Weekend Update – February 7, 2016

If the recently deceased Harlem Globetrotters’ great player, Meadowlark Lemon had been alive today and helping the equally great band, The Byrds, re-write their classic song, it would likely get a new title.

The title would perfectly describe what this past week was a all about.

“Spin, Spin, Spin.”

Whether it was post-Iowa Caucus result speeches by the candidates or President Obama’s comments in the aftermath of Friday’s disappointing Employment Situation Report and downward revision to the previous month, it’s easy to see the spin going around and around.

No wonder the stock market is getting dizzy and dizzier, despite its heights getting lower and lower.

With confusion coming from Iowa regarding the definition of “winning” from both sides of the aisle you could easily be excused for shaking your head as the week started.

Then, when a picture of decreasing employment numbers alongside increasing jobless claims numbers was painted as reflecting an increasingly robust economy you could have been further excused for shaking your head into the week’s end.

Politicians who want an opportunity to create a legacy, as well as lame duck politicians who want to cement a legacy are very adept at spin and the ability to portray everything in terms of black and white.

The other side is always wrong and the facts are as portrayed and not as fact.

For stock investors life was much easier when only having to deal with the paradoxical association between oil and stocks.

You simply awoke in the morning and saw where West Texas Intermediate was trading and knew that the stock market would go in the same direction.

Now they’re back into having to decide whether news they hear is good or bad and whether to react appropriately to that news or paradoxically.

Of course, that would be easier if news was really presented on a factual basis and not so quickly subjected to overwhelmingly sanctimonious spin.

With the notion that evidence of a slow down in the economy would make the likelihood of further Federal Reserve rate hikes less, bad news was once again being taken as good news. The predominance of oil, however, as a factor in the market’s direction may have been obscuring some of that newly rediscovered fractured thought process.

With the market having spent the week going back and forth with numerous large intra-day moves and some large daily moves, it all came down to Friday’s trading to determine the fate of the DJIA for the week, as it had only been 34 points lower heading into the final day of trading. That week included one day with a loss of 290 points and the following day with a gain of 193 points.

If you were among those for whom confidence could have been inspired by those kind of movements, then any kind of upcoming spin could have led you in any direction.

Of course, the direction also depended on whether you are now of the increasing frame of mind that good news is bad news.

While we awaited Friday morning’s Employment Situation Report release and the DJIA had been down only 0.2%, the broader indexes weren’t faring quite as well.

The S&P 500 had already been 1.3% lower on the week and the NASDAQ 100 was down 2.6%.

With Friday morning’s release, the data, while disappointing was likely not weak enough to give cause for much celebration for those looking for good reason to dismiss the possibility of future interest rate hikes in 2016.

What may have cast a pall on the market was the Presidential spin that focused on the 4.9% jobless rate and wage growth.

If you were among those interpreting bad news as being good, you had to interpret that kind of spin as being good news.

And that can only be bad as the FOMC had certainly not closed the door on further interest rate increases in its recent statement.

While the DJIA lost an additional 1.3% to end the week, the NASDAQ 100 tacked on an additional 3.4% to its already sizable loss for the week, while the S&P 500 lost an additional 1.9%.

Good luck trying to spin that as we begin to prepare for the coming week.

As usual, the week’s potential stock selections are classified as being in the Traditional, Double Dip Dividend, Momentum or “PEE” categories.

Having suffered the direct blow from decrease oil prices and the indirect blow from what those decreasing prices have wrought upon the market, it’s not easy to consider adding another energy position.

Who can begin to count the number of times over the past 15 months that it didn’t look as if we had hit a once in a generation kind of rock bottom bargain price for a barrel of oil?

With ConocoPhillips (NYSE:COP) having just slashed its dividend, you do have to wonder whether British Petroleum (NYSE:BP) could be next.

WHile its dividend this week is presumably safe, it’s harder to make that case for the remainder of 2016 if rude prices continue to test lows. In its defense, British Petroleum is better diversified than ConocoPhillips is after having spun off its refining assets a few years ago, but the risk of insufficient cash flow is still there.

