While I don’t want to put too much pressure on it, today may be the most important trading day of the year.
There are a lot of people who believe the adage: “As goes January, so goes the year” and “As goes the first week of January, so goes the month.”
Now we have a lot of cushion today, it would take close to a 2% drop in the indexes to turn this week negative so I’m getting very optimistic and I will predict a strong day today.
The foreign markets continue to show strength but a huge amount of money has been flowing into US funds and stands ready to be deployed but I still think there may be some correction first.
Oil is stubbornly rising today, getting dangerously close to $64. This will be great for our oil plays but bad for the DOW. There are no fundamentals driving the price up, inventories are well stocked and there will be a severe crash in oil (like nat. gas) if it doesn’t get very cold soon.
Gold had something of a rebound in Asia but it was the US markets that took it down last time so I will want to see it hold $530 before jumping back into our gold plays.
Jobs will be the big story today but I really see 5% unemployment as “full employment” so I think the weak jobs number will be great for the markets as it chases away the Fed.
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GOOG is on a tear, bashing through $450 yesterday and will have a lot of action into today’s CES presentation of “Something big involving media.” With the stock up $40 since Friday, it had better be a $10Bn idea!
Now I am certainly no Google basher, I called this recent action way back on 11/12 when Google was a TOTD and way down at $390 and my $3,500 price target for 2015 is still the street high (but others are catching up fast) but I do urge caution at this level.
We may see $460 today but it will be a very tough barrier to get past. Both GOOG and YHOO partnered with MOT to provide enhanced web services on the world’s most popular phones and I feel safer taking a position in YHOO at this point than Google.
With earnings coming up, I think YHOO will certainly beat estimates for the quarter and the year while GOOG has to fire on all cylinders to hit the $5.88 per share the street is expecting. Google is expected to beat, not hit, their targets which has gotten tougher and tougher as more analysts jump on their bandwagon.
Yahoo, on the other hand, is like the forgotten sister that nobody wants to date. Earnings will be up 100% this year but the stock has gone nowhere while younger sister google has almost doubled. At a certain point, Google will settle down with a lovely price point and people will suddenly realize that Yahoo is still attractive and available.
I like owning YHOO straight up and selling the calls but I also think the the Jan ’07 $30s at $13.75 are very attractive with a $2.40 premium. You can sell the Jan $42.50 calls right away for $1.10 (a ridiculous $2.50 premium) for a quick 8% and a nice ride into Jan 16th earnings but you will miss out on a big jump if they come out better than expected. Still, you would get called away at a 20% profit in just 2 weeks so it’s a nice, safe way to play it.
GOOG earnings should come just after Yahoo’s and, if you must play that, I would recommend the spread of the March $500 call for $13.45 and the March $410 put for $12.65. A $30 move in GOOG either way should put you in the money but it takes a strong stomach to ride out this sort of spread. You can offset this play by selling the Feb $520 call for $5.90 and the Feb $390 put for $4.85 but you are capping your gain at around $20 if the stock really takes off or plummets before they expire.
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So many oil companies may do well today. Following the Valero rule I like SU, SUN, HAL, BJS, NBR, OII and, of course, COP.
MOT should have another good day today with a strong showing at the CES show and the above mentioned partnerships with YHOO and GOOG.
TASR won yet another lawsuit so expect the usual 5% pop from that news. One of these days the momentum will stick and this stock will really take off but it might take a positive guidance report.
IBM took a necessary and painful move (for its employees) by freezing its pension plan. This takes them off my list of companies that will die from pension overdose (its nice not to have unions) and makes them a solid buy. With earnings coming out on Jan 16th the options are a little pricey but I like the Feb $85s at $2 (a $3.50 premium) enough to go for my first Trade of the Day for the new year!
BBY, which we picked on the 28th, will pop today but I think it will open too high to give a good entry point if you are not already in it. I will wait and see how it handles the 50 dma of $46.25 before getting into this one.
