How will the Dow handle 10,880?
This is all I care about today. If this is a real rally, it should blow through it like tissue paper on the way to another 100 point gain. If not, that may be all she wrote for the bounce. Don’t forget there is a lot of short covering on a bounce like yesterday so it will take a lot more than this before we can say real money is coming in to the market.
We discussed our levels last night so I won’t repeat but we are a long way from recovery so I am still mainly in cash, especially until options expire and the week sorts itself out.
Asia was up about 2% with India pulling a huge 7% recovery and Europe is looking up about 1.5% across the board but waiting for US confirmation to set their afternoon trading.
One big reason for the Asian turnaround was the Bank of Japan indicating they are not as anxious to raise rates as we were led to believe.
As I said yesterday, with oil, copper, gold, etc. leading a rally we are only setting ourselves up for another collapse.
We did get some SOX action yesterday, up 1.4%, with INTC up 3.5% and SNDK posting 3% with a strong finish:
http://finance.yahoo.com/q?s=sndk
On the whole I am encouraged but not excited yet. TXN still can’t get it going and GE is having trouble with the 200 dma of $34 so I will be watching both of those today. I also want to see if AAPL is forgiven and whether or not YHOO can find a buyer.
http://stockcharts.com/gallery/?yhoo
I wish I could be more optimistic but a slew of homebuilders got downgrades today and $70 oil is nothing to base a rally on when a hurricane or a terrorist attack can put us up to $80 in days so I’ll be day trading momentum but really looking to just take small gains and run until we get a real Nasdaq recovery, at least 2,150 would be about right.
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All these trades are dead if the Dow can’t break 10,900 or if any of the indices are down in the morning! As usual, I will be looking for the ones that go the wrong way and get cheaper, then pick some up as they turn my way.
I would still rather see a big sell-off than another small gain. The main reason gold is bouncing is that global fear of Stagflation is mounting so I will not be at all surprised if we get a drop and I will be entering very cautiously if at all.
We have to wait for the market to close to get the ADBE numbers but I like the Jul $30s, back at .85 (up 35%) but I sold mine for $1.10 already.
I was going to turn around and buy the AAPL $57.50s for .60 yesterday just as I dumped my puts for a huge profit but the stock was looking so pathetic that I didn’t pull the trigger. They jumped to .95 at the close but it’s a lot of premium for 2 days of trading.
I like UNH Sept $50s for $1.25 as a gamble that by then this option scandal may actually be over. Unless the whole sector is going straight to hell UNH is way oversold!
http://finance.yahoo.com/q/bc?s=UNH&t=3m&l=on&z=m&q=l&c=wlp,hum
PEP took a nice bounce off the 50 dma yesterday and I’m going to take a very small portion of Jul $60s at .70 as they should be able to ride up along a market recovery but I’m out if they cross the $57.50 mark. KO is also at the 50 dma at $42 so they can confirm each other.
BEAV Jul $20s are $1.20 and AIR Jul $20s are just .70 if BA continues to fly. Airbus delays make me stay away from air commodity plays ATI and TIE.
http://finance.yahoo.com/q/bc?s=BA&t=6m&l=on&z=m&q=l&c=beav,air
BSC turned in very nice earnings and should retake $130 today (5%). Anything less points to another round of poor sentiment.
LEH looks oversold to its peers and the $60s make a nice momentum play at $1.40 (.50 premium) as long as the market is moving up and GS stays positive. The Jul $62.50s are also not bad at $1.95.
HD is just about ready to turn and the Aug $37.50s are just $1.35! Last July the stock was at $43…
INFY should be up huge today as it is already up big in India – too late for us to play it again, perhaps we should have had more faith as it went down!
TM July $100s for $2.60 look really nice.
In a big market rally somebody’s going to buy GM so I might pick up some $25s for .65 (a .25 premium) just looking for a very quick profit.
Watch the Valero Rule but the XOM $57.50s are a great momentum play but you need to get out quickly as the time value erodes very quickly.
BTU might be good for a bounce if natural gas stays over $6.50 after inventory at 10:30. The Jul $50s are expensive at $3.50 but this is another stock sitting right on the 200 dma so any downward move is a don’t buy/get out signal. If ACI turns up then BTU is a very good play as ACI’s chart is much worse looking!
http://stockcharts.com/gallery/?aci
HET is another one sitting on the 200 dma so I’m confident in the Jul $75s for .75 with a .50 stop.
I still like GLW even though it has abused me of late. The Jul $22.50s are .95 and I’m going back in.
I wish I believed in this rally enough to buy the QQQQ July $38s for .95 but I just don’t!
CEPH has been clobbered with the sector but I like them for a bounce back to $60 but I will take the Jan $65s for $4.40 and stop out below $54.50. If this trade holds I will sell current calls against it but not until the stock retakes $60.
On the downside I am very interested in the BA $80 puts for .20 if the market turns sour on us.
SBUX is also ready to give up if the market keeps going down. I have been watching this for a month looking for a buy opportunity but it has had massive support at $35 but I like the Jul $35 puts for $1 in a down market.
Be very careful out there today! Any good roller coaster has one great big drop at the end of the ride and we just haven’t had ours yet. Maybe the ride will end and all the bears will get off and complain, saying “You call that a sell-off?” and all the bulls will be so happy we will go on to break new all-time highs despite $70 oil… Maybe…