What is also there is a very nice option premium in reflection of further risk.

Looking at the option premiums, I am inclined to look at more than a weekly option contract, as is normally my approach for positions going ex-dividend during the week.

The exaggerated volatility of the past 2 weeks is really enhancing the premium and the dividend is extraordinary, while likely having more safety than the option market may be surmising.

Also ex-dividend this week are DuPont (NYSE:DD) and International Paper (NYSE:IP).

While DuPont has gone considerably higher in the past two weeks, I believe that in the absence of general market weakness it can recapture much of what had been lost following the announcement of a complex deal with Dow Chemical (NYSE:DOW).

With some strength also seen in Dow Chemical recently, I took the opportunity to sell calls on uncovered shares and is a portion of the strategic theme for this week, I used an out of the money strike price and a longer term time frame than I would normally consider in an effort to lock in some higher volatility driven option premiums and to regain lost share value.

The same approach holds for if considering a purchase of International Paper.

While it’s recent earnings report exceeded expectations and met whisper numbers, its stock price trend for the past year has been decidedly lower and lower, even in the absence of structural or operating issues.

While its payout ratio is getting uncomfortably high, the generous premium should continue to be safe and I might consider locking in the premium for a longer term, perhaps to even encompass an additional ex-dividend date in May 2016, although upcoming earnings would also have to be considered if doing so.

For that reason, I might even consider going out to a July 2016 expiration in the anticipation that some of that lost luster in its price will be regained by then,

Although not ex-dividend this week, EMC Corporation (NYSE:EMC) is among some of those fallen angels in the technology sector and which are beginning to celebrate their newly found volatility with some enhanced option premiums.

Somehow lost in the story with EMC is that there is a buyout offer that appears to be on track for completion and at a price that is substantially higher than Friday’s closing price.

I’m not one to play in the same arena with those expert in the science and art of arbitrage, but this one seems to offer some opportunity, even as the deal isn’t expected to close until the end of the year.

While there may still be regulatory hurdles head, EMC appears to be a willing partner and while awaiting a decision, there are still some dividends to be had.

For that reason, I might consider buying shares and selling a longer term and significantly out of the money option contract. Since I also already have existing shares at $30, I might consider combining lots and selling calls at a strike below the cost of the original lot, not counting accumulated premiums and dividends.

Finally, I just don’t think that I can any longer resist buying shares of eBay (NASDAQ:EBAY) at this level.

eBay was one of my more frequent holdings until the announcement of its definitive plan to spin off its profitable PayPal (NASDAQ:PYPL) unit.

What could be more appropriate when talking about the week’s spin than to look at a post-spin eBay?

For years I loved holding eBay as it made little net movement, even as it had occasional spikes and plunges usually earnings related. All that meant was that it had an attractive option premium, with relatively little risk associated with it, as long as you didn’t mind those occasional plunges that were inevitably reversed.

WIth no real challenge ahead of it other than market risk in general, eBay is now at its post spin-off low and is offering a great option premium for what I perceive to be low risk.

WIth those premiums so attractive, but mindful that there may be near term market risk, I would probably think in terms of selling longer term and out of the money call contracts on any shares that I purchased.

While the market could continue to be further dragged down by declining oil prices and while games are still being played with what economic data really means and how it should be interpreted, you do have to wonder how any of that impacts eBay.

I know that I do.

Traditional Stocks: eBay, EMC Corporation

Momentum Stocks: none

Double-Dip Dividend: British Petroleum (2/10 $0.59), DuPont (2/10 $0.38), International Paper (2/11 $0.38)

Premiums Enhanced by Earnings:

Remember, these are just guidelines for the coming week. The above selections may become actionable – most often coupling a share purchase with call option sales or the sale of covered put contracts – in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week, with reduction of trading risk.

Weekend Update – February 9, 2014

Everything is crystal clear now.

