company also lowered its outlook for 2013 as a stronger Dollar eats into export markets. From a chart perspective, triple bottom support at 104.60 has been removed, breaking a range that has been clearly defined since the middle of March. Look for a slight upward move back into 105 as an area to enter into monthly PUT options in 3M.