Asia predictably is on fire this morning as they play catch-up coming off a long holiday but Europe does not seem very excited and US futures are flat in early trading.
The dollar continues to fall, especially against the yen and Warren Buffet has made a whole weekend full of anti-dollar statements. The weakish jobs number on Friday has put currency traders back to the mindset that the Fed is “one and done” on rate hikes (Wednesday being the one) but I think we will get an identical statement from the Fed and we should get at least one more hike in June.
http://stockcharts.com/gallery/?$USD
The bears are getting desperate and yelling “Top” as the Dow is just 140 points from an all-time high but in the last run (during the dreaded bubble) the Dow and S&P averaged 30 times earnings while they are currently averaging 15 times earnings so we are not even comparing apples to oranges, we are comparing apples to chicken or two other things that are totally different this time! The Nasdaq is, meanwhile, 150% below it’s bubble high when p/e’s of 100 were being snapped up as bargains so I don’t think we have too much to worry about.
We may get a bit of a pullback into the Fed meeting this week, especailly with oil weakening as nothing blew up over the weekend. Now that Cheney did his part to push oil up on the Russian front Iran is making some nice noises to calm tensions slightly on the nuclear side. This indicates to me that the manipulators have given up on $70 as unsustainable and are targeting the mid to low $60s to stabalize POO.
http://online.wsj.com/article/SB114708220159346484.html?mod=home_whats_news_us
Speaking of apples, AAPL computed won their lawsuit against the Beatles just this morning in London so no fines and no restrictions on using the name and logo to market music – this is a big deal as a loss was baked into the numbers so the $72.50s for $1.50 or the $75s for .60 should both make good day trades as long as the Nasdaq isn’t tanking. One caveat on Apple is that they’ve been shedding a lot of exectutives lately for reasons unknown.
The Dow could drop 77 points today and will still be in great shape as long as it holds 11,500 so be very careful today! The Nasdaq is 42 points over resistance and the S&P is up 25 but the S&P should provide the leadership as well as the SOX which will be leading the Nasdaq up or down. Any move down in the SOX from 528 would be an indicator to stay out but a close over 532 will be an “all aboard” call for the Nasdaq.
There is a lot of money waiting on the side for rally confirmation and this week will be critical. It’s all about the Fed now as 72% of the companies reporting have beat expectations (vs 57% average) so most stocks are underpriced from a technical perspective but after a Dow 500 pt run in the past 3 weeks, a pullback of 150 points would be expected and healthy at this point.
This is a very light data week leading up to the Fed meeting and if the world peace train continues to roll we could get a big crude correction by Wednesday’s inventory report. Gold ran up and then down in Asia, as expected but did not drop significantly from Friday’s close so it will probably follow the markets for a little while which means our gold plays may still be on but I will wait to see what the US market does with the $680 mark before making a decision.
The best thing that can happen is for energy to drag down the markets early this week but I will be keeping my eye on GE and JNJ as trend indicators for the broader markets.
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All of Friday’s oil plays are still relevant again following the Valero Rule closely, especially if oil breaks below $69 today.
Our 12/12 TOTD FSH is merging with TMO synergistic move that should be great for the combined company once the dust clears. We called a pretty good bottom on this one:
http://philstocks.blogspot.com/2005/12/fishing-for-good-stock.html
AQNT was a nice winner last month and the Jun $30s have come all the way down to .30 so I like them on a possible Nasdaq rally as well as the remote possibility that Yahoo, Google or MSFT making a run at them now that the ValueClick deal is off the table. This is a sell on the rumor trade as they will probably not get a $30 offer!
Now I like EBAY! Nothing has changed and that’s just the point – down from $40 in the past 2 weeks after a positive analyst conference on Thursday smells like a recipe for upgrades to me. I’m going very light on the $32.50s for .80 as this may still drop to $30 but I think the big volume sell-off on Friday may have marked a bottom – very, very risky trade!
http://finance.yahoo.com/q/bc?s=EBAY&t=5d
Here’s a private company worth keeping tabs on as they have come up with a very new way of addressing a very big problem that could revolutionize chip technology as well as vastly improve telcom infrastructure (ie. more video on the web). I’d say even if it works perfectly we are looking at 2008+ but this is really huge:
http://www.multigig.com/over.html
AA is being talked about as undervalued to the point of being a $30Bn takeover target which should give it a nice boost today, this might get people thinking about true Dow values which could be very good for the whole index, especially companies like INTC and MSFT. AA should plow past its 2003 high of $35 but it still has quite a way to go before passing the pre 9/11 high of $48. The Oct $37.50s are a reasonable gamble for $1.90 but set a very firm $1.50 stop and do not think that they will be able to buck an overall market downturn.
NBR did have a beat but not enough to justify 100% rise in price from last year as oil declines.
EVOL is a small cap that just got a nice EU contract after a disappointing earnings report so I like them for a rebound from $1.69.
N got a buyout offer today – I can’t believe we bought the May $40s for .90 last month! They should open at $30+!!! TIE, BHP, FAL and ATI may pop off this as well.
SKS is also a takeover candidate so the Nov $16s for $1.50 are a way to wait and see what pans out.
I still like ABX on any pullback but watch the POG closely, NEM and AU are poised for moves as well.
Be careful today but an upturn could be a major bull signal!
