Europe took a big hit this morning on rising unemployment and Asia looks flat so it will be a tough road up for our markets this morning.
There is snow on the ground in NY and it’s chilly so oil may hold steady as bull traders hope the groundhog was right but inventories are tomorrow, with Iran in the background we may see a huge reaction to tomorrow’s report. OPEC meets next week so that will be interesting as well.
Any kind of up day today and I go back to bull mode (and cover my ass on those Google puts!).
Google may be a market mover today as the CFO speaks at a conference this morning (after the Cramer super pump last night). He will also be speaking at another conference on Thursday but the Thursday analyst meeting will be the finale. Microsoft rolls out the next big thing and Apple has something to announce as well so there is the outside possibility of a big tech boom today.
Today is data day with the GDP Chain Deflator (Greenspan’s favorite indicator) expected to come in at 3%, the GDP itself which better make 1.5% or panic may ensue, Chicago PMI which needs to stay over 58, Existing Home Sales (at 10) will really kill the builders if lower than 6.5M and the Consumer Confidence which has possibly too high expectations of 105.
Home foreclosures are up 45% from last year with 103,540 homes in foreclosure in January alone, this is up 27% from December. Rising rates will exacerbate this trend as ARMs are already up 1.3% from last year.
Last week, when I took a cash position, I said that if this is a real rally we won’t be missing anything – I’m glad I reread that because I was right… If we are going up here, we are going way up and we can make our picks but if the market snaps off the resistance it’s sitting on, it could get ugly.
Let’s hope Apple and Microsoft really have something good to say but keep in mind that they may both have a product aimed at each other, doing little good for either company.
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A WMT spokesman made a shocking statement on CNBC yesterday as he was defending the company’s questionable health care practices. He said that 25,000 people applied for 1,200 positions at a California Wal-Mart so it must be a great place to work. Aside from the obviously way out of touch mindset of the executive, it shocked me that the economy is so bad that 25,000 people have to go to Wal-Mart for work! Bush and (yesterday) Snow say everything is great, I suppose this is a form of the word great that I’m not familiar with…
Speaking of the White House boys: What a surprise: HAL was given a big check by the US Army. Turns out they only overbilled a little bit and all is forgiven! Out of the $1.5Bn billed by Haliburton, including the KBR fiasco, the Amy ended up cutting a check for just $1.490Bn – take that evil corporation! Here’s a little exerpt from testimony on the matter that truly defines the concept of innocent until hell freezes over:
“First, KBR was supposed to feed 600 Turkish and Filipino workers meals according to their custom. Although KBR charged the government for this service, it didn’t prepare the meals. Instead, these workers were given leftover food in boxes and garbage bags after the troops ate. Sometimes there were no leftovers to give them.”
“Second, KBR charged the government for meals it never served to the troops. Until late 2003, Anaconda was a transition site for army personnel. Because there could be large numbers of extra personnel passing through everyday, KBR would charge for a surge capacity of 5,000 troops per meal. However, KBR continued to charge for the extra headcount even after Anaconda was no longer a transition site.”
“Food items were being brought into the base that were outdated or expired as much as a year. We were told by the KBR food service managers to use these items anyway. This food was fed to the troops. A lot of these were frozen foods: chicken, beef, fish, and ice cream. For trucks that were hit by convoy fire and bombings, we were told to go into the trucks and remove the food items and use them after removing the bullets and any shrapnel from the bad food that was hit. We were told to turn the removed bullets over to the managers for souvenirs. When I had the military check some of the food shipments, they would turn the food items away. But there wasn’t any marking of the record, so KBR just sent the food to another base for use. The problem with expired food was actually worsened with the switch to PWC because it took longer for the food items to get to the base as they were shipped from the U.S. to a warehouse in Kuwait.”
“KBR also paid for spoiled food and billed the army. When Tamimi dropped off food, there was often no place to put it in to the freezers or refrigeration. Food would stay in the refrigeration and freezer trucks until they ran out of fuel. KBR wouldn’t refuel the trucks so the food would spoil. This happened quite a bit.”
“In addition, KBR would cater events for KBR employees, like management parties and barbecues. This happened about 3 times a week. As a result, there were shortages of certain food items, such as beef, chicken, pork, salads, dressings, and sodas for the troops.”
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I am still day trading but I will start taking up some long positions if the markets hold up for the day!
HAL should get a boost today as the big check from the Army paves the way for them to spin off their KBR unit. I’ll wait for it to go a bit higher and then take a good look at the puts.
If BJ (who should have no trouble finding staff) has good earnings today, I’m going to take COST (3/2) Apr $52.50s for $1.35. COST is a much better company trading at the same price as last year. You can cover the calls with current $50 puts for .45 – pretty cheap insurance.
NT (3/6) got an upgrade from Prudential today and at $2.86 I think it’s a good entry point. They should turn a profit this quarter which would be a nice turnaround for the year.
PVH raised estimates again and is growing like crazy! Apr $35s are $2.50 quite a bit down from last week as the company is shuffling CEOs. I will ease into this one but want to be there when it turns back up.
Also in retail, ANF looks oversold and I like the Jan $60s for $11.50 (a $3.80 premium) maybe working it off by selling the Apr $72.50s for $1.52 (13%).
B of A is catching up to us, hitting SHFL with an upgrade today! That may be enough to get it over the 200 dma at $26.40 which will make the April $30s a nice gamble for .25.
NOBL’s CEO is calling it quits. This is often a bad sign. The auto parts business has been almost as bad as the auto business and Noble’s earnings will be a miss for the year.
APOL suspended earnings (disaster) so look for high flying competitor DV to take a hit perhaps making the $25 puts at $1.20 a good deal.
BBI (3/9) Made a power move yesterday but has a very long way to run if it’s real. I’m going to risk losing 1/2 and take the Jul $5s for .30 to give myself one additional earnings.
SPLS had very nice earnings and Apr $22.50s are reasonable at $1.30.
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While I am keeping the Trade of the Day as cash today, I do like the potential momentum trade possibilities for AAPL and MSFT.
If MSFT has a “wow” type announcement, it is a slow enough mover to take advantage of the very cheap $27.50s for .20 with a very nice risk/reward profile.
If AAPL knocks peoples socks off then the $70s may not be so bad at $3.40 but I would rather see it break the 50 dma of $73 and take the $72.50s.
