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Dear Friend,
Today I submitted an article to Seeking Alpha that I would like to share with you.
Terry
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| Option Tip of the Week |
Here’s the link – Caterpillar Options
There are lots of ways to make money with multiple calendar spreads. Finding an underlying stock which enjoys an implied volatility (IV) advantage is a good start. That is where Caterpillar (CAT) is right now.
While having an IV Advantage stacks the deck in your favor, it should not be used as a sole determinate in choosing an underlying instrument to trade options on. It is possible to make good returns with the 10K Strategy when you don’t enjoy an IV Advantage, but it is extremely helpful whenever option prices make it possible.
Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts.
You can see every trade made in 8 actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself?
I look forward to having you on board, and to prospering with you.
Terry |
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| Andy's Market Report |
It was another calm week for the markets.
The after-effects of QE3 and the iPhone announcement were disappointing for the bulls. Some analysts thought the push last week after QE3 would lead to further gains going forward. But that certainly wasn’t the case as all four major indices fell slightly lower this week, with the small-cap Russell 2000 leading the way.
The S&P 500, Nasdaq, Dow and Russell 200 lost -0.4%, -0.1%, -0.1% and -1.1%, respectively.
As I mentioned, the market and all of its sectors had pushed into a short-term overbought state so we shouldn’t be too surprised by the price action this past week. Typically, when we see short-term overbought, particularly very overbought readings in the market a short-term reprieve is anticipated.
But, what was most interesting about this week was that the market tried to advance several times and failed with each attempt. Could it be that we are going to finally see that overdue correction in the market?
Two leading indicators tell us that might be the case: oil and small-caps.
Both have pulled back and both are usually “tells” for where the market is headed over the short to intermediate-term. Anyway, we shouldn’t be surprised to see a slight 3% to 8% correction over the next several weeks. In fact, it would be rather healthy to see a bit of consolidation if we expect to see another worthy advance heading into the New Year.
Remember, we are sitting at five-year highs. Moreover, third-quarter-earnings are right around the corner which will certainly be a concern for most market participants.
"I think the market certainly is ripe for a pullback. But whatever the pullback, it's going to be rather shallow," said Peter Cardillo, chief market economist at Rockwell Global Capital, in New York. "Any disappointment in key economic data that would reverse the market's feeling the economy has stabilized, I think could trigger a 2 to 4 percent pullback," he added.
Profit warnings from such high-profile U.S. companies as FedEx and Intel helped form the view that third-quarter results could be a drag on the market.
"We've had some pretty negative pre-announcements, and those announcements for this time frame have been a little more than we've had in the past," Cardillo said.
Estimates for S&P 500 companies' third-quarter profits have fallen sharply in recent months, and earnings now are expected to drop 2.2% from a year ago, according to Thomson Reuters data. It would be the first such decline in three years.
In fact, outlooks for the third quarter are at the most negative since the third quarter of 2001. The negative-to-positive ratio for the upcoming earnings period stands at 4.3 to 1.
I have to once again point to the QE chart below.
As you can clearly see, with each injection of stimulus we have seen the effect and potency decline. IF the trend continues we could possibly see a reversal with this latest injection.
Again, we are at some very interesting levels in the market with lots of noise ahead: elections, third-quarter earnings, etc. Don’t be surprised to see a correction because how long can this market climb the wall of worry.
Markets can’t advance forever on the back of stimulus injections. At some point the economic numbers have to verify the validity of further advances. |
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| Overbought/Sold Condition Report |
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Overbought/Oversold as of September 22, 2012
• S&P 500 (SPY) – 73.1 (overbought)
• Dow Jones (DIA) – 70.1 (overbought)
• Russell 2000 (IWM) – 63.1 (neutral)
• NASDAQ 100 (QQQQ) – 68.8 (neutral)
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| Testimonial of the Week |
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I don't know if a lot of subscribers thank you but my wife and I have watched the money that we have invested in your program grow at an alarming rate. We especially like the fact, which no other investments offer, the ability to cash out profits every month if they are earned. Cheers to you and your staff." -- Rob
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Thank you again for being a part of the Terry's Tips newsletter. If you are interested in signing up as an Insider, visit Terry's Tips today for details.
Sincerely,
Dr. Terry Allen
Terry's Tips
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