Asia is mixed again today but Europe turned up after a poor start, even though oil has continued upward in overnight trading.
The Fed gave the economy a great report card and key changes in their statements indicate a willingness to take a session off (after 16 consectutive hikes) but balances that with an emphasis on the fact that they will remain vigilant on inflation.
http://online.wsj.com/documents/info-fedparse0605.html
AIG will weigh on the Dow but I don’t think it will be too severe.
The Nasdaq should and must bounce today as crossing below 2,320 will lead us into a place we just do not want to be. In reviewing Nasdaq performance there have been only 7 up sessions in the last 23 with 7 of the last 10 being negative yet since the 4/19 closing high of 2,370 the market has only lost 50 points, a move up here would be a significantly higher low and set us up for a nice run at 2,400.
http://stockcharts.com/gallery/?%24comp
On the weekly chart, we see that this is just a nice consolidation flag above 2,300 so it will be very exciting if we do turn up from here. With the Dow clearly in breakout mode (and still 60% behind the Nikkei) and the S&P also looking strong I’m going to have to handicap us for an up move rather than a down.
I’m initiating a position in QQQQ Jul $42 for $1.05 with a stop at .90 as even being a little bit wrong on this trade will portend very badly for the markets.
Oil is back at $72.50 in the pre-market, which is critical support for a higher move but also a point they cannot afford to be rejected from so any downward movement in oil today will be a very good sign. The XOM $65 calls for .35 offer excellent upside protection and can be spread against the $65 puts for .30, which I own many of!
A major reason XOM, COP and CVX will be celebrating today is that they got to keep $6Bn in tax breaks in the $70Bn tax bill moving through congress thanks to last minute Republican horse trading (ie. Republican: “OK, you can have $150M for school lunch as long as oil companies get $700M to look for oil” Democrat: “But isn’t that their job? Why do we pay them to find the thing they make money selling?” Republican: “Do you want me to tell Fox News that you won’t let little Timmy have his school lunch? Mu ha ha ha!“).
http://online.wsj.com/article/SB114730061600549468.html?mod=home_whats_news_us
Gold is being loved more by Europeans than Asians this week, it traded down to $706 in the Asia markets but broke to new highs within an hour of Europe’s open. This is odd as the demand driving gold is supposed to be coming from Asia so we need to be a little suspicious at this point.
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Here is a great idea for a low risk, long-term gold play from Seeking Alpha:
http://goldstockblog.com/article/10386
I would play this trade with the NEM Jan $60s for $6.70 vs. the short on GLD as a -$10 move in GLD (-$100 POG) would probably bring NEM back to $45 where the option would be worth around $2.25 but you would pick up $10 on the short play for a $5.55 net.
Going the other way, a $10 loss on the short would add $100 to gold and probably add about $20 to NEM as it would add 50% to the bottom line netting roughly $5.
If they remain flat through September you will erode about 1/3 of your option value so it’s a 1:2 risk/reward!
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If the Nasdaq does not go up today I will be moving into an almost all cash position as it is likely to take the other indices down with the ship so let’s be careful out there!
Speaking of gold (and when do I ever do that?), RGLD has fallen way behind the group. They are not miners, they hold royalty producing contracts with miners, and those contracts are generally performance based and indexed to gold prices. Although the last quarter was a disappointment, forward projections are based on $400 gold, conservative to say the least. I like buying the Jan $40s for $4.50 and selling the Jun $40s for $1 (22%) as an income producer.
NEM is also ready to explode out of the gate if gold hits $720 so it is still game on for the Jun $60s for $2.15.
If gold is getting away from you at the open, remember BVN does little pre-market trading and is generally behind the opening movement of the other gold stocks.
CSCO went down and down yesterday and I will wait a bit before buying calls but I can hardly contain my excitement as the conference call was clearly conservative and in-line revenues of $7.9Bn virtually assure an earnings beat. The 50 dma is $19 where I will buy the Jun $20s but I will be buying the Oct $20s for $1.80 if it starts to turn up here.
http://networkingstockblog.com/article/10338
We forgot about the nice DIS results yesterday! As expected, the parks were packed and people are still watching TV so the quarter was great and the Jun $30s are already .95 (up 75%). These are still worth a look on a pullback and profits should be taken below $30.
GM is racing into a showdown in July with the Delphi union but Rick Wagoner says not to worry. I have to be a little concerned as Delphi is somehow expecting to get 34,000 workers to stay on the job as they reduce their wages from $26 an hour to $12.50 an hour – no I am not joking! Despite the chart and momentum being totally against me, I am taking the $25 puts for .40.
Whenever you are worried about your commodity being overbought, just remember that we picked up the TIE $55s for $2.30 on 4/11:
http://stockcharts.com/gallery/?tie
BEAV was another good pick from the same day and the $25s are $3.40 (110%) up if you didn’t take the massive profits back on the great quarter they announced on the 24th. I’m rolling into the Jun $30s for .75.
http://stockcharts.com/gallery/?beav
ATI is a better company than TIE so I’m taking the Jun $85s for $4.
AIR is the last of the Boeing Buddies and they have gone down 10% since April so lets look at the Aug $30s for $1.10 with a tight stop.
I’m starting a new group called Oil Pals with TGE, HOS, RES and HYDL – all companies that have much better margins than the big oil companies they service. I’m hoping for a sector pullback so we can play these.
Nice EBAY summary of analyst day:
http://internetstockblog.com/article/10209
INTC is down at it’s 50 dma which is a full $3.50 below its 200 dma so I like the Jun $20s for .50 and if that doesn’t work I will buy twice as many Julys and so on until this thing turns!
Cramer was right about URBN – they missed earnings by 20% on in-line revenues – very bad! (Sorry Vic!).
Now that LVS has made their presentation at the gaming conference I’m looking at the Jun $70 puts for $2.30 with a stop at $1.80 in case this goes the wrong way but I don’t see how the Venetian can grow from here (99.9% occupancy) and much of the future growth is dependant on 4 out of 4 major deals coming off without a hitch. Also, an actual outbreak of bird flu will drop this stock below $50!
IAG is a little mining concern that mostly partners with other miners but the $10 calls are only .25 and make a fun gamble into tomorrow’s earning.
When in doubt, tell people you are selling in China! This is my standard advice to all companies looking to boost their profile with investors and RIMM is taking it today which should give them a nice boost but it remains to be seen whether they can displace the Chinese market leader, Redberry!
MT gets no respect and its p/e is close to half of that of its rivals X and NUE. Estimates are on the low side ($1.02) tomorrow so the bar is low and I like the Jun $45s for .95 but, if they miss, it will be worthless fast!
PBR has earnings tomorrow and they will have a very tough time justifying the 300% rise in price since last year. I’m already crying over the $100 puts I bought for .80 (now .60) so I can’t wholeheartedly recommend them but I will be adding to my position at this price.
BOT looks about ready to turn back up after consolidating around $100 the Jun $110s at $2.40 will double on a $5 up move and lose about .90 on a $5 down move (by the end of next week) so it’s a risk/reward trade but don’t be a hero, if it turns below $100 get out!
SRZ got a huge overreaction to a delayed earnings report yesterday! I’m sure they will have it straightened out next month so I like the Jul $40 for .75.
If either XMSR or SIRI turn up I will be immediately buying the other one, both are way oversold but I’m not certain this is the bottom (I do really think it is though). I like the SIRI Jan $5s for .60 and the XMSR Jan $20 for $2.
