Yahoo is slow today. Makes you realize how fragile the whole on-line economy really is. We had a day off-line (9/11) but what if it were a couple, a few, a week?
Do you even have a backup plan for your banking, stocks, contacts etc.?
Anyway, not to dwell on it but I notice a lot of companies freaking out about security all of a sudden and it gets me thinking maybe something is up and I like to be a boy scout about such things…
The other day we talked about how many times you can jump on a bed and bang your head into the ceiling (Dow 11,100, S&P 1,300, Nasdaq 2,300) before you decide you’ve taken enough lumps. Well on Friday, another bunch of rowdy kids in the form of retail investors sparked a broad based rally on employment numbers that usually cause a drop.
http://finance.yahoo.com/q/bc?s=%5EDJI&t=5d
Now the numbers weren’t too bad, a little over in jobs gained but overall unemployment went up as more people entered the work force and wages remained tame. Best of all they revised the previous forecast down so on the whole it looks like workers will remain underpaid for a while which we investors all love to see because those darn workers are just so expensive! Where are the robots they promised us?
With job growth at boom levels (I know, tell that to the moms working 2 jobs) we can expect the analysts to come out with more rate hike predictions by Tuesday to sour the markets. Usually we can count on Greenspan to purposely murder the party but I don’t think Bernanke is comfortable enough to step into the role of the guy next door who always tells you to turn down the music yet.
So we end the week in safer(ish) territory than we thought but only the Dow is above the 50 dma while the S&P is on it and the Nasdaq is 20 points below. So we keep our eye on the S&P for direction and confirm a re-rally if the Nasdaq can break back above 2,290 (remember when they said the Nasdaq would make 15,000 before the Dow?) this week.
The Nasdaq will not, can not rally without AAPL, MSFT, INTC, Semis in general and, Lord help us, Google and Yahoo. Maybe one can sit out but I’m pretty sure two will sink us for sure. The indices don’t always go up together but they sure as hell go down together so let’s just be very, very careful out there. I mean really, does this look like a rally to you? I’m not even sure it qualifies as a bounce, more like a bouncette ™:
http://finance.yahoo.com/q/bc?s=%5EIXIC&t=5d&l=on&z=m&q=l&c=
You can’t have a good party if so many big name guests don’t show up. It makes the other big name guests feel they are at the wrong party and they tend to slink out the door early looking for something cooler to do, then the remaining guests quickly realize no one cool is at your party and they all start making excuses and before you know it you are standing alone with all the leftovers…
The same breakdown can be observed in oil, which is why the S&P and Dow are outperforming the Nasdaq this week. Most of the oil shocks have already hammered those indexes so it is now possible for the oil patch to drop without taking the majors with them but a lot of the late day rally could still be attributed to a sudden recovery in the energy sector toward the close (never short oil into the weekend!).
http://stockcharts.com/gallery/?%24wtic
Looking at the weekly chart, you can see how amazing it would be if the price of crude drops any further as it hasn’t really been below the 40 week moving average since Sept. ’04, way back when oil was $30 a barrel. Here’s the chart of a random company to show you how devastating a reaction can be when a previously strong chart breaks that barrier:
http://stockcharts.com/gallery/?goog
The support for oil continues to look artificial and if they don’t get some fireworks out of the Iran/UN clash this week, we are seriously looking at $50 oil. It is already $5 cheaper per barrel (converted of course) to use natural gas than oil so all nat gas has to do is remain under $7 and there is no stopping the pressure it puts on oil as plant after plant converts over (maybe a 3 month cycle).
Speaking of which, all quiet on the Iranian front this weekend! Sure there were 46 more bomb deaths in Iraq (no one ever talks about injuries) and 6 in Afghanistan but that’s just the normal daily stuff that means we’re winning the war on terroism (according to Bush, who I never criticize – since I’ve been getting all these clicks on my phone 8-).
Here’s an interesting fact you won’t hear (because it won’t scare you into watching the news): Iran is planning (and this is what the big to do is about) to install 3,000 centrifuges this year to enrich uranium, a very long-term project. It actually takes 60,000 centrifuges to even begin to have a weapons grade program (5 years if it was a top national priority and they got the cooperation of the international corporations who would have to supply such a massive effort).
Someone whacked Milosevic in jail – I think that was mainly to remind us that the Soprano’s are back on tonight!
All in all, Friday was a perfect day to cash out, I even pulled out a profit in some positions I was prepared to take a loss on!
I’m hoping Monday gives me a reason to do something besides short oil!
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Make sure you read the Google Update in the post below this one! I will be updating the update in the morning!
