Did I miss anything?
I was off having a nice time this week and mostly when I bothered to tune in to the news or CNBC I was only thinking, gee I’m glad I’m missing this!
When I left we were worried about Kim Jong Il but I’ve been passing by TV’s tuned to giant fire balls that have nothing to do with him and the fear factor (now somewhat justified) is driving oil to record levels, likely to be followed by gold and other metals.
Asia continues to plunge, dropping another point or two today while Europe looks weak. We are back in the sort of situation we had back in mid-June where we would rather see a huge drop to a real bottom than another weak recovery. This time the global situation is obviously far worse and we are still way above Jun 14 lows: Dow 10,698, S&P 1,219, NYSE 7,708.
The Nasdaq beat its June low of 2,065 yesterday and should give us the first turn signal (if it does at all) but the SOX continue on an uninterrupted road to hell that has as much chance of accelerating down as it does of turning up.
http://stockcharts.com/gallery/?%24sox
Putting additional topspin on the Nasdaq is news that the California District Attorney (overseeing Silicon Valley) is launching a task force to investigate options backdating. This is starting to look like something almost everyone was doing, with over 50 companies now under investigation so get ready for more headlines there. Also bad for tech is a price-fixing probe aimed at chip makers.
The key for watching this market is going to be how middling earnings are received. GE was pretty exactly in line so we will see how they get treated today. Builders will take yet another hit (props to the Prof) as DHI lowers guidance yet again, taking a 10% hit overnight.
I am baffled by the spotty performance of the oil patch, especially the drillers as oil prices continue to climb. Apparently traders think this spike is temporary and, of course, $4 gas may finally lead to demand destruction but I want to see how oil handles $80 before I bet against that sector. Since the first $75 oil spike on 4/24 most of the oil patch has traded down with drillers like PTEN down 20%. APC has been hammered even though their purchase of KMG at $15 per barrel looks pretty smart right now.
http://finance.yahoo.com/q/bc?t=3m&s=XOM&l=on&z=m&q=l&c=oih+vlo+apc+su+pten
Gold stocks are in a similar situation, well off their highs when gold was at $700 briefly back in early May. Commodity traders probably think that the mid-east situation will soon blow over (its only been going on for a couple of thousand years) or they think it will get so bad that the global economy will collapse. Third quarter guidance so far indicates that many executives have the same fear so it may be a long, tough road ahead before we have any sort of recovery.
Right now you are getting paid 5% not to play the market and that is really the smart move this week. The weekend could go either way but, like I said, we really need a big, final bottoming move a lot more than we need a recovery right now.
Our yield curve is very inverted as professional investors run to short-term cash positions and the Dollar has even pulled out of its power dive as our currency continues to provide a safe haven for global investors.
The Dow flew through the 200 dma at 10,933 yesterday so we will see if it even attempts to cross it today while the S&P has no chance of seeing its 200 at 1,284. The NYSE is still above its 200 dma of 7,962 and bears watching while any move by the Nasdaq below 2,050 will likely send it all the way back to test the October low of 2,025.
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If oil stays at these prices you might want to look into BPT which is a trust that leases oil bearing land in Canada for a percentage of the profits. They pay a 10% dividend and have virtually no expenses outside of sending checks to shareholders. They will go ex-dividend in a couple of days and hopefully will pull back to around $80 where I really like them for a long-term play if oil remains above $75.
AMLN (7/24) has earnings coming up and we will see if they are really worth 250% more than last year. The Aug $50 puts are an outrageous $3.20 but I will be looking to pick them up at $2.50 or less.
UST got an undeserved pop along with big tobacco last week although they derive little benefit from the legal decision. If MO starts to drop, they will quickly follow suit and the Aug $45 puts are reasonable at .85.
EXPD is a great business but has gotten a bit ahead of itself with a 48 p/e. The company just set guidance for long-term growth of 15% which is not what you pay this kind of price for… Aug $50 puts are $2.70 and I would like them at $2 or less.
SBUX is resting right on it’s 200 dma at $34 and I have to believe that people will finally cut down on the $5 coffee with gas at $4 a gallon. I love Starbucks and have never been short on it but a cross of the 200 does not bode well and the Aug $35 puts are $1.90 and should be easy to dump if it heads up.
Samsung said profits were down 11% and the BOJ is raising rates so I like the SNE Aug $40 puts at $1 but getting out if it crosses back over the 200 at $42.35.
OXY has done nothing this week so I like the Aug $105 puts for $4 or less as a gamble on things working out over the weekend. These can be used to offset long oil positions.
OIH has been dragging the indiviual issues by quite a bit and makes a nice offset to the OXY play with the $150s at $1.75.
CBH (7/17) is my favorite bank and a nasty WSJ article has made them cheap prior to earnings. Aug $32.50s are expensive at $1.70 but that’s because they are oversold…
If people stopped buying Barbies my daughters did not get the memo. MAT (4/17) will let us know Monday but Aug $15s have a very low premium at $1.55.
Watch Apple and GE to get an idea of market sentiment today but cash is still king.
