What a difference a day makes!
We averted what would have been a disaster yesterday because our markets were closed while the rest of the world took a bath on worries over Iran, Nigeria, global slowdown, global expansion… you know, the usual.
Turns out things aren’t as bad as they thought yesterday so oil is back at $61.50 after spiking over $62 and the international markets are more than making up for yesterday’s losses led by the Nikkei with a spectacular 450 point jump, more than enough to erase yesterday’s 250 point loss (how’s that for exciting?). Tokyo is still far below its 16,777 high but a couple of more days like today and we’ll punch right through that.
Gold is sticking to the $550 mark so those stocks should rebound a bit but I’m not playing them until there is a confirmed move one way or the other.
With oil and Asia up and gold strong, everything old is new again today and we can expect investors to plow money into whatever worked last year but I think that’s a mistake. In the grand scheme of Global Rotation we have been tracking, the 2005 investment group has been steadily declining and this may be no more than a dead group bounce.
The reality that is hitting the oil patch this week is that even actual supply disruptions (I told you they would have to raise the stakes to move oil) are not going to push oil significantly higher because we just do not need any more oil right now!
http://stockcharts.com/gallery/?%24wtic
This is not the chart of a recovery, simply a small test of the 200 dma and 40 wma spurred on by (very coincidental) news. Oil will have to break $63 on volume to really be considered to be on the rebound and any drop back below $60.50 would be a major problem for the sector.
If oil companies like SUN, SU, XTO, HAL and SLB don’t move up close to 2% today, then you can be reasonably certain that this “rally” will be short lived and give us another great shorting opportunity very soon.
Today is a good day to watch from the sidelines unless we get some technical breakthroughs like Nas 2,300, S&P 1,300 and Dow 12,000 (I doubt it) but watch out if this rally is mainly oil based, that is no foundation to build on – as we learned last year!
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HD had great earnings and should be on its way past the 52 week high of $43.86, those Mar $40s we picked up for .80 last Monday should definitely be sold today as there is bound to be some sort of pullback and 600% profits should be plenty for anybody!
WMT, on the other hand, is not rocking people’s world with their outlook. They are already about as low as they can go (maybe $42 again) but then will make a nice long-term income producer as the fundamentals are still sound.
ESLR got a nice boost off a $100M German contract (the whole market cap is $800M). They will leap up but you can play SPWR, who will rise in sympathy as well as on news from a solar conference this week. Mar $35s are $4.50 (a $1.30 premium) but it’s a risky play.
CY has been fairly beaten down with the semis and they benefit from any jump in SPWR so I like the Jan $15s for $3.80 and selling the $17.50s for .40.
MRK is on fire with another court win, this should raise Pfizer’s long-term prospects as well.
DOW has a long way to fall if oil gets over $62. We can make all th e money we made on the way up on the way down with the $45 puts for $1.80 (a .60 premium). This is a very short trade based on oil over $62 as the company itself is actually in great shape. Don’t touch it if it breaks the 200 dma of $44.60.
GOOG is still trending mostly down but at this time of the month the premiums are just too outrageous to trade.
Today is not a day to guess the market. If oil continues unabated then we could get a very large sell-off. If oil peters out, then they will drag down the indexes until new leadership arises.
Almost a no-win situation today and most traders do not realize that this is day 2 of Nigerian crisis trading for the rest of the planet and that our market is just playing catch up while the rest of the world has already moved on without buying oil back over $62.
I’m beginning to think that we need real capitulaion in the energy sector before we will see real money being put to work elsewhere.