After three straight weeks of losses to end the trading week, including deep losses the past two weeks everyone was scratching their heads to recall the last time a single month had fared so poorly.

What those mounting losses accomplished was to create a clear vision of what awaited investors as the past week was to begin.

Instead, it was nice to finish on an up note to everyone’s confusion.

When you think you are seeing things most clearly is when you should begin having doubts.

Who saw a two day 350 point gain coming, unless they had bothered to realize that this week was featuring an Employment Situation Report? The one saving grace we have is that for the past 18 months you could count on a market rally to greet the employment news, regardless of whether the news met, exceeded or fell short of expectations.

That’s clarity. It’s confusing, but it’s a rare sense of clarity that comes from being so successful in its ability to predict an outcome that itself is based upon human behavior.

As the week began with a 325 point loss in the DJIA voices started bypassing talk of a 10% correction and starting uttering thoughts of a 15-20% correction. 10% was a bygone conclusion. At that point most everyone agreed that it was very clear that we were finally being faced with the “healthy” correction that had been so long overdue.

When in the middle of that correction nothing really feels very healthy about it, but when people have such certainty about things it’s hard to imagine that they might be wrong. With further downside seen by the best and brightest we were about to get healthier than our portfolios might be able to withstand.

It was absolutely amazing how clearly everyone was able to see the future. What made things even more ominous and sustaining their view was the impending Employment Situation Report due at the end of the week. Following last month’s abysmal numbers, ostensibly related to horrid weather across the country, there wasn’t too much reason to expect much in the way of an improvement this time around. Besides, the Nikkei and Russian stock markets had just dipped below the 10% threshold that many define as a market correction and as we’re continually reminded, it’s an inter-connected world these days. It wasn’t really a question of “whether,” it was a matter of “when?”

Then there was all that talk of how high the volatility was getting, even though it had a hard time even getting to October 2013 levels, much less matching historical heights. As everyone knows, volatility comes along with declining markets so the cycle was being put in place for the only outcome possible.

After Monday’s close the future was clear. Crystal clear.

Instead, the week ended with an 0.8% gain in the S&P 500 despite that plunge on Monday and a highly significant drop in volatility. The market responded to a disappointing Employment Situation Report with what logically or even using the “good news is bad news” kind of logic should not have been the case.

Now, with a week that started by confirming the road to correction we were left with a week that supported the idea that the market is resistant to a classic correction. Instead of the near term future of the markets being crystal clear we are left beginning this coming week with more confusion than is normally the case.

If it’s true that the market needs clarity in order to propel forward this shouldn’t be the week to commit yourself. However, the only thing that’s really clear about our notions is that they’re often without basis so the only reasonable advice is to do as in all weeks – look for situational opportunities that can be exploited without regard to what is going on in the rest of the world.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum and “PEE” categories this week (see details).

If you’re looking for certainty, or at least a company that has taken steps to diminish uncertainty, Microsoft (MSFT) is the one. With the announcement of the appointment of Satya Nadella, an insider, to be its new CEO, shares did exactly what the experts said it wouldn’t do. Not too long ago the overwhelming consensus was that the appointment of an outsider, such as Alan Mullaly would drive shares forward, while an insider would send shares tumbling into the 20s.

Microsoft simply stayed on its path with the news of an inside candidate taking the reigns. Regardless of its critics, Microsoft’s strategy is more coherent than it gets credit for and this leadership decision was a quantum leap forward, certainly far more important than discussions of screen size. With this level of certainty also comes the certainty of a dividend and attractive option premiums, making Microsoft a perennial favorite in a covered option strategy.

The antithesis of certainty may be found in the smallest of the sectors. With the tumult in pricing and contracts being promulgated by T-Mobile (TMUS) and its rebel CEO John Legere, there’s no doubt that the margins of all wireless providers is being threatened. Verizon (VZ) has already seen its share price make an initial response to those threats and has shown resilience even in the face of a declining market, as well. Although the next ex-dividend date is still relatively far away, there is a reason this is a favorite among buy and hold investors. As long as it continues to trade in a defined range, this is a position that I wouldn’t mind holding for a while and collecting option premiums and the occasional dividend.

