• This Week's Trade Ideas:
Bullish Ideas: Johnson Controls Intl Plc > JCI > $40.47 Last.  Buy the Feb. 16th 40 Calls for $1.55 or less with a close or anticipated close above $40.60 in an up market with expectations for continued strength in the major indices.  Earnings Release 1/31*

Gulfport Energy > GPOR > $13.11 Last.  Buy the Feb. 16th 12.5 Calls for $1.10 or less with a close or anticipated close above $13.25 in an up market with expectations for continued strength in the major indices.  Earnings Release 2/12*

Bullish Mentions: AIG, NUGT, NEM, IR, EQT, BX, FOSL.

Bearish Ideas: None at this time.

Bearish Mentions: None at this time.

• Market Overview:
The song remains the same this week as it was last week. The gang has all the major indices looking about the same (nearly identical). So…we’ll keep it simple with the SPYs.

• Below the Radar:
Yet again,  S i g n s   o f   S t r e t c h  remain the theme in this week’s BTR.

• Options Academy:
The fascination with earnings releases seems almost limitless so we’re going to tackle a very common question that crops up quite frequently during “the season”.

Our “Spider Sense” tells us that the Great Melt-Up REMAINS too Vertical…

But…we can’t pick a fight with it just yet!

The Trade(s):

We strongly suggest attending tomorrow morning's Advantage Point Morning Call for full details with respect to these idea(s), last week’s and options education.

Bullish Ideas: Johnson Controls Intl Plc > JCI > $40.47 Last.  Buy the Feb. 16th 40 Calls for $1.55 or less with a close or anticipated close above $40.60 in an up market with expectations for continued strength in the major indices.  Earnings Release 1/31*

Gulfport Energy > GPOR > $13.11 Last.  Buy the Feb. 16th 12.5 Calls for $1.10 or less with a close or anticipated close above $13.25 in an up market with expectations for continued strength in the major indices.  Earnings Release 2/12*

Bullish Mentions: AIG, NUGT, NEM, IR, EQT, BX, FOSL.

Bearish Ideas: None at this time.

Bearish Mentions: None at this time.

Outlook:

Last week in this mini Outlook section we called for a breather.  We’re taking a victory lap this week as a result!  The indices paused their upward ascent for a NANOSECOND!!! 😊

There was a little trepidation, due to the government shutdown nonsense of course, but, Monday’s relief action put that to bed for good.  We expect the earnings news to make even more merriment possible IF the gang chooses to do so.

Technicals:

Will be discussed in-depth in the Advantage Point Morning Call webinar.

Fundamentals:

These trade idea(s) and mentions are technically-driven.

(Editor's note: This trade idea may be updated periodically, in keeping with market conditions. It is intended solely for educational purposes.)

Recap of Last Week:

Government shutdown chatter hovered over the markets last week and was blamed for brief selloffs and then used to justify a relief rally on Monday.  Of our 3 ideas, 1 Bull Trigger, 1 Bear Triggered and the other bear was never able to break below our trigger.  We’re still keeping an eye on both ideas that triggered.

KHC, the bull idea, shot up, backed off to find and possibly convert resistance to support, and now is close to really moving higher.  It needs a little more push and a bullish market.  It remains above it’s trigger level.

OLN, the triggered bear idea, fell off big, then rallied, then stalled.  It’s still below our trigger level but we want it down soon because we don’t want to fight a rallying market for too long if the stock we’re in doesn’t drop from its own weight.

The song remains the same this week as it was last week.  The gang has all the major indices looking about the same (nearly identical).  So…we’ll keep it simple with the SPYs:

We’re even more super-stretched than we were last week.  The euphoria is even more euphoric etc., etc.  The snozberries taste like snozberries… It’s nearly the same thing, day after day, week after week.  And, as we noted last week:

“Things have gotten statistically absurd so we’re going to need a deft touch.  It’s hard to bet against a strong trend like this one but we also know that we’re not early birds if we’re to jump in as big bulls in most stocks right now.  We shall do our best!

…Sure, it can get even more stretched but not by that much in most cases.  Late to get in yet too early to counter-trend short it.  That’s really the story everywhere we look.”

