Wow, Thursday already, this week is flying!
Looks like the Dems won the Senate too and I think the markets are going to like it!
The Hang Seng liked it with a 141 point gain but the Nikkei can’t get it back in gear as rising oil ground Japan’s industrials to a halt.
Europe is flat ahead of our open but are holding their own record highs.
Will we get serious breakouts on our own indices this morning? If oil stays below $60 (but not so low as to crash the energy sector) I think we have a shot at 12,200!
Mr. Jones looks ready to party and, with 70% of the companies reporting so far giving us a beat, why not? This week may be a little early for a breakout but if we make it through the weekend without anything blowing up, we could be in very good shape.
Let’s keep an eye on some good and bad levels:
- Dow 12,200 very good, 12,100 not so much.
- S&P 1,390 record high, 1,380+ still very strong
- NYSE 8,900 record high, 8,800 holding record highs
- Nasdaq 2,400 = lift off, 2,350 needs to hold
- Russel 770 is breakout, 760 weakness
The SOX are likely to give us the greatest concern, they are likely to have trouble at the 200 dma at 470 but anything above there will lift the Nasdaq over 2,400 – hopefully Microsoft’s confirmation of Vista release will help today.
The Yuan is on the move, now at it’s year high as China tries to deflect criticism of this month’s record-breaking trade surplus. The Bank of England adds pressure to the dollar with another rate hike, bringing them to 5%.
That is bad for oil prices but not bad for US equity prices as they look cheap to foreign investors. The dollar is down 3% since the 16th which adds $1.80 to the price of oil and $18 to the price of gold.
Gold is, not too coincidentally, up $18 since that date while oil has remained flat at $58.95. Subtract that $1.80 dollar boost and we have oil at $57.15 – my 9/25 bottom target. This is my bad for not keeping on top of this as any bounce around here – even back to the topline resistance of $61.69 (now $59.89) is to be expected.
Very unfortunately, since we have to live with the dollar at this level, we are now looking at $59.89 as firming up as a floor for oil and we can expect a move to $62.88 (up 5%) without violating the general downtrend (but completely violating our puts!) and I would say a break over 2.5% ($61.38) will be very unpleasant for us oil bears!
It will also be unpleasant for the people of California who, as Cramer pointed out, let themselves be bought and are already facing 20 cent increases at the pump just 2 days after they voted against reform. Hopefully they will remember that extra $4 (or more if this keeps going) every time they fill up for the next 12 months enough to reconsider next time the oil companies tell you how why they should be allowed to keep all of your money.
The facts haven’t changed, OPEC is telling us we cannot possibly consume the amount of crude they are capable of producing, even at $60 a barrel and the IEA says it will take 30 years for consumption to go up 50% (if it were a stock, would you buy it?)but so what? Fundamentals haven’t mattered in this market since September…
What has changed is the fact that it seems to be politics as usual and so what if the oil industry has to toss around a billion of the $400Bn in profits they made this year to buy a few votes – it’s money well spent!
Still I hang on to the hope that some Trillionaire investing group will step in on our side and take control of this market (it certainly is ripe for the picking) but you’ve got to be in for a good fight. Our downside resistance starts at the 2.5% mark of $58.39 and a real downside will be confirmed below the next 5% stop at $56.89.
Seante committees will be the topic of discussion today as Pat Leahy looks to take over Judiciary, Dan Inouye will take Commerce, Ted Kennedy will run Health, Education, Labor and Pensions (uh-oh GM!), Chris Dodd takes Banking and Jeff Bingaman will take over Energy and Natur al Resources.
Leahy is looking to remove the antitrust exemptions enjoyed by insurance companies and Kennedy will make it his mission to raise the minimum wage and do something about health care.
Bingaman is a big alternative energy guy. Dodd is no fan of “excessive interest being charged by credit companies” as evidenced by MA’s 8% drop in the past 2 days.
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So times they are a changin’ and we’d better be ready to change our investment strategies with it!
As I said yesterday, the Nasdaq loves the Dems and, traditionally, big oil doesn’t but they will hold their cards until they are forced to fold so we may be waiting until spring for real change.
How can the Nasdaq not love CSCO’s Q1 report, let’s look for some really good movement in the equipment sector (because they’ve got to be hooking those things to something!).
TXN benefits from any good tech run and has been lagging lately but enough is enough at $29.50 so I’ll take some Dec $30s for .75 but certainly out if it hits .50.
I’m watching Dell but not ready to jump back in until it proves something at the $25 resistance. Lenovo’s margins are under pressure so I don’t think there will be a price war this winter.
One tech company I won’t be buying is HIT! Not only are sales off from 2005 but they only made $300M on $80Bn in sales, that’s a p/e of 270!
How many times can UNH go down on the same options story? Once a week or so seems to be the answer… This time I’m looking for an entry point as this nonsense has nothing to do with the company’s forward prospects.
BT had great earnings so I like T again with the Jan $35s at .90. Let’s keep an eye on NTT for signs of cost problems when they report tomorrow.
My buddies at OLED report tomorrow but I find myself without any as we took our 40% profits off the table at $6.89 at the end of September and they bounced back so fast we missed it! Hopefully tomorrow will give us a new entry as it is doubtful they made money and traders are very impatient.
PBR shoots for an all-time high tomorrow but didn’t we hear something about Venezuala not pumping as much oil? It will be interesting to watch…
TOA is a homebuilder in a fight with a bank (DB) over loan covenants and provides a good view of how fast this issue (land write-offs, underperformance) can affect a builder!
As I said last month, look for the fastest growing builders and assume they overbought at the top!
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HOV goes the builders one better by projecting an actual LOSS for the current quarter! “Our financial results for the fourth quarter continued to be negatively impacted by high cancellation rates and increased use of concessions and incentives, particularly on the resale of those homes which experienced contract cancellations,” said Chief Executive Ara Hovnanian in a statement.
Of 11 analysts who track Hovnanian, only 1 had them listed as a sell with C, DB and GS all still listing them as a buy. BAC, who had them at neutral, expected earnings of $1.05 a share vs. new guidance of a $1.96 per $28 share loss!
Citigroup is taking down the year estimates to $2.24 (less than they made in the first half) from $5.11, a far cry from last year’s $7.16 when the stock was trading at $73 a share in an Exxon-like spike in July.
Hey, this doesn’t stop people from buying GM so why should HOV worry?
Big trouble spots for HOV seem to be Florida, Orange County and San Diego where 35% of the people under contract walked away from their deposit rather than take delivery of the homes.
Net contracts for the quarter were 3,100 – a whopping decline of close to 40%.
“One reason cancellations are so high is that people think they can get the same house cheaper if they just wait a week or two,” said M.D.C. Holdings Inc. Chief Executive Larry Mizel
Standard & Poor’s Equity Research analyst William Mack maintained a “sell” recommendation on shares of Hovnanian following the announcement. He lowered the target price on the stock to $22 from $24.
“We think these write-downs, unprecedented for Hovnanian in magnitude, reflect huge inventories of existing homes and poorly timed land purchases by the company,” the analyst wrote in a research note to investors.
