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Our indicators are giving bearish readings for the third week in a row, but we could see a rally if the House of Representatives passes the Republicans’ health care bill. A vote on the bill was originally scheduled to take place yesterday after the close of trading, but it has since been pushed back to today.
My feeling is that the health care bill will pass eventually, but, after a short-lived rally, the market will likely start to resume its correction. If it doesn’t go through, then we’ll probably have a more serious decline.
From a valuation standpoint, I’m still leaning toward the bearish camp. Plus, market breadth is not as strong as it has been, as the number of stocks advancing has been shrinking relative to the number of stocks that are declining.
Retail is a particularly weak link, as I’ve mentioned before, so today I’m recommending a bearish play on G-III Apparel Group, Ltd. (NASDAQ:GIII), best known for operating stores like Donna Karan, Wilsons Leather and G.H. Bass & Co.
Buy to open the GIII May 20 Puts (GIII170519P00020000) at $0.80 or lower.
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