Thursday Morning

Europe is pulling back a little today but Asia flew up to new record levels, the Nikkei is now at 17,489 – just last May it was tied with the Dow at 10,700. Not to be outdone the Hang Seng tacked on 311 points today. The Chinese are on their way here with $15Bn to spend to help out some American companies (one of which is possibly GM) as what they consider a show of good faith prior to to a major get-together with Bush. As I said in November, perhaps we can wrap GM up in a box and give it to them and stamp it “no refunds or exchanges” and let them deal with it! That’s not the only way China is attempting to help poor, struggling American companies. Tsinghua Tongfang (I think he fought Bruce Lee in Enter the Dragon), China’s #3 PC maker, has shockingly agreed to sell computers with legitimate copies of windows. China’s President is scheduled to make a stop in Redmond next month. Oil is officially out of control and now at a level that our market can’t ignore. Last time oil went from $65 to $69 was Jan 15-23 when the Dow slipped from 11,047 to 10,661 so place your bets accordingly! The time before was August when we slipped from 10,700 to 10,350. We may be saved from total disaster because the ECB left rates unchanged which should bring the dollar back up a bit and at least slow the run in commodity prices. On the other hand, now they are pulling out the hurricane card to scare oil up further. At this point I would say it’s a fairly safe bet that the the DIA May 111 puts for .95 are a fairly safe bet as either oil heads up and kills the Dow or oil pulls back and oil companies fall which drag down the Dow. SPY $130 puts for $1.25 are also interesting. With all this uncertainty gold has run up to $599 pre market, great for BVN and perhaps time to revisit NEM which is still way off it’s $60 high. The $55s are .80 and make for a nice momentum trade but not if gold is rejected from $600, which is more likely than not. Apple may save the markets today so don’t jump into shorts until we see how it goes. ===================================== Obviously if the market is tanking I’m not trading anything but nothing has actually hurt it for a couple of weeks so I remain tepidly optimistic. MRK got hammered in the after hours even though the decision was split and the award ($4.5M) was pretty low. With 9,200 cases to go (so far) expect all kinds of gyrations with this stock. The last loss they had was $253M on August 19th and the stock went from $30.59 to $27.15. It was back at $29 10 days later and over $28 within 5 days. The key for Merck is how many new cases are filed based on this decision. GM is certainly not out of the woods but the $17.50s were too frustrating to keep but I will be looking at the $20s for $1 as a momentum play if it heads down again. Based on this article it should: http://online.wsj.com/article/SB114420532052817411.html?mod=yahoo_hs&ru=yahoo I’ve got to beef up my editorial division because the Wall Street Journal is less than 6 months behind me on stories like this: http://philstocks.blogspot.com/2005/11/pension-pressures.html BJS posted strong growth and earnings are 4/25 so I’m going to take advantage of the recent pullback and pick up the May $37.50s for $1.15. The EPA is conducting a probe into BP’s pipeline spill in Alaska. Ordinarily I’d jump on the $70 puts for .60 but I just can’t take the pain in oil anymore! I was just wondering how I missed this move in steel and it turns out I didn’t, I just forgot: http://philstocks.blogspot.com/2005/12/x-marks-spot.html TGT posted some pretty nice numbers and has a lot of room to run so the $52.50s make a nice play at .70 (a .60 premium). MMM also has lots of room as they raise guidance a few %. The $80 calls are just .35 if it doesn’t open too high.