Monday Morning

I’ve thought about this all weekend and I just cannot get excited enough about this rally without two things: 1 – Bernanke this week making a clear (not like Greenspan) indication that an end to rate hikes is near. 2 – SOX, not Boston but the Philadephia Semiconductor Index which is currently holding down the Nasdaq which is holding back the other indices. If the Nasdaq can let go and get moving, we could be looking at Asia-style rallies this year (20%+) but if it doesn’t, we could still have a quick reverse. That being said, the morning looks great with Asia running up 1 and 2% across the board (like a 150+ Dow move) and Europe looking strong as well. In our markets, analyst expectations for the first half were pretty low, especially in the home sector and now the semis so what we need now is a few big beats to move us forward. The way this works is kind of like roulette for the analysts. We know they haven’t got any more how a stock (or the actual company) is going to perform so essentially what happens is when they see beat, beat, beat in consecutive quarters, they start betting miss just because they think you can’t do it 4 or 5 times in a row. This is how Apple can go up from 12 to 60 in 2 years, their last 4 quarter beats were: 41%, 19%, 3%, 6%. Now that the beats are getting smaller, many bets are placed in Apple having a miss so the stock dropped from $86 to $62 so earnings next month will be very interesting. Even though we have the early signs of civil war in Iraq and another pipeline attack in Nigeria, oil is dropping slightly but oil sector is still in favor as retail investors plow money into everything that worked last year. This will be great for us later as the oil stocks will be drastically overbought next time the POO corrects. I’m expecting that we have 10 days before a major correction (funds will take profits on the 31st) barring bad news from the Fed or skyrocketing oil. ===================================== BTU is high on my watch list as it sits just on top of the 50 dma of $46.75. This will be a real directional indicator for the market but my guess is it will get overbought up to $51-$52 and then plunge below (unless something blows up). Google should get a boost today as the Judge ruled they don’t have to turn any documents over to the government. This does nothing to improve their pospects nor will it improve their current quarter but any excuse to pump this stock is seized upon. It turns out the best way to play Google last month would have been to buy it at the close and sell it at the open every day, this would have netted you 15% last month! Another one we should keep track of as a paper trade. HYTM is a health management company on the move. Revenues are way up and growth is on track but losses are still heavy. I like the stock for a long term hold at $7. I like owning PLLL and selling the outrageous April $17.50s for $1.30 for a quick 8%. If you see MSFT and INTC and AAPL and TXN start to move up, then the QQQQ $41 calls for $1.15 (a .70 premium) could do very well this month but again, beware Bernanke this week! I can’t tell if I like this PFE deal or not yet but I think a leaner, meaner Pfizer is generally a good idea. With a forward p/e of 12 and trading at close to 20% off it’s 5 year average I have to go with the Jun $27.50s for .50 through earnings. It’s worth .50 to me to see what the new Pfizer will look like. LVS dropped its offering price from $50.25 to $49.15 making a lot of shorts very happy! This was our best case scenario but I took my puts off the talble already as there was no indication this was going to happen last week. 8-( Another telling sign is that the underwriters have only taken 4.7M out of 8M shares that were offered to them so they don’t want the shares either! ********** Trade of the Day – BA ********** Just when you thought Boeing couldn’t go any higher, it gets another upgrade! I don’t know who, I just heard it on CNBC but it isn’t unexpected by anyone reading this Blog. BA is a nice slow mover so we can pick up the $80 calls for $1 (a $3.15 premium) for a nice little daytrade. Don’t be greedy as it has had a great run and should correct shortly!!!