Friday Morning

Personal income was up .5 (a little low/good) and spending was .6, just what was expected but the PCE deflator hit 2.1 which indicates some potential inflation which our markets may worry over but on the whole these are very good numbers. Asia is up triple digits and Europe is looking strong again today so anything less than a .5% move up today will be a big disappointment, even on a short trading day. The Dow and the S&P erased a week of losses yesterday but the Nasdaq still has to make about 10 more points to move past “weak bounce” status. Without the Nasdaq getting it in gear, this “rally” will not last! Oil and gold are still heading up slighlty and should stay up ahead of a long weekend which gives us a whole extra day for something terrible to happen. As long as we see this consistent pattern of trading we know the markets remain jittery about international tensions. Volume should be light today and anything can happen but junior traders (the ones that don’t get to stretch the 3 day weekend into 4 days) can usually be expected to keep the status quo which one would hope will be flat to up today. If the world is kind we can expect a real rally on Tuesday but today is a day I will maintain cautious optimism. The note auction went poorly yesterday so watch for creep on the 10 year, over 5% might turn the markets back down. The Enron verdict sends a message that the markets are being regulated and corporate shenanigans will not be tolerated (when they are caught in such an obvious way at least). Overall this should be good for the markets but in the short-term it is worrying tech and health investors, especially in light of the recent options investigations. ===================================== I’m watching ADBE (6/15) as it looks way oversold but the last quarter wasn’t so great so it’s a tough call. Estimates have drifted down to .30 from .32 in the past 3 months so they don’t need much to pull a beat. Unit sales were good at HPQ and Dell and ORCL and SAP are turning around. The $30s are .75 and expire 4 days after earnings so this is a potential wipeout on bad earnings but could be a great play if they surprise. This is one ugly chart so I’m taking a very small entry position just to keep tabs on it. http://stockcharts.com/gallery/?adbe LU refuses to hit my $2.30 target after 10 days of waiting in a horrible market slump so I guess I’ll buy a little for $2.58 to get started. Big resistance or breakout point at $2.90. I guess I found a UNH play I can live with (can’t you just taste the enthusiasm?). I hate to miss a rally but I also hate to be a sucker so I’m going to pick up a few Dec $45s for $3.40 and sell half the position in July $45s for $1.65. Below $41 I will sell the other half for $1.20 (my guess) which should protect me down to $39 where I would buy out the caller and dump the postion. If it goes up, I will be updating this as we will have lots of options! If (AND ONLY IF) UNH breaks up we need to jump on AET $40s for .60. Also watch HUM, which is resting just above it’s 200 dma but has already recovered 2/3 of its drop. MS was off to a good start yesterday and I still like the Jul $65s for .70. A small undervalued finance company is MCGC which had a 66% rise in earnings over last year but is trading well below last year’s highs. The Russel 2000 indicates that their commercial loan business is probably in good shape and the Sept $15s are just $1.25 (a .35 premium). As the dollar makes a small comeback so does SNE which was very good to us last time we came in at this level. They had a terrible summer last year so the Jul $50s are only .80 while the Oct $50s are $2.20 so I’m willing to take a small position on the July’s with the full expectation of doubling down on a Jan play if this one goes south. I’m out if this crosses below $44.50 but that will cost about half the postition! KO is on a huge roll and the $45s are just .30 so what the heck! Wow, I should have held those LVS calls! They won the Singapore bid to build the first casino there and people are going nuts! How was that for calling a bottom? http://stockcharts.com/gallery/?lvs I like NVDA here with the $25s at .65 but I’m out at .50 as any break down would be very bad. If MT doesn’t do something monumentally stupid like up their bid or jump on another company, the failed Arcelor takeover should be great for the stock. It already leaped up 8% yesterday but it’s still down from $42 where they upped thier bid and they’ve been held down all year as no one but Mittal management liked the original deal anyway. This leaves us with a clean company with an industry low p/e of 7.7 (vs X at 11.8) in a very hot sector. I like the $35s for $1 but not if the stock drops below $32 in the morning so I’ll be patient. Remember not to take today too seriously as most of the traders are already gone and the ones that are here are in get out of town mode.