Wednesday Wrap-Up

Well the Fed decided to let us know they are considering taking a pause (pressure dollar down) that refreshes while at the same time the Treasury decides China does not maniplulate currency (pressure dollar up). Tomorrow is the 10 year note auction and if we don’t get a lot of action on it then the dollar can go into freefall and make Warren Buffett very happy. Gold is flying up towards $710 in anticipation of this and oil closed over $72 so it’s amazing the markets aren’t completely in the toilet. I can’t imagine that these two moves are not coordinated with a commitment by China and others to buy a tremendous amount of notes tomorrow to keep the dollar from melting down (and forcing the Fed to raise rates anyway) so we will have to watch this carefully. Keep in mind that the Dow is up 250 points in the past 5 days and 600 points since 4/17 so what we are seeing is a lot of money moving into large caps and especially out of tech. The Nasdaq is now right on the 50 dma at 2,320 so it literally cannot take anymore of a downside. Unfortunately the SOX crashed through their 50 dma of 513 like a paper wall and INTC, VZ, NOK, MOT, SNDK, RIMM, GOOG, YHOO etc. give us no indication that there will be an improvement in the Nasdaq tomorrow. http://stockcharts.com/gallery/?%24sox The S&P is miles above resistance and in no particular danger. If it weren’t for the tech dragging it down it would be as close to a new high as the Dow is. My shining ray of hope is MSFT, who picked up .6% today with a strong finish but I am very, very concerned about the Nasdaq for tomorrow. ===================================== AU was the star of the gold sector today and the Jun $60s moved up 35% to $1.80. I bought ABX $35s for .65 at 3:30 as it was just laying there all day! http://finance.yahoo.com/q/bc?s=ABX&t=1d NEM Jun $60s opened at $1.90 and finished at $2.20 (up 15%). BVN barely moved but the Jun $35s went up to .75 (up 25%). DCX gapped up to fast to make a play on the Jun $57.50s. HPQ didn’t go down, which I considered a huge plus! UNH was a shining star all day and the Jun $50s finished the day at .70 (up 75%) but I got stopped out at .65 on a late dip. We’ll give it a few days and look for a long set-up. TM was a big disappointment today so we are out of the Jun $120s with more than a double but I’m concerned about the Jul $130s already down to $1.80 (down 30%). VVUS was a great call, up 31% for the day! The Dec $5s are up 325% to .85, not bad for a day’s work – this is how I like to play biotech!!! Sometimes an ugly chart cannot be denied as HW drops another 1.5% today. Aug $35s are down to $1.90 (down 15%). PGIC was indeed the way to play CRYP as they went the opposite way all day! The Sept $12.50s ran up to .85 (up 30%) and it looks strong. http://finance.yahoo.com/q/bc?s=PGIC&t=1d I’m not even going to discuss Apple – makes me too angry… http://biz.yahoo.com/ap/060509/france_itunes.html?.v=4 EBAY, on the other hand, had another nice day and the Jun $32.50s jumped to $1.50 (up 66%). AQNT was up huge again today, slamming right into the 5% rule and the Jun $30s are now .60 (up 200%). Thank goodness we took MOT off the table and only took a small hit on the Jul $25s, down a nickle to .35: http://finance.yahoo.com/q/bc?s=MOT&t=1d GME finally paid off today as the $45 puts zoomed to .55 (up 40%). http://finance.yahoo.com/q/bc?s=GME&t=5d MRB went crazy at the end of day to $3.50 (up 10%), someone must have told them there is gold in those mines! http://finance.yahoo.com/q/bc?s=MRB&t=1d&l=on&z=m&q=l&c= I grabbed the TXN $35s for .15 today and they are only up a nickle so far if you want to play the home game with me! The Jul $35s are a much more sensible play at $1.25. http://biz.yahoo.com/cnnm/060510/051006_texas_instruments.html?.v=5 ===================================== We missed the news on OWENQ today (up 78%) as they settle their asbestos suit for a “mere” $5.1Bn. This is fantastic but I’m not sure it’s wise to buy the stock as the bankruptcy documentation says the following: “Existing Owens Corning stock will be cancelled when an approved reorganization plan becomes effective. 131.4 million shares of new stock will be issued with an aggregate plan value of $3.942 billion. The distribution of shares is described below. Existing holders of Owens Corning common stock (which will be cancelled upon emergence) will receive warrants to purchase 5 percent of the fully diluted shares of the reorganized company, assuming exercise of all warrants but ignoring management options, at an exercise price of $45.25 per share. The warrants can be exercised within seven years of the effective date.” So this is great for the company but not for current shareholders, who could end up with only the right to pay an additional $45.25 to buy into the new company for each 10 shares of stock that they own (which will be cancelled worthless). If you buy into the company’s forward valuation of $6Bn (it is currently worth $91M actual dollars, even after today’s run) then it’s a $16, 7 year option – pre asbestos this company was never worth more than $2Bn. Even allowing for inflation since the 2000 crash, $6Bn may be a stretch out of the box but I do think the potential is there for them to grow into it. I would rather wait until they are officially out of bankruptcy to play this game so we can get a handle on how the operating costs stack up outside of court protection but this company can drop $600M a year to the bottom line and really bears watching!