Oh dear, now Microsoft has done it! This is the Nasdaq version of a bomb being dropped… The Vista operating system is being delayed again!
Bad for PC makers, bad for software makers, bad for retailers like BBY who will miss a lot of holiday sales…
The World markets are down across the board and the US futures don’t look so hot.
Microsoft is a Dow component as well as a Nasdaq component and, of course, an S&P component and will likely be down about 3%, back to the 50 dma at $27. Whether or not it goes below will be the test of the day but, on the whole this one quarter pushback presents another buying opportunity for Microsoft (remember what happened to SNE last week on their delay?).
Like I said yesterday the Nasdaq needs to test 2,285 before it can head back up, below that and it will probably drag the other indices with it.
Oil will get a big test today as well as it sits just above $60 on inventory day. Remember, we often get an opposite reaction just after inventory to shake out the suckers so be very careful!
Mortgage applications were abysmal last month so bad for housing, bad for lenders
Zacks, actually holds analysts accountable by ranking them. It turns out none of the highly ranked analysts work for major firms! Here’s a good article on analysts:
http://www.ohio.com/mld/beaconjournal/business/14129939.htm
If I were a fund and I thought this was a real rally, I would be buying today. In a bull move, you are very lucky to get sector moving news like Microsoft’s that give you a chance to scoop up things you missed so we’ll see what really happens today.
Good article today in IBD so you know it’s not just me denouncing buy and hold strategies:
http://www.investors.com/editorial/editorialcontent.asp?secid=1205&status=article
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Speaking of bad analysis. MS earnings today will be greatly affected by layoff expenses and stock options so the numbers will look like a miss but but are actually be very good. This could be a great buy opportunity but even GS has pulled back from spectacular earnings so I wouldn’t take it as any more than a day trade if at all. MS is sitting right on its 50 dma of $60 so it will have a hard time going down and the $60s are pretty expensive at $1.70 so I would wait and see if they come closer to $1 if I am going to buy at all.
BMY and Plavix partner SNY settled a patent dispute with a third party to keep exclusivity thru 2011 so expect both to take off. If you think a $44Bn company can’t zoom on news, watch BMY closely today! Plavix represents 10% of SNY’s profits and had been written out of the company so look for both companies to shatter the 5% rule in early trading. I’m staying away as it is probably too late to catch it and also because the deal could still fall apart. At “just” $44Bn, BMY may become a takeover target as there are several big pharmas looking to improve their pipelines.
NVDA has been flying high and will suffer from the Microsoft delay. The Apr $50 puts are $1.65 but only good if the Nasdaq is trending down.
INTC will give a good entry point back at around $19.50 as people don’t seem to understand that computer companies that ship machines in Q1 ’07 buy chips in Q3 ’06 so this delay has no effect on Intel’s year. Whatever the May 20s are going for will be worth it as people overreact to the news, as of yesterday the May 20s were .75.
If the market is sane (I know, when is it?) then AAPL will be a winner today as this can’t help but boost their sales over the holidays. Although risky as Apple has been under attack for a month, the Apr $62.50s aren’t so bad at $3.10 (a 3.70 premium) but obviously to be sold quick as the premium will kill you over time. Also, the broohaha over the French ruling on ITunes will hang heavy over the stock until it is resolved.
http://online.wsj.com/article/SB114301426202704998.html?mod=hps_us_at_glance_technology
It turns out GLW’s secret project was environmentally friendly TV glass. That may not seem like a big deal to you but in Europe, where they would love more market share, it will be huge – they actually have laws over there to protect the environment! This is a tail wagging the dog story as they are still debating an exemption on TV makers but with GLW coming up with a solution (and maybe some campaign money) it is now possible for the EU to say no exemptions on glass. The company is great on so many levels that I am now looking at buying the Jan ’08 $25s for $7.60 and selling the May $30s for .80 for a quick 10%. This stock has already given us two triples in the past 4 months so perhaps we are asking too much of it…
GOOG is having a lot of trouble keeping the price up in the pre-markets. Perhaps it is because too many people have caught on to the fact that you can buy Google every day at 3:55 and sell it at 9:30 for a nice profit thanks to all the after hours pumping that goes on. I don’t know if this is so much changing up their game or a mad rush to the exits as the end of the quarter is upon us for funds who may not want to feature Google as 5-10% of their holdings as it is down 30% from the last quarterly report! I played with the options yesterday as research and decided they are so overpriced ($12 premiums near the money) that it’s a no-win at this price. With earnings probably coming after expiration I think the May $310 puts for $10 coupled with the Apr $370s for $6.70 might be the way to go at the moment but only with fun money.