Lowes (LOW) is always considered an also ran in the home improvement business and some recent disappointing home sales news has trickled down to Lowes’ shares. While it does report earnings during the first week of the March 2014 option cycle, I think there is some near term opportunity at it’s current lower price to see some share appreciation in addition to collecting premiums. However, I wouldn’t mind being out of my current shares prior to its scheduled earnings report.

Among those going ex-dividend this week are Conoco Phillips (COP), International Paper (IP) and Eli Lilly (LLY). In the past month I’ve owned all three concurrently and would be willing to do so again. While International Paper has outperformed the S&P 500 since the most recent market decline two weeks ago, it has also traded fairly rangebound over the past year and is now at the mid-point of that range. That makes it at a reasonable entry point.

Conoco Phillips appears to be at a good entry point simply by virtue of a nearly 12% decline from its recent high point which includes a 5% drop since the market’s own decline. With earnings out of the way, particularly as they have been somewhat disappointing for big oil and with an end in sight for the weather that has interfered with operations, shares are poised for recovery. The premiums and dividend make it easier to wait.

Eli Lilly is down about 5% from its recent high and I believe is the next due for its turn at a little run higher as the major pharmaceutical companies often alternate with one another. With Pfizer (PFE) and Merck (MRK) having recently taken those honors, it’s time for Eli Lilly to get back in the short term lead, as it is for recent also ran Bristol Myers Squibb (BMY) that was lost to assignment this past week and needs a replacement, preferably one offering a dividend.

Zillow (Z) reports earnings this week. In its short history as a publicly traded company it has had the ability to consistently beat analyst’s estimates and then usually see shares fall as earnings were released. That kind of doubled barrel consistency warrants some consideration this week as the option market is implying an 11% move this week. While that is possible, there is still an opportunity to generate a 1% ROI for the week if the share price falls by anything less than 16%.

While I’m not entirely comfortable looking for volatility among potential new positions two that do have some appeal are Coach (COH) and Morgan Stanley (MS).

Coach is a frequent candidate for consideration and I generally like it more when it’s being maligned. After last week’s blow-out earnings report by Michael Kors (KORS) the obvious next thought becomes how their earnings are coming at the expense of Coach. While there may be truth to that and has been the conventional wisdom for nearly 2 years, Coach has been able to find a very comfortable trading range and has been able to significantly increase its dividend in each of the past 4 years in time for the second quarter distribution. It’s combination of premiums, dividends and price stability, despite occasional swings, makes it worthy of consistent consideration.

I’ve been waiting for a while for another opportunity to add shares of Morgan Stanley. Down nearly 12% in the past 3 weeks may be the right opportunity, particularly as some European stability may be at hand following the European Central Bank’s decision to continue accommodation and provide some stimulus to the continent, where Morgan Stanley has interests, particularly being subject to “net counterparty exposure.” It’s ride higher has been sustained and for those looking at such things, it’s lows have been consistently higher and higher, making it a technician’s delight. I don’t really know about such things and charts certainly aren’t known for their clarity being validated, but its option premiums do compel me as do thoughts of a dividend increase that it i increasingly in position to institute.

Finally, if you’re looking for certainty you don’t have to look any further than at Chesapeake Energy (CHK) which announced a significant decrease in upcoming capital expenditures, which sent shares tumbling on the announcement. Presumably, it takes money to make money in the gas drilling business so the news wasn’t taken very well by investors. A very significant increase in option premiums early in the week suggested that some significant news was expected and it certainly came, with some residual uncertainty remaining in this week’s premiums. For those with some daring this may represent the first challenge since the days of Aubrey McClendon and may also represent an opportunity for shareholder Carl Icahn to enter the equation in a more activist manner.

