Thursday Morning

Hmmm. The Nikkei posted a new 5 year high. Other Asian markets are mixed and Europe is off a bit but also holding 5 year highs. We are looking to hold roughly the same technicals as yesterday: Dow – over 10,950 is positive, under 10,900 is negative Nasdaq – must hold 2,300 any negative move is reason to worry S&P – must hold 1,280 but 1,285+ will be very positive Yesterday the markets did very well despite oil and housing drops – that signals the start of a very positive leadership change. Those sectors may exhibit continued weakness today while the new leaders (large caps, manufacturing) pull back a bit so the morning, at least should be down. Oil is on hold pending natural gas inventories at 10:30 (and a flat dollar pending the ECB rate decision) but gold is on fire at $575! The consensus is a dead wrong expectation for a drawdown on natural gas – I can’t even imagine what these analysts are thinking – so look for a lot of action on any kind of gas build at 10:30. If oil drops below $66 after inventories, then expect the market to take off. Also, look for oil markets to partially trade on the sole basis of whether or not a rodent that is poked out of a box with a stick will or will not see his shadow (do you think he’s even looking?). I am not kidding! It’s a sunny day so the bull traders will be keeping the hope alive that it will mean 6 more weeks of winter. My take on this is that this winter has been just like Spring anyway so bring it on! Groundhog Day, by the way, is one of my favorite movies. We are really not that far up the socio/evolutionary development ladder from the people who sacrificed virgins to volcanos you know… If you take out the dollar factor yesterday, this will be gold’s second $7 move in a row. Perhaps it is the Iran factor (btw Iran, Iran, Iran, Iran has replaced Google, Google, Google, Google for today) but I think a lot of currency traders are hedging with gold until they figure out where the dollar/euro ratio will settle in March. This means that gold will be the play of the day as many of the stocks mistook yesterdays slight drop in price as a rebuke of the $570 level rather than the the 1.5% increase in the dollar it actually was. The worse the markets look today, the better for the gold stocks! January retail sales are officially out Feb 14th and everyone but you and me will be shocked that January sales will beat December this year. We are only a few years into the rapidly accelerating gift card phenomenon and it seems that no one really understands the impact. A strong, surprising retail report could provide a nice kick to the markets that will start today as individual stores report. Tomorrows jobs report may show a huge build in employment which can be a double edged sword as a tight labor market portends inflation and lower corporate profits. Of course since much of the increase should be in non-manufacturing it really means that outsourcing is not killing the country and we may be in for another strong cycle of growth. This just in (7:20 am) the US did, in fact, back down on seeking sanctions against Iran. Man am I good (see earlier prediction)! Don’t buy anything unless we hold our technicals and get back to cash if we don’t. The only thing worse than a loss is a bigger loss because you didn’t want to take the loss! This Iran news is as good as it gets although it may be perceived as a sign of weakness on our part. ===================================== HOT had blowout earnings today with a 59% rise in profits. If we are lucky it will get stuck at the 50 dma of $62.50 in the pre-market and we can jump in at the open. This stock will almost certainly retest its high of $65 so I like the $65 calls which are currently .30 but will be much higher by the open. This makes MAR a buy ahead of their earnings on 2/9, especially if we can still pick up the $70s for under $1 today. OEH also looks like a buy for 2/22 earnings. Of course if luxury hotels are doing well we can expect casinos to thrive. BYD (2/9) looks good with Mar $40s at $6.10 (a .50 premium) or you can buy the stock and sell the current 45s for a quick 3% and then sell the March 45s in two weeks for another 5%. HET remains my favorite and, although I have been saying buy it since $60, the 2/22 earnings should be just what it needs to drive it over $75. I like the Mar $75s for $2. RIMM won a patent issue in England this morning and the DOJ says it will not back up a shutdown order from the judge in the US case so the hits just keep on coming! PALM may be topping as major shareholders beg to be taken private (probably expecting to go back to being an also-ran to RIMM). Keep an eye on DVN to indicate oil’s direction. If they can’t move up, there is no hope for anyone else! RDS.A is getting killed on record sales but a 4% dip in earnings. Also, their reserves are falling. For a market that barely looks past next quarter, it’s amazing how negative news projections for 2020 can kill a stock! I’m sticking with my 75% short (March $270 puts) 25% long (Feb $420 calls) position on Google today (unless things change of course). Here is a very good article that summarizes my thinking on it: http://online.wsj.com/article/SB113883872757062642.html?mod=home_us_inside_today UNH is turning up and may cross $60 with a vengeance. I like the March $60s for $2.15 as well as the Jan $50 for $14 against which you can sell the March $60s for 15%. PD is still a buy, even at this level. They are splitting on the 17th and I would want out by then but the $170s are “just” $2.25 and could be a coup if the stock breaks $170. As long as copper continues higher, this stock is a fairly safe bet. I will be waiting/hoping for a pullback as I sold my $160 calls on Tuesday for what I thought at the time was a nice double. 8-(( ABX dropped 1.5% yesterday and left the April $27.50s at $4.50 (a $1.02 premium). BVN dropped 3% (remember, it was a dollar thing) leaving the March $30s at just .80. MRB went all the way down to $2.91 from $3.20 and I like that stock but still not as much as NAK at under $7. DOW will be a big mover if oil goes down. If you insist on holding oil stocks this one is a good virtual portfolio balancer. The Mar $40s at $3 have a low .70 premium. PHM had the expected great earnings so it will be interesting to see how it holds up in a very negative housing environment. SBUX has plenty of room to run on strong earnings. Congrats if you are holding our calls! CX still has a little room to run as construction spending is way up. We called this back on the 20th and $4 is a very nice move so don’t be greedy and set tight (.50) stops. FRK is ready to break back up even more. This one is already up 15% from the 20th but that was up 10% from our first pick in November so what the heck. In a perfect world, the markets will pull in today and give me a chance to buy in just below $53. With all this talk about chip makers not being able to keep up with demand, I forgot all about AMAT. There are not many companies who supply this sort of thing and AMAT is the first on Intel’s rolodex. I like the Mar $20s for .60 coming into earnings on the 15th. It’s going to be a crazy day! Good trading, – Phil