SNE is good to watch today as it tests its 50 dma of $46.50 on a tough day. They have the same issue as Apple does in France and are well off the $51 they were trading at in January. The big difference is that Sony has additional music publishing interests riding on the French ruling so I’m staying out of play but watching the match very closely!
I’m starting to like NYT at this price. You’d think they were closing the way it’s dropping and the company just reaffirmed ’06 guidance! They are making the same as they’ve made for the past 4 years which isn’t exciting but shouldn’t drive the price down to 1/2! I’m not looking to catch a falling knife but we do need to keep an eye on this one.
FDX profit is up 35% and they are raising their forecasts but with the mood of the market today, even this may not be enough but ORCL had the same problem yesterday and recovered nicely from the open. If FDX can do the same we could be looking at a $5 move so I’ll be interested in the $115 calls if I can pick them up for around $1.50 AFTER (not before!) IT BOTTOMS!
AMAT is mad as hell and they are not going to take it any more. They are buying $5Bn of their own stock (20%) and rewarding those that didn’t bail with an increased dividend. I love these guys! $18 calls are .35 so how much could a few contracts really cost?
GM is finally getting an agreement with the UAW and Delphi which will at least take the uncertainty off the table (as long as you believe they can actually make all the payments). The $22.50s are $1.10 but I’d rather wait and take the puts once it tops out – not paying workers is not going to save this company!
Between a bad mortgage report and a CFO resignation today will be a bad day for FRE. The $65 puts are $1.40 and look great but expect the stock to hold the 200 dma at $62.50. It will be hard for trading buddy FNM to get away from this so they may make a nice play too with the $55 puts at a low premium at $1.80 (.40).
http://finance.yahoo.com/q/bc?s=FRE&t=5d&l=on&z=m&q=l&c=fnm
PFE may get a nice boost on the BMY news (unless they bid on them). It’s a very slow mover and the $27.50s are just .15 but the $25s have just a .15 premium at $1.45. You could buy both and, as soon as you make .20 on the $25s, take them off the table and hold the $27.50s for a month for free! Do not touch this/get out if it falls below $26!!!
I will be on-line today and entering comments re. oil but I am sill liking SLB despite the danger of it being kept aloft by HAL. The risk/reward on that one is huge on the $115 puts at $2.20. By that I mean that a $5 move up this week will cost you about $1 while a $5 move down will gain you $2. Assuming it is totally random, you are getting 2:1 odds for betting the downside.
Don’t forget MUR is in Cramer denial land as well! The $45 puts are all the way down to .65!
Real Bad Estate!
MLS is in total collapse at the shopping mall REIT is suffering from an accounting scandal involving “overbooked revenues and/or under-reported expenses.” Essentially the charge is that historical income may have been routinely overstated to pump up the stock price. Things like this are a death spiral for a reit as lenders pull loans, the company defaults on projects, gets penalized, loses partners…
“Work on a Mills development in Chicago halted last week after contractors demanded prepayment because of concerns about the company’s viability.”
http://stockcharts.com/gallery/?mls
In a real life is unfair kind of trade I’m going to take VNO $95 puts for $1.40. VNO is the top competitor in this industry and has also doubled in the past 2 years. The horror of what happened to MLS will certainly spook some VNO investors as well as:
BXP $90 puts for $1.
EOP $35 puts for $1.20 (in the money).
