Fasten your seatbelts, it’s gonna be a bumpy ride!
Japan has gone back into freefall and Europe looks very weak so I can’t imagine what it is that people are seeing in the US futures at the moment. There is the incredibly thin possibility that money is moving to our relatively underpriced market but I still see too much fear factor to imagine a lot of people saying yes to US equities.
The dollar is down 1% this morning which will put upward pressure on commodities but should also help the indexes as our stocks do look 1% cheaper!
Had it not been for energy stocks last Friday, the markets would have lost another 1% so if oil prices improve they will drop and hold down any gains until new leadership emerges.
Gold is back touching $560 but Oil took a hard bounce off $69 which is the only actual good news I’ve seen.
Banks stocks are getting whacked by the rush to bankruptcy that we should have seen coming due to last year’s change in regulations (I get so mad when I miss obvious macros like that!).
Cash cash and more cash are your friends this week. The averages are now a lot closer to falling off a cliff (3% down) than retracing back to highs (5% up) so the best we can really hope for is that we have a new range that may be a little higher than last year’s.
Told you so on Google by the way! Let’s see if the upgrade parade can save them today.
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BIIB took a nice bounce off its 50 dma of $45 and it is a safer way to play the Tysabri review than ELN but Elan can be played by buying the stock and selling the Feb $15 calls for a ridiculous $1.20 (a 20% premium) and then selling the March calls which should be even more outrageous as the 3/7 review deadline nears.
NKE lost their CEO suddenly, never a good thing. We spotted trouble in the company way back on 11/17 when heavy insider selling put them on the radar. As there was a lot of optimism on the stock the $85 puts were fairly cheap at $2.10 and make for a nice day trade.
MCD is still a buy, their Chipolte IPO just raised it’s offering price by 15%. I still like the March $32.50s even though they are up 20% from our pick.
AAPL should go without saying if the Nasdaq starts back up, this company is everything Google promises to be but with actual verifiable performance over time!
My old favorite GENZ looks really good at $70. The 200 dma is $68.50 which gives a nice short-term floor so easing into this position slowly may be a nice way to go.
YHOO looks very good to me with a Nasdaq rebound. The Jan $30s can still be had for $7.30, up 5% from Friday’s pick.
I am baffled by the price action on BVN. The political situation is not unstable enough to justify a p/e that is heading below 12 in ’06, less than 1/2 of the industry mean. If gold holds over $560, I am all in on this stock.
NAK is up 10% from our Wednesday pullback buy-in of $5.60. I’m a buyer at $6 and a holder at $6.20.
MOT has a long way to go before it’s 200 dma of $20.50 but I can’t wait to buy it. I will be hoping for something close to $21 but will pay $22.50 if the market starts coming back.
EK is consolidating at $24 and will be a real buy if it shows strength against the markets but I would really like to see it test below $24 before jumping back in that old favorite.
Ford’s troubles should boost GM this week. DON’T BUY GM!!! Oh my gosh, I can’t believe you thought that for even a second… Let’s hope for GM to go up to $21.50 then buy the March $20 puts for $1.
JNJ is playing real hardball in the Guidant deal. If they are going to make a move, it will likely be today so, just for today – I like the $60 puts for .70 coming into tomorrow’s earnings. I think an announcement that they will pay more for GDT will hammer JNJ’s stock. This is a real gamble and the position can be wiped out by strong earnings tomorrow!
********** Trade of the Day – FRE and FNM **********
FRE and FNM are looking overbought and may run into additional regulatory headwinds that will curtail future earnings. It looks like this will be Greenspan’s last battle and, if Bernanke takes up the fight, the entire profit mission of these quasi-agencies may be called into question. I like the FNM March $50 puts for $1.30 and the FRE Feb $65 puts for $1.10.