Traditional Stocks: Lowes, Microsoft, Verizon

Momentum Stocks: Chesapeake Energy, Coach, Morgan Stanley,

Double Dip Dividend: Conoco Phillips (ex-div 2/13), International Paper (ex-div 2/12), Eli Lilly (ex-div 2/12)

Premiums Enhanced by Earnings: Zillow (2/12 PM)

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

Weekend Update – January 12, 2014

Confusion Reigns.

January is supposed to be a very straightforward month. Everyone knows how it’s all supposed to go.

The market moves higher and the rest of the year simply follows. Some even believe it’s as simple as the first five trading days of the year setting the tone for the remainder still to come.

Since the market loves certainty, the antithesis of confusion, the idea of a few days or even a month ordaining the outcome of an entire year is the kind of certainty that has broad appeal.

But with the fifth trading day having come to its end on January 8th, the S&P 500 had gone down 11 points. Now what? Where do we turn for certainty?

To our institutions, of course, especially our central banking system which has steadfastly guided us through the challenges of the past 6 years. The year started with some certainty as Federal Reserve Chairman nominee Janet Yellen was approved by a vote that saw fewer negative votes cast than when her predecessor Ben Bernanke last stood for Senate approval, although there were far fewer total votes, too. On a positive note, while there was voting confusion among political lines, there was only certainty among gender lines.

While Dr. Yellen’s confirmation was a sign to many that a relatively dovish voice would predominate the FOMC, even as some more hawkish governors become voting members this year, the announcement that Dr. Stanley Fischer was being nominated as Vice-Chair sends a somewhat different message and may embolden the more hawkish elements of the committee.

That seems confusing. Why would you want to do that? But then again, why would you have pulled the welcome mat out from under Ben Bernanke?

Then on Friday morning came the first Employment Situation Report of the new year and no one was remotely close in their guesses. Nobody was so pessimistic as to believe that the fewest new jobs created in 14 months would be the result.

But the real confusion was whether that was good news or bad news. Did we want disappointing employment statistics? How would the “new” Federal Reserve react? Would they step way from the taper or embrace it as hawks exert their philosophical position?

More importantly, how is a January Rally supposed to take root in the remaining 14 trading days in this kind of muddled environment?

Personally, I like the way the year has begun, there’s not too much confusion about that being the case, despite my first week having been mediocre. While the evidence is scant that the first five days has great predictive value, there is evidence to suggest that there is no great predictive value for the remainder of the year if January ends the month lower. I like that because my preference is alternating periods of certainty and confusion, as long as the net result remains near the baseline. That is a perfect scenario for a covered option strategy and also tends to increase premiums as volatility is enhanced.

I prefer to think of it as counter-intuitive rather than confusing.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum and “PEE” categories this week (see details).

There’s not much confusion when it comes to designating the best in large retail of late. Most everyone agrees that Macys (M) has been the best among a sorry bunch, yet even the best of breed needed to announce large layoffs in order to get a share price boost after being range bound. However, this week the embattled retail sector seems very inviting despite earnings disappointments and the specter of lower employment statistics and spending power.

Finding disappointments among retailers isn’t terribly difficult, as even Bed Bath and Beyond (BBBY), which could essentially do nothing wrong in 2013 more than made up for that by reporting its earnings report. While earnings themselves were improved, it was the reduced guidance that seems to have sent the buyers fleeing. There was no confusion regarding how to respond to the disappointment, yet its plummet brings it back toward levels where it can once again be considered as a source of option premium income, in addition to some opportunity for share appreciation.

L Brands (LB) shares are now down approximately 12% in the past 6 weeks. It is one of those stocks that I’ve owned, but have been waiting far too long to re-own while waiting for its price to return to reasonable levels. Like Bed Bath and Beyond it offered lower guidance for the coming quarter after heavy promotions that are likely to reduce margins.

