This is going to be one crazy day, one way or the other.
Will Google crash the whole market by causing a sell-off in every high beta security or will rational investors see this as a correction of a single, overbought stock?
The Asian markets are not taking it well at all. Since they are up 40% for 2005, they have many stocks that have doubled or better. Google is currently causing a knee-jerk reaction in every high flying stock but I think the US may escape because, outside of oil and gold, nothing has gone up since 2004. Of course, another sell-off in oil and gold will trash the markets again as it is very doubtful that tech can assert itself today with panic in the sector.
Oil is flat in the pre-market due to the storm but Wednesday’s forecast is for 50 degrees in NYC, so couple that with another build (and the storm won’t be reflected in Wed’s numbers anyway) may represent another good shorting opportunity.
Gold is flat and the dollar remains strong while rates are creeping up but still inverted.
The market could still go either way but let’s keep our eye on the technical’s we discussed last week and look for genuine buy signals rather than head fakes.
Retail sales are out tomorrow and should be stronger than expected but the rest of the week does not promise much data outside of crude inventories.
I’m betting today will be surprisingly (to the media) strong despite early worries as all the factors I was looking for last week are in place. A real collapse in Google could spook the markets early and the real test will be how/if they recover.
Speaking of things that need to recover, here’s the quote of the day: “The vice president didn’t see him,” she continued. “The covey flushed and the vice president picked out a bird and was following it and shot. And by god, Harry was in the line of fire and got peppered pretty good.”
Cash cash cash today until we get some real positive signals. In a perfect world, oil will run up today and tomorrow so we can get some puts in for Wednesday (but this is also an option expiration week where anything can happen).
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Apple may have the toughest time today. As I mentioned over the weekend, Apple has actually always outperofrmed google http://finance.yahoo.com/q/bc?s=AAPL&t=2y&l=on&z=m&q=l&c=goog but without all the credit. Now a collapsing Google could drag Apple down a bit more.
DNA had a couple of deaths in the Avastin trials, this should send the stock below $80. DNA is a great example of how clearly charts can give you a heads up on movement: http://stockcharts.com/gallery/?dna
WFMI is taking a healthy bounce off the very strong 200 dma of $65 but, unless there is real volume to it, don’t think it’s a rebound.
GOOG is being pumped up in the pre-market, recovering 50% of its European losses already. Looks like fake support at $350 to me at 8 am. This Chinese censorship thing will not go away for Google as their competitors begin to use the issue to alter public perception of the company.
CHK’s founder and president resigned just 30% off the top but possibly quite a bit higher than he expects it to be heading if gas prices don’t rebound. Even at $30, the stock is still double last year and about to slam into its 200 dma of $28.50. ECA plunged right past the 200 dma and looks ripe for a great fall as well. If CHK breaks $28.50, the $27.50 puts are irresistible at .20.
HPQ is looking good into Wednesday earnings. I am fairly postitive we will see a revenue beat and even if earnings miss they will be up 30% from last year. Guidance should be positive as well so I’m going to take advantage of today’s sell-off to ease into Jan $30s for $4.60. I will also cover with 1/2 the amount in current $30 puts for .50 just in case….
DELL has earnings the next day and
HD is taking a minority stake (49%) in one of China’s largest home centers for just $200M (1 week’s earnings). This is an excellent move for another stock that still costs less than last year. Earnings are out 2/21 and I really think expectations are very low so I’m going right in on Mar $40s for .80. You could cover this nicely with the Mar $37.50 puts for .45 but I’m not going to.
SBUX got a Prudential downgrade to neutral. I see this as a chance to buy more but let’s see where it lands (probably well above the 50 dma of $31.50).
If the markets head up today, all of last week’s picks are still very workable especially the 10 times I said to buy BA! Keep money in your wallet though, like the VP, we want to keep our powder dry so we can take our shot when a pesky lawyer pokes his head up!
China just announced an alternate energy program that will scare OPEC more than Bush’s pronouncement as China doesn’t really care whether or not people want a nuclear power plant in their backyard or not, they will just build them! The fact that 60% of Americans don’t want one is misleading as well since 75% of our existing plants have room for expansion and don’t actually require permission for “upgrades.”
So we’re buying GE again! They hit a home run selling Olympic advertising (and $100M in light bulbs and other GE stuff to Torino) and with 0 shows in the top 10, they have nowhere to go but up. It is very unlikely that an upstart will be called upon to build what may be $500Bn in new nuclear projects this decade so the future is looking very bright for GE indeed.
GE collapsed in the tech crash in 2001 and again following 9/11 and really never recovered. Out of 10Bn shares outstanding only 39M shares are shorted so don’t expect any surprising rallys but, as a long-term hold, this stock is without compare and, at $4 less than Dec 2004, it should work in the short run as well.
