The Week Ahead..

8am The coming week will be a good tell as to what the market is truly thinking. There is very little in the way of vital economic data. The most important piece of information about the economy announced this week will be the retail sales data on Thursday. As we all know, the economy in the US is mostly based on the consumer. If we begin to see strength from the consumer, we will know for sure that the consumer is crawling out of their hole. That is yet another positive indicator for the overall economy.

We will get a true indicator of what the market is thinking because there will be little in the way of fundamental "noise" moving the market in one direction or the other. We will see how, on the whole, the big institutions feel about the market. While the futures are lower this morning, I would not be surprised at all to see the market end the day higher. There is a lot of money on the sidelines waiting to go to work and it tends to move in on Mondays. While anything can happen, I would say the tendency is for the market to end the day higher.

That said, lets look at some trading ideas. My (WWE) trade from last week is currently up about 4% from where I bought it. I wanted to buy in stages and it is running a little right now. I want to see the action when it goes ex dividend next week. I probably will not add any more to that position until then. My Gold (GLD) November call options are down quite a bit right now. I bought the calls (as anyone should) with the knowledge and expectation that they could go to zero if the trade doesn't work. I think it will work longer term because of the inflationary pressures on the economy, but I might have to suffer a little short term. The (PALM) puts I bought last week are going to be up pretty nicely today. The stock is down about 5% in the pre-market this morning. I think it has farther to fall. This trade could be a double pretty shortly. I am fairly confident this will be a very profitable trade.

As for a new idea today, I am looking at General Mills (GIS). They raised their outlook for the year today. Whenever a company announces higher earnings guidance between earnings announcements, it is almost always a bullish sign. About 85% of the time, this is a good indicator that you will see a strong run going into earnings. Here is how the trade works. Buy today, even if the stock trades up a little. The purchase should be about 1/3 of a position. The next 1/3 should be if the stock trades lower than today (about 5% lower). If it goes lower than that (5% lower than the second buy), buy another 1/3. Each purchase should be used to lower your cost basis going into earnings on July 1st before the market opens. At that point, we should see some analyst upgrades, an earnings beat, and the stock should head higher. That will be the decision point. If you have a healthy profit at that point, I would sell into the strength. If you don't have a nice profit at that point, I would be looking to sell some out of the money calls to lower your cost basis further. This is not a stock that moves dramatically from one day to the next. If you trade this correctly, you can create a profit through strategic purchases, collecting dividends, and selling calls even if the stock trades lower than it will today. This is a pretty low risk idea, I like those a lot. Until next time, stay low risk..