The most recent mini-leg of the rally is fresh enough that it can continue as well.  All in all, this mix makes for tough sledding as the current leg is has held support and continues to do so at the time of this writing.  We’re forced to settle where we have time and time again over the past year:  Go with the flow!  That’s it until it changes.

There’s a middling economic calendar this week but earnings releases and guidance should provide enough propellant to make things fun should they decide to do so.

Yet again,  S i g n s   o f   S t r e t c h  remain the theme in this week’s BTR.

This the best start to a year for Global Equities EVER! (see above)

Not surprisingly, (Thank You Central Banksters, Bogus Accounting Measures, Share Buybacks and last but not least, Bubblevision!), this:

They can’t get enough of everything, including RISK!!!

Now, back to BOA guardedly getting all jazzed up!:

“We here raise our 2018 year-end S&P 500 target to 3000 (from 2800), reflecting upside forecasted by four of our five target models, as well as our 6% higher normalized EPS forecast reflecting the recurring impact from tax reform.

We are watching for signs to temper our enthusiasm on the S&P 500. And with 11 of our 19 bear market signposts having been triggered, the risk-adjusted reward of stocks appears less compelling. But note that since 1968, at least 80% of our signposts have been signaled ahead of prior market peaks.”

Our personal favorite is the last one, S&P 500 Market Cap to GDP!  Proving yet again that this market is the most out of step with underlying economic performance than nearly all others in our history!  Yet, we know and in fact preach, that it will matter not until it matters.

Earlier today, economist Robert Shiller of Nobel Prize and “Shiller PE Ratio” fame was interview on Bubblevision err CNBC and warned the yahoos there that market corrections can come with little notice and there won’t necessarily be any forewarning that conveniently appears prior.  Speaking of the Shiller PE Ratio:

The only time it has been higher was when “profits don’t matter, it’s clicks man” or propaganda to that effect dominated CNBC’s airwaves.

And…Finally, a little perspective on what they’ve wrought beyond some of the most historic bubblicious developments of all time.  The asset inflation gambit that launched into hyperdrive approximately 9 years ago, courtesy of the FED and their central banker friends around the globe, has worked like a charm.  Need proof?  Presented without commentary:

Bank and Roll like a Test Pilot!

The fascination with earnings releases seems almost limitless so we’re going to tackle a very common question that crops up quite frequently during “the season”.

Earnings reports are in full swing and we know that well as the majority of folks that attend our live weekend events tend to remind us of that fact, albeit, inadvertently.  This week brought the ever-popular: “I heard something about a money straddle on TV that can tell you how far a stock will move when the earnings come out.  What’s that all about?”  Which was quickly followed by: “I’ve heard that before too, can you cover that for us?”  We can, and we shall… 

Through the software magic of “ThinkBack”, behold Apple’s Feb. 2^nd ATM straddle price with the stock closing at $177.00 on the button yesterday:

Now, the ATM strike is actually $177.50, and that ATM’s straddle value is about $8.20, and there’s more than a week’s time to the earnings release in early Feb., however, we’re just going to round things off and summarize things succinctly for those that share this curiosity with respect to earnings moves by way of this graphic:

Well…while intentionally avoiding mathematical precision, look at it this way, the options markets are thought to be forecasting a little over an $8.00 move between now and with the earnings release in AAPL from the $177.50 strike price.  We arrive at that conclusion based on the observation that the markets are willing to pay $8.20 for the aforementioned ATM straddle in focus.  They wouldn’t pay that much (or so the thinking goes), if they didn’t believe a move of that price magnitude was not only possible but looming.  The options markets are presumed to have a “built in intelligence” and ability to forecast such matters.

Anyway, this is how it’s done, but in reality, we should wait until we’re much closer to read into the divinations of the ATM earnings straddle.  We’re too far away and much could change between now and then.  When we’re right on top of earnings, that’s when the straddle will really be all about the post-earnings release reactions.  Until then, let’s see how things play out in AAPL between now and the earnings date which will be upon us shortly.

If you have questions, ask away in this week's Advantage Point Morning Call webinar.