Target (TGT) has had enough bad news to last it for the rest of the year. While it recently reported that it sales had been better than expected prior to the computer card data hack, it also acknowledged that there was a tangible decline in shopping activity in its aftermath. Its divulging that as many as 70 million accounts may have been compromised, it seemed to throw all bad news into the mix, as often incoming CEOs do with write-downs, so as to make the following quarter look good in comparison. For its part, Target, recovered nicely on Friday from its initial price decline and has been defending the $62.50 line that I believe will be a staging point higher.

Sears Holdings (SHLD) on the other hand doesn’t even pretend to be a ret
ailer. The promise of great riches in its real estate holdings is falling on deaf ears and its biggest proponent and share holder, Eddie Lampert, has seen his personal stake reduced amid hedge fund redemptions. Shares plummeted after reporting disappointing holiday sales. What’s confusing about Sears Holding is how there is even room for disappointment and how the Sears retail business continues, as it has recently been referred to as a “national tragedy.”

But I have a soft spot in my heart for companies that suffer large event driven price drops. Not that I believe there is sustainable life after such events, but rather that there are opportunities to profit from other people like me who smell an opportunity and add support to the share price. However, my time frame is short and I don’t necessarily expect investor largesse to continue.

I did sell puts on Sears Holding on Friday, but would not have done so if the event and subsequent share plunge had been earlier in the option cycle. Sears Holdings, only offers monthly options and in this case there is just one week left in that cycle. If faced with the possibility of assignment I would hope to be able to roll the puts options forward, but do have some concerns about a month long exposure, despite what would likely be an attractive premium.

While there’s no confusion about the nature of its products, Lorillard’s (LO) recent share decline, while not offering certainty of its end, does offer a more reasonable entry point for a company that offers attractive option premiums even when its very healthy dividend is coming due. Like Sears Holdings, Lorillard only offers monthly option contracts, but in this case I have no reservations about holding shares for a longer time period if not assigned.

Conoco Phillips (COP) has been eclipsed in my investing attention by the enormous success of its spin-off Phillips 66 (PSX), but had never fallen off my radar screen. While waiting for evidence that the same will occur to Phillips 66 through its own subsequent spin-off of Phillips 66 Partners (PSXP), my focus has returned to the proud parent, whose shares appear to be ready for some recovery. However, with a dividend likely during the February 2014 option cycle, I don’t mind the idea of shares continuing to run in place and generate option income in a serial manner.

Perhaps not all retailers are in the same abysmal category. Lowes (LOW), while not selling much in the way of fashions or accessories and perennially being considered an also ran to Home Depot, goes ex-dividend this week and has traded reliably at its current level, making it a continuing target for a covered option strategy. I’ve owned in 5 times in 2013, usually for a week or two, and wonder why I hadn’t owned it more often. Following its strong close to end the week I would like to see a little giveback before making a purchase. Additionally, since the ex-dividend date is on a Friday, I’m more likely to consider selling an option expiring the following week or even February, so as to have a greater chance of avoiding early assignment of having sold an in the money option.

Whole Foods (WFM) also goes ex-dividend this week, but its paltry dividend alone is a poor reason to consider share ownership. However, its inexplicable price drop after having already suffered an earnings related drop makes it especially worthy of consideration. While I already own more expensively priced shares and often use lesser priced additional lots in a sacrificial manner to garner option premiums to offset paper losses, I’m inclined to shift the emphasis on share gain over premium at this price level. Reportedly Whole Foods sales suffered during the nation wide cold snap and that may be something to keep in mind at the next earnings report when guidance for the next quarter is offered.

Although earnings season will be in focus this week, especially with big money center banks all reporting, I have no earnings selections this week. Instead, I’m thinking of adding shares of Alcoa (AA) which had fared very nicely after being dis-invited from membership in the DJIA and not so well after leading off earnings season on Thursday.

While I typically am niot overly interested in longer term oiutlooks, CEO Klaus Kleinfeld’s suggestion that demand is expected to increase strongly in 2014 could help to raise Alcoa’s margins. Even a small increase would be large on a percentage basis and could easily be the fuel for shares to continue their post DJIA-explusion climb.

