Flashback Thursday

I started writing today’s overview and it started sounding familiar so I took a minute to read my own column (damn I’m good!) and I realized it’s Tuesday again! The technical are in the same place as they were Tuesday morning, Europe is down on higher oil and Asia is mixed… you get the point, just read Tuesday Morning again and save us both a lot of time. Bottom line is that we are either going to firmly establish these levels as a floor or a ceiling today and tomorrow – breaking through will give us many long opportunities while bouncing down will leave a lot of stocks looking very overbought. We do have some choppy retail numbers coming out so be very careful of the nature of any rise today as an energy sector rally will do no real good for the rest of the market. Actually, real estate should get a boost off a HOV beat so we are really flashing back a whole year where real estate, oil and commodities were the only plays. Google will once again make or break the markets and I am leaning towards break but not as much as I was on Tuesday as we have deflated that bubble by 10%. Also different is that there is no Cramer pump as there was Monday night, which put a lot of people into the stock at exactly the wrong time. I will be keeping a spread on GOOG into the conference (which is pretty much all day) looking to pick up more on one side or the other as momentum picks up but I am prepared to give up and take a quick loss before my values deteriorate in case it freezes between $360 and $370 (I doubt it though). I will try to keep posting in today’s comment section in case you’re interested. Speaking of Cramer pumps, it was LVS’s turn last night, see last night’s comments for a detailed report. The ECB raised rates and Japan may as well so the dollar is dropping, this accentuates our market declines to the rest of the world. Oil is putting major pressure on the markets that is not likely to let up through Monday’s UN Security Council meeting on Iran. Also, it is refinery maintenance season when about 10% of our capacity is off-line at any given time, so there’s another $5 added right there. Bottom line is that all Chavez has to do is make one irrational statement and he could knock the price of oil up $2, meaning $5M a day in additional profits for his retirement account (hmm, maybe those statements aren’t so irrational after all!). For $5M a day, I’d thumb my nose at George Bush too! Bush is in India lauding their nuclear program but I seem to remember a few years ago we were calling for sanctions if they pursued a nuclear program and everyone said that it would be the end of the world as India and Pakistan hate each other with a passion (Pakistan is so pissed about Bush’s visit to India that they blew up a diplomat today). Perhaps in a few years he will be over in Iran congratulating them on their nuclear program too! I’ll be pulling back to 75% cash early today until we can get a good look at the market. Way too dicey here to commit to… I will try to keep up in comments but there is a lot going on! ===================================== Now logic would dictate that a company with a p/e of 6 telling me that earnings are in line would be at least a hold but we’ll have to see how HOV does today. Looking at the fundamentals, how can you not like this stock? The headlines say “Hovnanian’s 1Q Profits are Flat.” Sure but they are flat to a record breaking quarter despite “deteriorating” market conditions – what do they want from these people?!? HOV earned $7.16 per share last year vs. GOOG’s $5 per share yet HOV shares cost about 1/10th as much. That’s right, Google has to earn $50 per share ($16Bn) before it equals HOV’s value. The same goes for the whole building sector, it is just not that cyclical! Check out the 20 year chart for TOL: http://finance.yahoo.com/q/bc?t=my&l=on&z=m&q=l&p=&a=&c=&s=tol Not so bad for a retirement account is it? Let’s watch for the conference call at 11 to get an idea of where this is heading but the sector is just full of oversold companies so here’s a few potential plays if HOV takes off: BZH is sitting right on the 200 dma at $63 so the Apr $65s make a nice play at $5.80 but get the heck out if it pushes below $62! DHI needs to retake the 200 dma of $36 and push to $37 before it’s back in play but, at the same price as last year, I like the Jan ’08 $35s for $7.20 as a good, long-term income producer if it breaks up. TOL is also primed for a major pop (or a rejection) as it is just under the 50 dma of $34. Jun $35s for $2.20 should hold up well into earnings regardless. ===================================== In the oil patch we may be able to play the upside again! Valero Rule is beyond critical and we are conditioning this on oil over $62.50! RDS.A has Apr $60s for just $2.90 (a $1 premium). Think of it as renting the stock for .02 per day. PTEN took a huge bounce on Monday and may have the momentum to retake the 30s. The $30s can be a nice momentum trade at .60. PDC got way oversold and could fly if it breaks over $17 but the $17.50s for .20 make for a good gamble. THE is an old pick and is back above its 200 dma on big volume so Apr $40s look very appealing at $1.35. RIG had a huge sell-off over rising costs that will quickly be passed on. It is halfway bounced back already but $80s for $1.25 are very attractive. UPL is in bounce or crash territory. No play here but it might be a good indicator for the others. I really think MUR can’t go any lower but I could be wrong. If I’m not the Apr $50s for $1.20 could be a nice thing to hold on to. Last April the stock was at $52 and 2005 beat 2004 by 75%! ===================================== Look for at least a mild retracement of around 25% of yesterday’s tech gains, at least in early trading. The trick will be whether or not we can get it back in the afternoon. Like I said, it’s a Googly World today so let’s be real careful! Other than the above, I’m not touching the markets today except to wiggle out of my positions. Perhaps BCRX Sept $20s for $4.30 as this bird flu thing is gathering momentum and the close puts are so outrageously priced they make good sells (ie. Apr $22.50 is $1.25, a 15% premium!). ESLR is on quite a tear but still doesn’t make any money, a fact people seem to forget as the stock trades at 7x ’04s open. If it hits $17.50 I want to buy the Apr $17.50 puts for less than $1 but no way do I pay more! Oh well, 4 hours till Google mania – check the comments and I’ll try to keep you informed. Good trading, – Phil