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Since I’m not really in anything, other than what I mentioned on Friday plus my Google spread, it seems silly for me to talk about picks like they still work but let’s just review these standouts with the grain of salt they deserve:
I should have just given all my money to Mr. Buffett and taken a break like I recommended on Sunday where he could have turned $88,000 of my money into $89,900 on Friday (up 2.2%). There is still time on this one as it should go right past its previous high of $95,700 as long as the market remains uncertain but not terrible.
WYNN made us money last week as a short and worked even better this week (as long as you weren’t greedy last week and held) going from $72 to $75 and back to $72 on Monday, then straight down to $68 (still too high) on Friday.
Wynn’s Monday madness gave LVS a boost too but my call to double up on the idiocy was bang on and LVS gave and gave all week, dropping 12% from Monday’s high.
http://finance.yahoo.com/q/bc?t=5d&l=on&z=m&q=l&p=&a=&c=&s=lvs
Our QQQQ $45 puts finished the week at $4.50 (up 40%) and was a nice cushion for the week.
Gold was decimated but we weren’t supposed to play it to the upside unless the crisis escalated, these are now fantastic buys if it all hits the fan!
GE has a good time in a bad week, still looks strong.
TSO was way lower on Wednesday but, even with the recovery, the option volatility increase to make the $65 puts shoot up to $4.10 (up 40%) even though the stock was only down .2%!
http://finance.yahoo.com/q/bc?t=5d&l=on&z=m&q=l&p=&a=&c=&s=tso
We got our CSCO dip, down 5% but the Jul $22.50s maintained 90% of their value at .65 (so I’m buying another round).
SU, OII, BTU, UNT… Blah, blah, blah doubled, blah blah, hit it on the head again, blah blah – getting dull isn’t it? Most of these rebounded nicely and offer great reshorts if oil stays below $60 on Monday.
We got a great pullback on CDRN and selling the Apr $65s worked out great and they should be bought out for $1. If the market is going up, I like this for a reup at this price ($55).
CHA down $1 still looks like a nice China play after a great test at $34.50.
BIIB Jan $45s ran up to $8 (up 15%) but half of that was lost on the Apr $40 insurance puts. No sense in selling them for a quarter at this point as it still represents 5 weeks of insurance which is alway good to have with biotech.
LGF was a big disappointment, stay out of hollywood from now on!
COF was a poster child for how to turn a double into a loser as our fantastic trade on Monday took a technical bounce off $85 (signaling us to get out with our double intact) on Wednesday but then gapped up so hard on Friday there was no way out!
http://finance.yahoo.com/q/bc?t=5d&l=on&z=m&q=l&p=&a=&c=&s=cof
CME was another great example of how greed kills! The $420 puts went from $5.10 on our Tues am pick right to $15 on Wednesday afternoon (up 200%) but if the reversal to $10 didn’t give you a hint to get out and you still wouldn’t take the $12 it peaked out at on Thursday (greedy doesn’t begin to describe that) then you deserved what you got on Friday!
http://finance.yahoo.com/q/bc?s=CME&t=5d
Tuesday 5:30 am: “CTRN is one to watch on the upside as this seems to be the next hot retailer. They are dying with the sector right now but should come back with a vengeance.”
http://finance.yahoo.com/q/bc?t=5d&l=on&z=m&q=l&p=&a=&c=&s=ctrn
Also from Tuesday (I should have just quit there!): “If FDX goes up, then UPS is a buy. If FDX goes down, CLDN is a sell.”
http://finance.yahoo.com/q/bc?t=5d&s=FDX&l=on&z=m&q=l&c=ups%2C+cldn
CHS $40 puts were a triple before pulling back to a double+ on Friday – Please set stops on winners!!!
DBRN was a nice hit on Wednesday am with the Jun $45s finishing the week strong at $3.30 (up 40%) but you should be out by now.
C continues to look good, as expected. The $45s are now $2.10 (up 30%) and we should be happy with that much!
I was impatient and paid over my $7.50 target for PGIC but at that price it’s still a buy and hold but a long term play, if it has trouble breaking $8 again, get out fast!
On Thurs am I said HMT was “giving $20 calls away for .25” They shot up to .35 even though the stock was flat, sill good if the market picks up.
MOT and AAPL were both terrible trades as MOT got a recall on Razors (so what?) for a small defect (dropped calls) and AAPL is now in total crisis because everyone thinks Jobs is moving on to Disney/Pixar and is done with Apple again (and anyone who remembers the worse than GM disaster Apple was without Jobs understands the concern).
CAT was a nice safety call with the Apr $70 puts gaining 10% to $1.95.
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Well, we made less trades than usual but had pretty high percentage of winners (80%) for such a crummy week. Make sure you read the “My Trading Policies” article as we will be needing it if times turn tough on us – we have been in a really good quarter of consistently picking winners that made so much money it didn’t matter if you failed to exit. Don’t count on that to continue!!!