Finally, I was a bit confused as Verizon’s (VZ) shares took off mid-day last week and took it beyond the range that I thought my shares wouldn’t be assigned early in order to capture the dividend. In the absence of news the same didn’t occur with shares of AT&T which was also going ex-dividend the next day and other cell carriers saw their shares drop. In hindsight, the drop in shares the next day, well beyond the impact of dividends, was just as confusing. Where there is certainty, however, is that shares are now more reasonably priced and despite their recent two day gyrations trade with low volatility compared to the market, making them a good place to park money for the defensive portion of a portfolio.

Traditional Stocks: Bed Bath and Beyond, Conoco Phillips, L Brands, Lorillard, Target, Verizon

Momentum Stocks: Alcoa, Sears Holdings

Double Dip Dividend: Lowes (ex-div 1/17), Whole Foods (ex-div 1/14)

Premiums Enhanced by Earnings: none

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

Weekend Update – June 30, 2013

The hard part about looking for new positions this week is that memories are still fresh of barely a week ago when we got a glimpse of where prices could be.

When it comes to short term memory the part that specializes in stock prices is still functioning and it doesn’t allow me to forget that the concept of lower does still exist.

The salivating that I recall doing a week ago was not related to the maladies that accompany my short term memory deficits. Instead it was due to the significantly lower share prices.

For the briefest of moments the market was down about 6% from its May 2013 high, but just as quickly those bargains disappeared.

I continue to beat a dead horse, that is that the behavior of our current market is eerily reminiscent of 2012. Certainly we saw the same kind of quick recovery from a quick, but relatively small drop last year.

What would be much more eerie is if following the recovery the market replicated the one meaningful correction for that year which came fresh off the hooves of the recovery.

I promise to make no more horse references.

Although, there is always that possibility that we are seeing a market reminiscent of 1982, except that a similar stimulus as seen in 1982 is either lacking or has neigh been identified yet. In that case the market just keeps going higher.

I listened to a trader today or was foaming at the mouth stating how our markets can only go higher from here. He based his opinion on “multiples” saying that our current market multiple is well below the 25 times we saw back when Soviet missiles were being pointed at us.

I’ll bet you that he misses “The Gipper,” but I’ll also bet that he didn’t consider the possibility that perhaps the 25 multiple was the irrational one and that perhaps our current market multiple is appropriate, maybe even over-valued.

But even if I continue to harbor thoughts of a lower moving market, there’s always got to be some life to be found. Maybe it’s just an involuntary twitch, but it doesn’t take much to raise hope.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend or Momentum categories. With earnings season set to begin July 8, 0213, there are only a handful of laggards reporting this coming week, none of which appear risk worthy (see details).

I wrote an article last week, Wintel for the Win, focusing on Intel (INTC) and Microsoft (MSFT). This week I’m again in a position to add more shares of Intel, as my most recent lots were assigned last week. Despite its price having gone up during the past week, I think that there is still more upside potential and even in a declining market it will continue to out-perform. While I rarely like to repurchase at higher prices, this is one position that warrants a little bit of chasing.

While Intel is finally positioning itself to make a move into mobile and tablets and ready to vanquish an entire new list of competitors, Texas Instruments (TXN) is a consistent performer. My only hesitancy would be related to earnings, which are scheduled to be announced on the first day of the August 2013 cycle. Texas Instruments has a habit of making large downward moves on earnings, as the market always seems to be disappointed. With the return of the availability of weekly options I may be more inclined to consider that route, although I may also consider the August options in order to capitalize somewhat on premiums enhanced by earnings anticipation.

Already owning shares of Pfizer (PFE) and Merck (MRK), I don’t often own more than one pharmaceutical company at a time. However, this week both Eli Lilly (LLY) and Abbott Labs (ABT) may join the portfolio. Their recent charts are similar, having shown some weakness, particularly in the case of Lilly. While Abbott carries some additional risk during the July 2013 option cycle because it will report earnings, it also will go ex-dividend during the cycle. However, Lilly’s larger share drop makes it more appealing to me if only considering a single purchase, although I might also consider selling an August 2013 option even though weekly contracts are available.

