Thankfully Friday

One way or another, at least this week is going to finally end!

Asia is up slightly and Europe is down slightle so it is up to us to set a direction today.

Options expiration day so be prepared for anything and everything today. With the indices down 3% for the week on a huge volume drop at yesterday’s close a bounce doesn’t seem likely so I’m going to be expecting it.
http://finance.yahoo.com/q/bc?t=5d&s=%5EDJI&l=on&z=m&q=l&c=&c=%5EGSPC&c=%5EIXIC

In the very least there should be a suckers rally in the morning but even a full point rally will not even qualify as more than a dead market bounce so please don’t get too excited. I will be especially wary about an energy led rally as it is the rise of energy prices finally showing up as inflation that caused the collapse in the first place.

The Nasdaq has not had 9 consecutive days of decline since May of 1984 (which was a pre rally blow off) so we can expect at least some window dressing buyers trying to save it by the day’s end rather than have that be the weekend headline.

I will remain in day trade mode but in fantasy land we are looking for the Dow to hold 11,300 (up 94), the Nasdaq to get over 2,230 (up 25) and the S&P to not go lower than 1,257 (down 3 pts). Anything less than this is no rally at all as we are just trying to retake the low end of the previous bands. Other than the Dow, which has a strong rising 200 dma (the leadership change we are hoping for), we are just hoping to get back to where we were on Jan 1st!

So let’s use the January theory to look at plays for today. The January theory (which we are making up for the day and only applies to today’s situation) says that if your stock is not Dow-like (large cap, global corp) then if it is still higher than Jan 1st it is likely to go down if the market twitches and if it is lower than Jan 1st it should be a rally participant.

Oil is still higher than it was on Jan 1st but not if you apply the the still 7% decline in the dollar which puts the adjusted price at $65.10, just $1 over and also one dollar over the 200 dma at exactly $64.10 (this is no small coincidence).

On Monday I said “Oil blew through resistance and dropped to $69.41 (.09 under my morning target) and is ready to challenge my dollar adjusted mark at $68.50 where it should find good support” and we just touched $68.50 yesterday before bouncing back up $1.

Adjusted gold is down to $632, still $100 higher than Jan 1st but ready to plunge if US traders can take it below $668 in current dollars (but be careful as the dollar is bouncing and the eqation changes by the minute!). There will be no comfort from the mining stocks until we get a very firm move away from this level. Expect there to be a challenge as soon as today as every morning this week gold has been driven down $10 in the US markets.

Yesterday we saved a lot of money by pledging not to try to save the markets as those who tried to be brave got crushed when the markets rolled back at the day’s end. It will take a 77 point Dow rise just to get us back to the point where we said we wouldn’t get excited yesterday so please, please, please do not get too excited!!!

I know it is tempting, I know things look so cheap, but we thought the same thing last April and in July of ’04 which were the mid points in 900 and 700 point Dow drops. Just this Monday/Tuesday we had a 100 point “rally” after a 250 point drop where it was very tempting to call a bottom but my suspicions were justified as we quickly dropped another 300 points in the next 2 days so please indulge my paranoia on this one!

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The best kind of news is SEC investigations! Not necessarily for the companies being investigated but for the short sellers who attack them. In addition to UNH there are questionable option activities at the following companies: ACS, ALTR, BRKS, CMVT, ULCM, VRNT and JBL. Check out their charts!

New subpoenas have just been handed out so we have an opportunity on CMX, who have actually been up this week on great earnings may just be caught in UNH’s investigation or they may have their own problems. Since they are just under the 200 dma of $49.50 we can take the Jun $50 puts for $2.05 (a .95 premium) and sell if this thing even twitches above that line.

AMT (1/1 = $27) pierced their 200 dma yesterday and then they announced an internal review of option practices. I like the Jun $30 puts for .30 on this one.

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Even in a very strong looking market I am just window shopping and will be looking to sell a trade as soon as I enter it. I don’t think there is anything on Earth that will make me hold stocks over the weekend but I’ll be making comments today in case a miracle happens and I change my mind (but really, with expiration day you can’t trust anything that happens anyway).

MT (1/1 = $26) upped its bid 34% for Arcelor to $33Bn and pledged to reduce its voting rights in the combined company. MT’s market cap is only $24Bn so that extra $9Bn might hurt just a bit. I like the Jun $30 for .75 but it is a ridiculous premium as I guess I’m not the only guy who thinks this is a bad deal at 70% over Arcelor’s 1/1 price!

X (1/1 = $47.50) ignored a Wednesday increase in world steel prices and dropped $14, making one very ugly chart but it should at least make it back to $65 on this news and also because it will wipe out all the $65 puts (10,000 of them) so I love the $65 calls for .30. Remember, on a trade like this we sell at .50 if it even backs down just a nickle! I do not like this trade into next week as the chart is just too scary!
http://stockcharts.com/gallery/?x

That’s it for stock picks, I just don’t like anything until I see proof! There are a couple of oil puts to play if oil retests $58.50 and especially if it goes below it.

CLB (1/1 = $37.5) has not been buying in to the oil sell-off like the rest of the sector and is still has 15,000 $30 puts that are in the money so I like the $30 puts for .30 looking for .50.