This is going to be great!
If you have been taking my advice you are loaded up with cash and ready for today. We have a lot of excellent indicators to guide us through the day, a benchmark Nasdaq component in crisis and a market moving oil report at 10:30.
Google, google, google, google. There, I said it. If you are not sick of it yet – you will be by 4pm! The higher it opens today, the more I want to short it. I will try to work into a new March spread based on momentum – look to the comment section of this article for intra-day updates.
The Nikkei dropped 169 pts today (1%, not a big move for them) but other Asian markets are flat. Europe had a bad start but improved nicely during the day (+ .5%) and I expect the same from our markets. Remember, if they aren’t buying world markets then ours must really be bad if no one wants that either! It means that global investors feel that cash is better than US stocks.
If the Dow holds 10,850 then it is superbull time but even 10,825 will be a great sign. The Nasdaq can’t help being pummelled today with heavyweight Google dropping $16Bn in value this morning and other techs having sympathy pains. This is patently ridiculous as any of those other companies would kill for Google’s numbers! If, somehow, the Nasdaq makes it back to 2,300 today, just buy anything that isn’t nailed down. 2,275 would be great but I will only be concerned if we fall below the 50 dma of 2,268.
The S&P will be the most rational indicator of the day and 1,280 will be the threshold test. If the S&P can’t shake this off (Google is not a member) then we will have to wait this out.
Gold was sold off in Asia and is recovering a bit in Europe, I think the US will take it back over $570 today but if not, get out of gold fast!
Oil is surprisingly strong coming in to what I think will be another strong inventory build and no cold snap in site.
Mortgage applications declined again, another blow to the housing market. PHM has earnings tomorrow and will give us a good indicator.
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Today we’ll see how those TWX March $17s perform. We picked them up Monday for .90 and it looks like we got the earnings we were hoping for and so-so guidance but no one seems very excited about it in pre-market. 8-(
It’s really up to BA to save the Dow today. I called this last Monday and I took a position on the $70 calls for $1 so I have my fingers crossed! The fear is that, like TXN, they will not be able to meet production demand without increasing costs. Boeing has been through enough of these cycles at this point to perhaps get it right.
If BA is well received then AIR, ATI, BEAV and TIE may benefit as well.
DVN had pretty good earnings but great growth in oil and gas reserves. If prices stay high, this company is way underpriced. Since nobody reads that far down a report there may be a nice buy-in opportunity on this one! They added 439M barrels to inventory, at $60 that’s like finding $25Bn this year so you could say that earnings are a little higher than they seem…
DUK also had blowout earnings, let’s take the profits on the July $27.50s today (should be 50% or so from yesterday’s $2).
If oil does stay strong today, I’m going to take those MUR $60 calls for .80 (a big gamble) we talked about yesterday.
I really like the SU $80 puts for $2.75 coming into the inventory report. Get out of (or do not initiated) the position the second VLO ticks up or if oil is still over $68! If the inventories build above 2M barrels, there could be a major sell-off in the oil patch.
Another oil short I am looking at is the SUN $90 puts for $1.30. Both of these trades are risky but I think we can get out with little damage (20-30%) if the inventory goes badly against us vs. the possibility of a huge gain if oil drops.
JBLU was way worse than expected. Stay away from that sector.
The MS/BLK deal may not be happening. BLK gained $20 (15%) since the rumor started but it’s not an optionable stock and I don’t short $135 securities (but if I did, I would).
PALM has been flying as RIMMs cut-off deadline looms. Regardless of the outcome, this legal hassle has certainly gained PALM market share that will be hard for RIMM to win back. I picked PALM way back at $30 so it’s hard to pick again at $39 but it still looks very good.
ESLR should get a boost today thanks the the President’s energy initiative. This one is already at an all-time high and makes no money so I am nervous. SPWR just can’t go any higher can it? By CY to take advantage if you miss the run on SPWR.
FCEL is also way high and BLDP will have a hard time living up to the hype. QTWW broke my heart once and I won’t let it again. So who’s left? The not so obvious CPST and my favorite from the left wheat field ADM! ADM controls most of the corn and wheat that Prez Bush wants to turn into Ethanol! Think of them as the next Exxon. The stock is already way up on strong earnings so I will be hoping for a pullback but buying in around $30. CPST I like straight up.
I don’t know why K went down yesterday but it looks like one to watch once it bottoms out – hopefully around $40.
MOT is a buy again. It’s been holding $22.50 nicely but was weak last year until April so I will wait just a little longer.
SYMC is dropping for the wrong reasons. They had a ton of acquisition costs but are doing well otherwise. I think the threat of MSFT in their sector is way overblown but I’m staying away for now.
VOLVY does not get the respect it deserves. Perhaps because nobody can pronounce Volvo Aktiebolaget without that special jelly they use in Sweden but it’s in the same hot sector as CAT but has 1/2 the p/e and better growth than they are being given credit for. Earnings are coming Friday and I like the July $45s for $5 (a $1.23 premium).
Yahoo may get beat up a bit today but the bottom line is that they did not lose share to Google, which means they went down far too much already!
MSFT faces a critical test of faith today. It would be easy for them to give up a lot of the $1.50 gain since earnings last week, remaining above $27.75 will be a sign of great strength for the stock.
TEN missed targets but gained 10% since Thursday, easily taking out the all-time high yesterday on strong volume. The $20 calls are way underpriced at $2 but I would wait for a pullback opportunity and buy on the reverse.
LVS has got to be kidding with this price! The p/e is now 204 and they are now the world’s largest casino by market cap, although they earn less than 1/4 of HET or MGM’s earnings. There is no logic to this price at all so I am shorting out of principal with JUN $50 puts for $4. This will give them enough time to blow both earnings and their Singapore development bid (they already lost their partner). This was a very successful put in the past, check out this past post for a summary of why this stock is just no good: http://philstocks.blogspot.com/2005/12/viva-las-vegas-but-not-lvs.html
Stay nimble today, it’s going to be a wild ride!
