Wednesday Morning

Fed Day! Fed Day! Fed Day! Yup, that’s all we’re going to hear today so just sit back and wait for it to be over. There is no way to know what will happen or how the market will react to whatever happens so we need to be cautious and patient today. The Nikkei fell right of the table at the end of the day on worries about our Fed which is sparking worries that the BOJ will be forced to tighten: http://finance.yahoo.com/q/bc?s=%5EN225&t=1d It wasn’t Toyota, which had crushing earnings or BIDU, which is growing like gangbusters, lots of builders got sold off and gold went up again on inflation worries, now $704 in the overnights. Europe is trading flat and we need to watch them for a similar end of day sell-off. Oil is flat ahead of 10:30 inventory reports and we need to keep a close eye on the Valero Rule and the Friday list of oil puts keeping in mind that there is often a head-fake reaction to the reports but any build in crude should bring oil below $70 at least. Demand numbers come in a little later (or are interpreted later) and will be key. Gold is flying but should get a pullback at this level before heading on to $800. AU is still my favorite current gold play with the Jun $60s at just $1.40 but I sold my golds yesterday and I’m not buying back in until we get a drop. If I were going to take a contrarian play it would be GOLD which may have gotten a little ahead of itself – let’s use this as our canary in the coalmine to see if the market is turning. In general, the US economy and the World economy in general is too strong for the current rate environment, I remember being thrilled to get a 9% car loan 20 years ago, and all this fear of rate hikes is just a temper tantrum being thrown by a bunch of spoiled teenagers having their free allowance taken away and being told they have to learn the true value of a dollar. Down the road it will lead to more sensible purchasing decisions (eg. Blue Chips). Let’s remember that May options expire next week and you shouldn’t be holding any May contracts unless they are very short trades. If you really love your position, roll into June and if you don’t love it enough to put more money in then get out! ====================================== Othe golds I will be looking at on pullbacks are: NEM Jun $60s below $2 – but not until gold breaks back above $700. BVN Jun $35s are a fun play at .60. We took the DIS Jun $30s for .55 in yesterday’s comments and that’s looking like it will be a very nice trade as the company announces a 12% increase in net profits. For some insane reason CELL announced a 6:5 stock split last night. I like this company but the cost of administrating the split wipes out whatever small benefit could be derived so we’ll keep an eye on the market reaction. GM blew through the 200 dma for the first time since last July when that crazy old man started buying the stock. The better their stock does, the more likely Delphi workers will strike so let’s keep a close watch on this one for a shorting opportunity but it is unlikely to fall back below $25 without some consolidation. DCX Jun $57.50s look good for .95 as they broke right above the 50 dma yesterday. Also from comments we have the SYMC Jun $17.50s for .65 and the Jun $15 puts for .15. Based on earnings, I’m inclined to try to get a dime back on the puts and let the calls ride. HPQ is still not forgiven but I am happy with the $32.50s for $1.40 (up .10). I picked up BCRX $15s for .85 yesterday as a fun trade as the bird flu movie was out yesterday. Wolf made an excellent post in comments about a circular that is being given out in hospitals to deal with people’s questions so I’m hoping it filters down to this stock as well. If we look like we have momentum the Jun $17.50s are a nice play at .55 but get out at $1. I finally broke down and took the UNH Jun $50s for .40 as I like the risk/reward ratio although this is one horrendous chart: http://stockcharts.com/gallery/?unh ATYT is shaping up to be a good long-term play as they are the leading graphic supplier in the new multimedia phones. It may be painful to accumulate as it is likely to test the 200 dma at $15.25. I like buying the Nov $17.50 for $1.65 and selling the Jun $17.50s for .60. We have been sitting on the TM Jun $120s for a couple of weeks and they are currently at $5.30 (up 130%). Today will be a good day to cash them out and flip into the Jul $130s for $2.50 (apx) to lock in profits without giving up additional upside. The excellent earnings will be tempered by concerns over a rising Yen hurting future sales. VVUS got great phase 2 trial results on Qnexa and I’m going to pick up the Dec $5s at .20 as a pure gamble they will retake their 2004 highs. Ho hum, TASR wins another lawsuit… The Sept $12.50s are still .65. I have to like HW at this price, the chart is uglier than UNH (well, not that ugly but close) but the quarter was great, although a disappointment. I’m going to give them another quarter by taking the Aug $35s for $2.20. CRYP knocked the cover off the ball which makes me like PGIC agian with the Sep $12.50s at .65 but getting out if we break below the 200 dma at $10.40.