Wednesday Morning

Asia continues to recover from Mondy’s drop and Europe is on good footing (never dropped) so it is all up to the home team to depress the planet! The S&P is back dangerously close to 1,300 and is the one to watch today as a slip below could be a very very very bad sign. The Nasdaq looks safely above 2,300 at 2,33o and the Dow really needs to reassert itself above 11,300 otherwise that will begin to look like a solid top. Oil continues it’s mild pullback ahead of 10:30 inventories with Iran saying they do not intend to use oil as a weapon but at the same time they are saying they have enough trouble keeping up with domestic demand which is an interesting new tactic to boost the prices. Nice noises from Iran also serve to calm the gold market for the day but now inflation is rearing it’s ugly head so we need to watch the 30 year to see which way gold is going – a pullback to 5.05% will take some of the air out of gold but seasonal fundamentals should keep it well above $600. Mortgage applications are at a 5 year low which hopefully will get traders back to thinking the Fed might be done (new home sales were up causing everyone to panic about a data dependant Fed yesterday). Durable goods orders were up huge (6%) which is another inflation indicator, so as stupid as this is – our economy is too strong and nobody wants to commit to stocks in fear of endless rate hikes which will weaken the economy… Strong economy = strong demand for oil, no matter what the inventory shows today the oil traders will likely hang their hats on this one. I am officially staying mainly in cash for the rest of earnings season as the reactions have been too unpredictable to make money on. I will be watching COP today to see if I want to stay in XOM (tomorow) but I feel very strongly about ABX (5/3) even though they will probably pull back prior to earnings. So please take all picks with a huge grain of salt as good earnings do very little to guarantee a rise in stock prices this week. ===================================== COP only hit earnings on the button. Granted the number is 13% over last year but the stock is up 75%. As insane as it seems we will have to wait and see if it can hold a p/e of 7! What killed them is a drop in refining income of $310M so I think they should buy Valero who seem to be a lot better at it! Glancing over COP’s numbers I would have to say they are singularly incompetant and this may not be a negative indicator for the industry. AHC, on the other hand, tripled profits and blew analysts out of the water by 40% so it looks like E&P companies are going to have it over more integrated oil this quarter. BA reported a 29% rise in profit and 12% revenue growth but the stock will drop as that’s not enough to justify a 70% run-up in 12 months. Profits were actually up a lot more than that as last year’s Q1 included another .06 in special tax benefits. I would almost call this looks good but is great but I am concerned with expectations having gotten away on this one as it is sitting $13 above the all time high set last month. My temptation with BA is to buy the $85s as they bottom out today. The PC section of durables looked strong, more fuel for market leader HPQ (5/16) to move up on but the sector has been falling out of favor so let’s watch LXK for some indication as they had great earnings but did little yesterday. Cramer should be crowing about UARM today who posted great numbers which is very funny as everyone panicked out yesterday and dropped the stock $2 at the end of the day! NSC had great numbers, just like BNI did yesterday so I like BNI for a bounce today with the $85s not so bad at .95. CNI is a nice long way to play Canadian resources and did not deserve its drop either so will make a nice play if BNI and NSC move up. Oct $50s give you time to evaluate direction without too much pain at $1.60. http://finance.yahoo.com/q/bc?t=1y&s=CNI&l=on&z=m&q=l&c=bni+nsc HMC doubled earnings to 1.9Bn so shame on whiny American car companies! We picked this several times in the past but it’s already up 40% from last year and I think the gap up today may be hard to make money on. TM (5/10), on the other hand is also up 40% and you know what you see more of on the road so I think the Jun $120s for $2.25 make an interesting play. HAL will attempt to reverse a very ugly short-term chart today so I’m holding off on the $85s until it looks real. IF Google recovery THEN = Yahoo recovery with the Yahoo $32.50s at .75 but take the profits and run! S had my favorite kind of earnings! Looks awful but are actually good… Nobody can read a report because the headline is earnings down 55% on 75% increased revenues but both numbers are a reflection of the Nextel merger which cost .19 so earning would have been up 8% for the combined company. I’m going to let this one shake out a bit and hope to pick up the June $25s for .50 but I’ll pay more if it doesn’t come down enough.