Wednesday Wrap-Up

Bad Iran, bad, bad! There, I have officially done more to reprimand Iran than the UN will tomorrow. Still, as expected, oil traders made that the story of the day (apparently the 45 day-old deadline was quite the surprise on the NYMEX floor at around 11:30) and got oil back above $70 at the close. They forgot to bring natural gas with them, possibly because it is virtual portfolio suicide ahead of the inventory, and it dropped back to $6.50 after spending 15 minutes above $7 yesterday. We are firing on all cylinders with the indices moving closer to my test marks in a nice, orderly fashion. The SOX punched through 450 with a big finish but the Transports provided the day’s biggest disappointment and that does worry me – more on that tomorrow. There is no more room to grow without testing our tops so tomorrow will be a very interesting day. Oil, as I mentioned, kissed the $68 level but got rescued by frenzied buying that came out of nowhere for no reason. It is taking a greater effort every day to pump up the price of oil. You can see from the 5 day chart how unnatural buying is not really good for a stock as USO was pumped from slightly oversold to massively overbought in just 4 hours. Notice what happened to them last Friday when it opened at this level! http://finance.yahoo.com/charts#chart9:symbol=uso;range=5d;indicator=ema(50,20,5)+stochasticslow+volumema(5);charttype=candlestick;crosshair=on;logscale=off;source= You can also see how the volume is increasing each day with heavy selling each morning followed by pump action buying to reel in the next round of suckers, or bagholders, to use the official jargon. XOM had the strongest volume in two weeks and did not follow oil back up as 24M shares were traded around $68, just 3 days after posting a new all-time high of $71 on 18M shares. This brings XOM below the 20 dma (now $69) for the first time since 6/29 when it traded at $61 and oil was at $74. Note the serious (20%) divergence of Exxon from the price of oil since 7/17 : http://finance.yahoo.com/q/bc?s=XOM&t=6m&l=on&z=m&q=l&c=uso So since topping out, just 100M of the 5Bn outstanding Exxon shareholders have gotten out. If funds want to lighten up just 5% on XOM, they have no choice but to sell into any strength as it would take 10 days of double average volume to work off 5% of the shares! Gold was all over the Iranian situation today, jumping $7 against a fairly flat dollar. The invisible hand is all over this one with money coming out of commodities, including homes, flooding the market with dollars causing rates to drop and commodities to rise forming a nice, soft pillow of cash for the economy to land on. You don’t have to believe me, Uncle Ben took my weekend Blog and turned it into today’s speech saying: “Rising disposable incomes should enable household spending to expand at a moderate pace and provide continued support for the overall economic expansion,” Bernanke said that should be the case even though smaller gains in home equity would likely lead U.S. households to save more out of their current income. “The rapid pace of house price appreciation in recent years likely contributed to the decline in the saving rate,” he said. “Similarly, the cooling of the housing market and associated reduction in capital gains on housing will probably provide some upward impetus to the saving rate.” If he next explains that money that flowed into commodities is now providing additional liquidity I will expect a check because this is getting ridiculous – he has now used 4 consecutive articles of mine in his last 4 statements! ====================================== I hope Ben’s been taking our picks too because he could use a little extra cash to augment that chincy Fed Chairman salary… Our oil plays went phenomenally well if you followed the Valero Rule and maybe so-so if you didn’t. We got an early sell signal from USO at 11:30 that was followed by our majors at 1pm so we will use 1pm exit pricing on our oil plays – we called it officially dead at 1:45 in comments. http://finance.yahoo.com/q/bc?t=1d&s=XOM&l=on&z=m&q=l&c=vlo%2Coih%2Cuso Our master plan to sell XOM $67.50 puts yesterday at .55 and rebuy at the open saved us a dime and the .45 entry went all the way to .90 (up 100%) before finishing the day back at .75. The $70 puts peaked out at $2.45 (up 225%) and that was just too much for me to leave on the table as it bobbed up and down a dime from there around 1:15. CHK Oct $30 puts was a disappointment, staying at .80 all day. The $32.50 puts ran to $1.50 (up 100%) making the Octobers a freebie while the $30s were not worth selling, still at .25. ECA Oct $50 puts, on the other hand, opened at $1.20 and held $1.40, down .20 from the high but looking good. Our original ECA play, the $55 puts let us out for $4 (up 90%) so the longer puts are now much more than free! BJS was well behaved with the $32.50 puts finishing at $1.30 (up 40%), down .20 from its high. MDR Oct $45 puts went nowhere all day. TDW $50 puts were a perfect call with a great $1.60 open and a $3 finish! http://finance.yahoo.com/q/bc?s=TDW&t=1d ADZA opened too high to play, up 6% to $16.89. COST Oct $50s came in at .75 and finished at .80, the $50s were just too far out of the money to play on that 5% drop! AXA had another good day and the $35s are now $2.30 (up 60%). TINY is in the too much, too fast category with a 13% gain today to $11.25 (up 20%). The March $10s are well in the money at $2.40 (up 120%). If you sold the Oct $10s you are called away with a nice profit but they would have been a good trade too at $1.65 (up 300%). CAL keeps rollin along with the $22.50s at $3.30 (up 100%). LUV is dragging behind with the $17.50s still .40 (up 60%). STX Mar $22.50s are back at $2.50 (up 66%) – I can’t believe we got that again! SLB $62.50 puts are in the money at $2 (up 85%). TIF earnings tomorrow but I’m already out. Have a good one, – Phil