Stocks of some of the newest disruptive tech companies have posted big gains ahead of earnings, so grab some profits...but hold on to some for the upside that's left, writes Nicholas Vardy of Bull Market Alert.
Last week was yet another negative week for US markets. The Dow Jones fell 1.77% and the S&P 500 dropped 1.48%. Global markets fared slightly better, with the Emerging Markets Index down only 0.7%.
US stock and options markets were closed on Monday and Tuesday, as Hurricane Sandy crushed the New York area. It was the first time the market has closed for a weather-related event since Hurricane Gloria on September 27, 1985.
As a result, I won't be making a new Bull Market Alert recommendation this week, and I will look to make up for this by offering an extra recommendation in the coming weeks.
The big news was Bull Market Alert portfolio holding Stratasys (SSYS) rocketing over 10% last week on the back of huge earnings from rival—and former holding—3D Systems (DDD). Stratasys itself reported earnings on Friday, and the market clearly expected good news on the back of DDD's results.
Sell half your January $70 call options, up 66.67%, to lock in your gains. Hold on to your remaining options and the stock for bigger gains ahead.
As a result of the pullback in the market, several of your positions moved to a hold, including Bank of Ireland (IRE), Seadrill (SDRL), and Medivation (MDVN).
Otherwise, financial markets continue to be oversold as the current correction continues. There are a couple of important implications for this in terms of your Bull Market Alert portfolio.
First, the bigger the bust, the bigger the bounce. On the one hand, the market has not bounced as quickly as I had expected. On the other, when it does, it will do so even more strongly. I remain convinced that we will see a solid rebound in the market between now and the year-end—one that will be turbocharged on the prospect of a more business-friendly administration in Washington, DC.
Second, a poorly performing stock market does not bode well for President Obama's re-election prospects. The correlation between the performance of the US stock market and the US president's popularity has been very strong. And based on Friday's close, the market is trading where it was on August 16—which, again, tracks Obama's waning popularity.
The stock market is a potent indicator, not because most voters own stocks, but because it reflects the public mood and the overall direction of the economy. A poorly performing stock market makes consumers and business feel negative, pessimistic, and uneasy. That feeling of pessimism ultimately reflects on the nation's political leader, whether deservedly or not.
Finally, on a personal note, I attended the NFL football game yesterday between the St. Louis Rams and the New England Patriots in front of a sell-out crowd of 84,004. Although it was a one-sided 45-7 victory by the Patriots, the more unusual thing was that the game was here in London, where the NFL has been looking to expand for several years.
Next year, the NFL plans to play two regular season games in London, including one with my hometown team, the Pittsburgh Steelers. It is amazing how small the world has become.