Wild Wednesday

Markets SHOULD be off to a great start as strong economic news from Japan has started a fire in the rest of the world but inflation is raising its ugly head and the US and European markets are so scared of the Fed that they gave up close to 1% within minutes of a CPI that came in higher than expected. Asia is up triple digits across the board on news of 2-3% GDP growth coming from the World’s second largest economy. As this is up from -.5% to 0% it is quite an improvement. Consumer confidence in Japan also had the best numbers in ten years. At more than twice the size of China’s economy, everything you heard about Chinese demand on raw materials will now apply to Japan as well! After years of malaise there is a real boom beginning in Japan as Tokyo alone has 160 hi-rise projects currently under construction (about as many as in the whole US) which will mean soaring demand for steel and copper. This is already leading to a quick reversal in commodities today. http://www.emporis.com/en/wm/ci/bu/sk/?id=100297 Looking ahead on the Japan situation we can expect a boom in Liquefied Natural Gas and Uranium (their chief sources of power). Japan has 13 nuclear power plants under construction – that’s in a country smaller than California! Unfortunately, all this fun growth will push oil back up too, even though Japan is the most oil efficient nation, it is still the World’s #3 consumer behind the US and China (the least efficient). It should go without saying that gold is back and the dollar is having another bad day to boot! Expect a big snap back in gold today and I am just salivating over the bargain basement prices on miners thanks to that ridiculous sell-off. I will still be watching how the US markets treat gold today but it is obvious the appetite is back in Asia and Europe. My main concern of the day is the 10:30 oil inventory data which could kill the early day oil rally and put additional strain on the markets from that sector so we are going to pray for some real Nasdaq leadership and keep an eye on GE as our bellwether stock. How HPQ is treated will matter a lot and AMAT will let us know if the SOX are forgiven as they had great earnings but a poor reaction in the AH. If we can’t recover today and wind up with gains I will be back in cash at the end of the day as you really couldn’t ask for better rally conditions outside of a single data point (the CPI). The Nasdaq is down at the 200 dma of 2,230, it’s low for the year, so a drop to 2,225 will get me completely out of the markets. The best outcome we can hope for is that the 10:30 oil report drops the energy sector and rallies the majors to shift market leadership but it may be too much to hope for… ===================================== Don’t forget we’re in option expiration week so expect the unexpected. Risk is virtually intolerable on any May trade so using anything other than fun money is not advised!!! The high-rise data got me thinking of elevators which got me thinking of Otis which is owned by UTX these days and generates half of their profits. I came across an interesting study which should have tipped us off to buy UTX back in the $40s and we certainly need to have it on our radar as soon as it pulls back from its recent run: http://www.mindbranch.com/listing/product/R687-22.html X had a nice pullback and should head back up if the market turns so I like the Jun $75s for $1.10 but I’d rather pay more when it breaks $69 so I can be a little more confident of direction. DOW got an upgrade from JPM and they are a great way to play oil under $68.50 so I like the Jun $40s for $1.95 (a $.60 premium). High steel is bad news for GM, DCX, F, TM and HMC and you are just not a reader if you didn’t guess it’s time to short GM again! The options prices are outrageous but I still like the Jun $22.50 puts for .65 perhaps stopping out if the stock CLOSES over $26. I have to take a stand for fundamentals and buy the AMAT Jun $17s for .70 (a .45 premium). I don’t know why people are selling but I’m buying and if they don’t work, I’ll double up on the $16s next month! After bouncing off the 200 dma at $370 and a $80 drop on no particular news since earnings, dare I say that Google has suffered enough? Under fire from Microsoft, AOL and Yahoo I think the company is back in its comfort zone and may be ready to rock and roll. The risky and fun play for the day is the $390s for .80 as a $10 rise today will probably net you a triple while any move below $370 is a very clear sell signal. For next month, the Jun $400s at $6.80 have a much lower premium than previous Google options and the same $370 line will let you get out without too much damage (although I would probably hold down to $365). ADSK is nice and beaten down with earnings coming out tomorrow. The Jun $40s for $1.20 can be offset against the May $35 puts for .30 to ward off disaster in case I’m wrong. CCJ took a very nice bounce off the 50 dma and I like the Japan demand story for uranium so I will take the Jun $42.50 for $1.20. MRB is back to $3.07, gold was at $550 last time this stock was at $3 before yesterday! GG is the best of breed miner and I have to ignore the scary chart and take the June $35s even though the $1.65 price is outrageous. NEM $55s for .45 are certainly a fun trade as the stock was at $55 just yesterday and at $59 last Wednesday. ABX is in a sweet spot for today with the $32.50s at .45. The Jun $32.50s for $1.40 are a real bargain compared to the $2 out of the money GGs but still a lot to pay for a month. AIR $25s are .30 and the Jun $25s are $2.50 so I like the May just in case it takes off earlier than expected. I only make this trade on a strong BA chart which is unlikely today! I was very proud of my impulse control in not buying Apple yesterday so I’m not going to ruin a good thing by getting all excited that it’s back at $65, a level that offered no support at all in the March drop (but has held nicely in April). They will have to break $67 on good volume for me to take a recovery seriously. Speaking of SIRI, both Sirius and XM are down over the recording industry lawsuit against XMSR over XMs ability to record radio songs onto the Inno which even has the slogan “Hear it, click it, save it” so I can’t even imagine what defense they will be using in court… What investors don’t realize is that Sirius already has an agreement with the recording industry for their recording system and the suit is being used as leverage to get XM to play ball as well. This is a win/win for SIRI as XM’s costs are sure to increase one way or the other but let’s wait and see where they bottom out. The call of the week goes to Forbes and Akhtar Samad of Bear Stearns in an article I read one day too late: http://www.forbes.com/2006/05/15/pfizer-neurocrine-biosciences-0515markets14.html?partner=yahootix ====================================== Yesterday we said WWWD and today we have a look at T Boone Pickens holdings through BP Capital management. I will want to wait for the sector to bottom out a bit more but this does represent a nice list with lots of potential: ABB Ltd. 1,343,649 Shares ARCH COAL INC 826,174 Shares BJ SVCS CO 1,078,100 Shares CONOCOPHILLIPS 400,565 SharesCONSOL ENERGY INC 676,362 SharesDENBURY RESOURCES INC 1,074,972 SharesDRESSER RAND GROUP INC 644,951 SharesEOG RES INC 826,761 SharesFOUNDATION COAL HOLDINGS 250,117 SharesGLOBALSANTAFE CORP 672,187 SharesGREENBRIER COS INC 146,302 SharesJACOBS ENGR GROUP INC 268,731 SharesMASSEY ENERGY CORP 1,181,918 SharesMURPHY OIL CORP 633,990 SharesPEABODY ENERGY CORP 1,533,807 SharesQUICKSILVER RESOURCES INC 1,275,850 SharesROWAN COMPANIES INC 463,642 SharesSUNCOR ENERGY INC 1,262,376 SharesTESORO PETROLEUM CORP COM 537,935 SharesTODCO 544,770 SharesTRANSOCEAN INC 592,444 SharesVALERO ENERGY CORP NEW 1,033,016 Shares