01/22/11 Weekend Update & Outlook - Bears Get The Best Of The Bulls - Apple (NASDAQ:AAPL)

Broader Market Weekly Performance:

Dow +0.73%

S&P -0.76%

Nasdaq -2.37%

Russell -4.26%

VIX +8.76%

BookingAlpha

MARKET UPDATE:

The market took it from all sides this week. Headwinds from uncertain economic data were augmented by Apple's (AAPL) Steve Jobs announcing another medical hiatus. Jobs will remain CEO but the news sent AAPL tumbling over -6% for the week. Excluding the Dow, markets logged their first negative week since November. Commodities also fell as China announced it would continue attempting to curb inflation.

Here is a quick rundown:

Pros:

-Unemployment fell but included a “seasonality caveat”

-Existing Home Sales exceeded forecasts

-China Q4 GDP, Industrial Production, & Retail Sales all above expectations

-European bonds rally on rumor of supported debt buyback (aka: bailout)

Cons:

-Asian Markets fell on fears of rate hikes in response to solid economic data

-Steve Jobs medial hiatus press release

-Evidence of inflation in NY & Philly Manufacturing data

Profit taking re-entered the market this week after the huge run starting in November. Earnings were solid and helped offset the mixed economic data releases. Good news is priced into the market but the gravity defying advance has been abated. Less than 20% of companies have released earnings yet this earnings cycle and I anticipate solid numbers to continue to be released.

While our markets seem “healthy”, Asian markets are in a clear downtrend. They are supposed to be the engine to pull us out of the recession and are clearly faltering. This will have an effect on our economy and markets so it is a good idea to keep one eye on that part of the world.

I expect some more grind in the markets next week as earnings continue to be delivered and “surprise” to the upside. We may even see a run back to the S&P sub-1300 range for one last hoorah. However, the party is coming to a close. Some cracks became evident this week but I think we have another week or two before I would get short the market. Conversely, I would not get long here either. Short term (1-2 week) credit spread strategies look appealing right now but I would leave some distance on the downside with any put spreads in case the markets move lower more quickly than I anticipate.

Areas of support remain at S&P 1260, 1250, 1225ish, and ultimately at 1175. Resistance remains at S&P 1295, 1300, & 1310.

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BOOKINGALPHA UPDATE:

It was a busy Options Expiration week at BookingAlpha. Numerous positions expired worthless for full profits during Friday's OpEx and a couple new positions were opened as well.

The AAPL Iron Condor put on Tuesday in response to the Steve Jobs news and the anticipated earnings expired Friday for a homerun trade. Clients gained 38%+ on this trade lasting only 4 days!

Our SPY Iron Condor also expired for full profit as well providing a handy 15%+ gain for the 2 week trade.

The QQQQ debit put spread worked out perfectly as overbought conditions were worked off in this week's pullback allowing us a 5%+ gain on the spread in only 9 days.

The plagued ORCL strategy from Dec was finally closed this week as well. It was quite a creative trade (due to necessity) and the hedge employed helped mitigate the loss incurred. Unfortunately, ORCL leaped to a new high on Thursday and Friday as we were unwinding the position; which was inopportune timing to say that least after 2 weeks of barely any movement in the stock at all. But, we got it closed, limited our losses and lived to fight another day which is key in this business.

2 new spreads were opened at the end of this week in response to the pullback that has occurred in the market. One of our routine SPY credit spreads was executed Thursday and an IWM credit spread was opened Friday.

IWM got hammered this week and is reading very oversold in the short term. I emphasize short term because I think medium/longer term it is overbought like the entire broader market. However, for the short term I think we could see some sideways action and maybe even a small snap-back. Any strength will benefit the position greatly and allow us to scalp a nice profit by the end of the week.

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