I always seem to find myself somewhat apologetic when considering a purchase of shares like Phillip Morris (PM). I learned to segregate business from personal considerations a long time ago, but I still have occasional qualms. But it is the continued ability of people to disregard that which is harmful that allows companies like Phillip Morris and Lorillard (LO), which I also currently own, to be the cockroaches of the market. They will survive any kind of calamity. It’s recent under-performance makes it an attractive addition to a portfolio, particularly if the market loses some ground, thereby encouraging all of those nervous smokers to sadly rekindle their habits.

The last time I purchased Walgreens (WAG) was one of the very few times in the past year or two that I didn’t immediately sell a call to cover the shares. Then, as now, shares took, what I believed to be an unwarranted large drop following the release of earnings, which I believed offered an opportunity to capture both capital gains and option premiums during a short course of share ownership. It looks as if that kind of opportunity has replicated itself after the most recent earnings release.

Among the sectors that took a little bit of a beating last week were the financials. The opportunity that I had been looking for to re-purchase shares of JP Morgan Chase (JPM) disappeared quickly and did so before I was ready to commit additional cash reserves stored up just for the occasion. While shares have recovered they are still below their recent highs. If JP Morgan was not going ex-dividend this trade shortened week, I don’t believe that I would be considering purchasing shares. However, it may offer an excellent opportunity to take advantage of some option pricing discrepancies.

I rarely use anecdotal experience as a reason to consider purchasing shares, but an upcoming ex-dividend date on Darden Restaurants (DRI) has me taking another look. I was recently in a “Seasons 52” restaurant, which was packed on a Saturday evening. I was surprised when I learned that it was owned by Darden. It was no Red Lobster. It was subsequently packed again on a Sunday evening. WHile clearly a small portion of Darden’s chains the volume of cars in their parking lots near my home is always impressive. While my channel check isn’t terribly scientific it’s recent share drop following earnings gives me reason to believe that much of the excess has already been removed from shares and that the downside risk is minimized enough for an entry at this level.

While I did consider purchasing shares of Conoco Phillips (COP) last week, I didn’t make that purchase. Instead, this week I’ve turned my attention back to its more volatile namesake, Phillips 66 (PSX) which it had spun off just a bit more than a year ago. It has been a stellar performer in that time, despite having fallen nearly 15% since its March high and 10% since the market’s own high. It fulfills my need to find those companies that have fared more poorly than the overall market but that have a demonstrated ability to withstand some short term adverse price movements.

Finally, I haven’t recommended the highly volatile silver ETN products for quite a while, even though I continue to trade them for my personal accounts. However, with the sustained movement of silver downward, I think it is time for the cycle to reverse, much as it had done earlier this year. The divergence between the performance of the two leveraged funds, ProShares UltraShort Silver ETN (ZSL) and the ProShares Ultra Silver ETN (AGQ) are as great as I have seen in recent years. I don’t think that divergence is sustainable an would consider either the sale of puts on AGQ or outright purchase of the shares and the sale of calls, but only for the very adventurous.

Traditional Stocks: Abbott Labs, Eli Lilly, Intel, Mosaic, Phillip Morris, Texas Instruments, Walgreens

Momentum Stocks: Phillips 66, ProShares UltraSilver ETN

Double Dip Dividend: Darden Restaurants (ex-div 7/8), JP Morgan (ex-div 7/2)

Premiums Enhanced by Earnings: none

Remember, these are just guidelines for the coming week. Some of the above selections may be sent to Option to Profit subscribers as actionable Trading Alerts, most often coupling a share purchase with call option sales or the sale of covered put contracts. Alerts are sent in adjustment to and consideration of market movements, in an attempt to create a healthy income stream for the week with reduction of trading risk.