Well I said it was going to be a tricky day and it was – for the shorts!
After taking what, to me, was a surprising early dip, the indices perked back up around 12:30. As I said in comments when I came back at 1:20: “Holy Buying Opportunities Batman!”
In case new readers missed it, I talked about all this happening just before Halloween when I decided to flip into bull mode.
We got great entry positions on everything we wanted and didn’t have to wait long to feel good about our purchases.
Did we hit all of our watch levels?
Dow 12,200 – check. S&P 1,390 – check. NYSE 8,873 – check. Nasdaq 2,400 – check. Russell 785 – check. SOX 480 – check. Transports 2,650 – check.
Isn’t this the part where someone says “prepare for liftoff“? We used the rocket example to assess the situation back on 10/27 so I won’t rehash it here but we are certainly in launch mode and now we have to see if we have enough fuel to reach escape velocity.
One part of the economy that may be succumbing to gravity (finally) is the energy sector. XOM could not get positive this morning despite a big open for oil and it only attracted 17M shares worth of buyers for the 3rd time in 2 weeks.
Volume has been so low on XOM this past month that it has pulled the 3 month daily average below 22M for the first time in 6 months, when the stock traded at $60. Still, at $74 a share, 17M shares represent $1.25B a day.
We already know that XOM is buying about 10% of that themselves, at a cost of $100M per day but they still need to pull $1.1B into that roach motel of theirs in order not to panic the ones that are already in and starting to wonder why the floor is so sticky.
Here’s a funny chart I’ll entitle “A Tale of Two Commodities.”
Oil itself had a rough day, so we won’t pick on it. Crude tested $59.15 early but then drifted before ending the day very near the low at $58.28.
Here’s an interesting 3 year comparison chart where the heavy volume selling does not seem to bode well for crude at this level. Notice how far it’s veered from the green projected path this week!
We’ll see if we hold below our $58.39 target but that’s a lot to ask on oil’s first day below! Inventories should be very interesting tomorrow…
Gold barely budged at $627 as the dollar stood pat ahead of tomorrow’s numbers.
On the whole, it was an amazing day, reversing a week of consolidation in one grand move. If we can hold this tomorrow, we may be in for the next leg up of the rally!
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Of course we did well today, monkeys with dartboards were picking 80% winners so I’m not proud but I’ll still take credit for these picks:
I though ANF was going well, we got in at $3.70 on the Dec $75s and sold the Nov $75s for $2.50 but the stock is getting trashed in the AH because it “only” met estimates of 43% earnings growth! I will likely be buying out my caller first thing…
DELL Jan $27.50s came in at .55 and finished the day at .70 (up 27%).
I missed DHI but what a day! The Dec $25s finished at .90 from a .45 open.
On Halloween I asked the question: “What if you spin off an evil division and no one wants it? HALmay be about to find out as they put investigation-pending KBR up for bids.” Well before they even get the offer out, the redcoats are giving them problems!
Just for kicks I picked up the HD Dec $35 puts for .15 as they were down .45 on the day.
We got half out of LOW Dec $32.50s at .35 (up 25%) as the .28 basis was from a DD we did not want to risk.
We debated whether or not it was time to short LVS but not with the market on fire like this!
I had to take the OIH Jan $135 puts for $5.70 and sell the Dec $135 puts for $3.70 as there are too many ways to win.
We picked up the QQQQ Dec $44s which finished up .15 at .85.
I may have been a little greedy looking for low $40s on my SNDK call so let’s keep an eye on them as they retest $48.
TIF Jan $35s didn’t move much but finished at $2.60 (up 18%).
TIVO got away from us with a 7% gain!
UCTT was suggested by MJ and it’s a really great company so we’re going to keep an eye on it if the SOX stay strong.
WSM Dec $35s zoomed up to $1.25 (up 79%) after a big dip.
That poor guy with the 94,000 XLE $53 puts that were bought for $2 still has them at .02! Lesson for us – don’t follow the money!
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1Dutch asked about SBUX and in answering him I talked myself into them. Here’s the logic:
SBUX – well we have strong consumer numbers so I doubt anyone’s cutting back on their lattes. Coffee was cheaper in Q3 than Q2 and 5% cheaper than last Q3.
We know they have more stores and we know they’ve straightened out their new drink glitches and we know they added breakfast in a lot of places and sandwiches. Same store sales were up and I think the China numbers should be good too.
They bought back $550M in stock (2%) and 17 analysts only think they will beat last Q3 by a penny (.17) even though they did .182 last Q and sales look stronger (with coffee down 8%).
There’s health care (they do that for their people) and shipping and materials but I think they have the pricing power to keep that under control and I bet they are getting better rent deals too (something no one pays attention to but with 10 stores a day opening up, it does matter).
I was kind of hoping we’d get a sell-off but I think this morning might have been it. Dec $40s for $1 are the gutsy way to go but you can also do the Dec $37.50s for $2.25 and sell the Nov $37.50s for $1.50 leaving you with a pretty safe .75 spread on Friday.
I’m going the dangerous way but not too crazy.
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I apologize to Ann Coulter, who I find very amusing but this is one funny quiz! I got 3 wrong…
