Watch Out Wednesday

This bird flu thing needs to go away if we are going to get anywhere today. Japan was up 300 points on a drop in the Yen but the Hang Seng went down a bit on Yuan appreciation news. Europe is generally down by over a point and our pre markets are all over the place so it’s a real “enter at your own risk” kind of day. This will be our last chance to turn it around or we may face another 5% drop in the markets so today will be very tough to call, especially with the Flu wild card. Gold is down $7 in Europe to $666 which you can interpret as a sign if you wish or possibly that people aren’t worried about bird flu or that people believe bird flu willl decimate the world economy to such an extent that not even gold will hold value. Oil is trading down too and it’s inventory day so we may get a wild correction there at 10:30 (after the usual head fake). Oil puts will probably be the only thing I play today but there are few obvious plays there as they ended yesterday with only a weak bounce on the whole. Yesterday’s buying was very artificial and could be quickly reversed. I should have taken that vacation yesterday as this is not a market worth playing until this Flu panic goes away (of course, if it turns out to be justified, then watch out!). Let’s watch the S&P again as it is now the 200 dma at 1,260 while the Dow is resting righ on the psychological level of 11,100 and a fall into the 10,900s will probably panic investors into another wave of selling. I cannot emphasize a cash position strongly enough in this market. With all indices below technical levels the chance of missing a large rally is very slim while the chance of participating in a crash is getting better every day. Even if your cash position is 75% of what it was you will be better off than if you lose another 25% of your virtual portfolio as you only have to make a 30% comeback from 75% but you have to make a 100% comeback from 50%! ===================================== I’m not going into any oil play unless it goes the wrong way prior to inventory so I can buy cheap and I will only trigger after inventory in strict accordance with the Valero Rule. We are looking for a build in crude inventories, any draw will be a bullish sign for the oil companies. Also, oil must remain below $71 as well. XOM is well trapped in a channel between $62 and $59.75 and I really like the spread of the $62.50s for .65 and the $57.50 puts for .65 as a break in either direction could make you very happy. I will take a small initial position and look to add a little more to each side at .40 or less until it breaks out one way or the other. COP closed just below its 200 dma of $63 after trying hard to break through yesterday. I like the $60 puts for .75 but must sell/not buy if it crosses back over $63. CVX just dropped below the 200 dma as well ($58.25) and the $60 puts have a low premium at $2.35 (.45) with an obvious stop/don’t buy just .15 over yesterday’s close. UPL bounced off the 200 dma of $55.50 Monday and is well above it now but if the above mentioned companies move down, UPL should follow. The $55 puts are $1.85. ACI is still running a little hot and the July $50 puts are cheap at $4.60 (a $1 premium). SU was sharply rejected from the 50 dma of $82 yesterday and will suffer greatly if oil dips below $70. The $75 puts are $2.10. ===================================== If the S&P is below 1,260 then no call is a good idea but, just in case there’s a rebound, I do have a few I will be watching… I still want to see a bounce or a turn so I’m not ready to jump in with puts either. ML raised GM to a buy with a $37 price target! With 14,000 brokers we can expect quite a rush on the stock today, possibly to about $26 which will give the Dow a boost. If it holds, it could set off a round of bargain shopping that we need to get the markets moving. TM has gotten oversold again and has a safety net of the 200 dma at $100 so I will keep my eye on this one but I want to get the Oct $110s if they come down to $5. LVS is a travel stock so if the bird flu scare picks up steam I like the $60 puts at $1.20 but watch out for a bounce off the 50 dma at $62.50. GOOG is a gift as we have another chance to buy the $420s for $2.55 (they were $3.90 yesterday afternoon. This is one stock that would benefit from something that makes people stay home! Now Google is having a 5/31 investor conference call which should prove interesting. GILD should benefit from renewed bird flu panic as Tamiflu is the only currently available treatment. My guess is that the $57.50s should open at around $1.10 and that’s where I will look to play this one but only if BCRX keeps going up (that’s the speculation play). TXN is being given away at under $31. The Jul $32.50 puts are just .90. Along the same lines, I can’t resist the GE Jul $35s for .45. GE is still my market indicator, if they go down, I don’t buy anything. The same goes with TXN for the Nasdaq – both they and Intel are at dangerous lows and if they can’t bounce from here there is no hope.