We’ve had some decent earnings reports and China may not dump their dollars as fast as some had feared so we should get a good open today.
Now it is critical that we hold the resistance levels we set yesterday, all of which were tested except, thank goodness, Nasdaq 2,350.
The Nikkei is testing 16,000, down 700 points since 10/26 as oil prices are taking a heavy toll on Japan’s manufacturing sector. At the same time, rising Japanese interest rates are causing investors to unwind Japanese loans which have been used to invest in other, higher paying currencies so chaos may follow.
Europe is flat despite news that the UK is tracking 30 terrorist plots and 200 cells involving 1,600 people who “were actively engaged in plotting or facilitating terrorist acts here and overseas.” The threat includes “resilient networks, some directed from al Qaeda in Pakistan, some more loosely inspired by it, planning attacks including mass casualty suicide attacks in the U.K.”
It won’t take much to panic the US markets today and I’m very worried about profit taking into the weekend so I’ll be taking some of my own profits (see how it all starts!) with very tight stops on calls and longs.
Will the Dow hold 12,100? 1,370 is where we are watching the S&P. The NYSE held 8,800 impressively yesterday while the Nasdaq was very impressive above 1,375 but the Russell barely held 760 so let’s keep a close eye on them today.
Dont’ even think of buying in if the SOX continue down as that’s a trendline we do not want to cross! The transports may be saved by falling oil prices today, unless the US pump crew jacks it up again, and they must hold 2,570 – which is only 5 points away.
CNBC is getting out of control with the oil pumping: At 5:33 the woman talking about oil said “well oil prices are moving a LITTLE BIT LOWER on SOME profit taking after yesterday’s gains after a much bigger than expected drawdown in natural gas.” Aside from the total inaccuracy of calling 6Bcf a lot of gas (out of 3.4Tcf in storage) she said this as oil was down .76 on the chart right behind her!
Speaking of oil pumpers, the IEA upped their demand forecasts this morning to prop up rapidly declining oil prices in Europe but to no avail so far as European traders aren’t as gullible as their American counterparts. Even the Nigerian police don’t take the “rebels” seriously.
Just to be clear – oil has gone down every day. Not to us (US) but to people in Europe, Japan, China, even Russia who buy their oil in ever cheaper dollars.
While gold has made some appreciable gains in October, oil has fallen through several floors, even as the dollar has dropped 2.5%. Now we play a game of what will collapse first, the sad-dollar adjusted $59.95 level for oil or the sad dollar itself which can be pushed over a ledge if a Chinese minister sneezes.
“By June 2007, Saudi Arabia is expected to have enough spare capacity to offset all Iranian exports” Saudi Director Nawaf Obaid said.
That being said, I am no longer going to bother shorting oil as we just have to wait for the right time and, at the levels they have gotten to this past week, the companies now have a very long way to fall. I will hold the Dec and January puts I have but will make no new purchases until they are back in the money.
Maybe sooner, maybe later, but the oil industry has already sewn the seeds of its own demand destruction.
I am also not going to buy more gold (we have NAK and MRB already) until it does more than just react to the dollar unless the dollar breaks 84, in which case gold will be back around $700 in no time.
On that sunny note – let’s see what we can trade!
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I was browsing through Nancy Pelosi’s stock virtual portfolio (I know it seems wrong!) and a couple of holdings caught my eye:
- Lots of commercial property, very sensible!
- Lots of T, so she can’t be too concerned about the merger!
- City Car – a very cool company.
- CMCSA, my favorite cable play and 9/11 pick.
- DWA and LGF – so Hollywood, both smart choices.
- MGRC, which I hope she double downed on that dip!
- Morningstar indicates she trusts the analysts
- NRPH which develops ADD and pain meds but has problems after doubling earlier in the year.
- She holds OSTK, this indicates she does believe that “those bastard naked short sellers” are manipulating the markets.
- PLCM – another excellent choice and a bet on business expansion.
- SCHN, what a great pick!
So she’s a very patient investor, heavy into commercial real estate (including hotels) and she tends to buy what she believes in. She’s also an owner of Piatti Italian restaurants, one very diversified investor!
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We may get some profit taking heading into the weekend so let’s keep a close eye on our levels and be extra careful out there!
In Wednesday’s comments we decided that LMT was our defense target and took the $85 puts for .85 and it looks like they might do well as Mr. Burns points out they lost a $15Bn Helicopter deal to our buddies at BA! They are also getting a tough time on a jeep bidfrom Navistar (who I like).
GS says to buy JWNso do we even need any facts? I was hoping to catch them off a bounce on the 50 dma at $44 but we’ll keep an eye on this one in comments as it could make a nice momentum play.
Cramer gave a mega-pump to NYX, giving a target of $285 on this $90 stock. While I like the exchange, I see them overpaying to merge with one of the European exchanges as they are desperate to do a deal and this does concern me so I will hope for a pullback to the low $80s and reconsider. The decision to ease a key Sarb-Ox regulation is a big part of the rally.
It’s always a red flag to me when a company makes a big deal about all the stuff they could sell in China as it usually means they can’t figure out how to sell more stuff at home so I’m issuing a yellow cardto NOK to come up with a proper strategy rather than more of the same (cheap phones in the 3rd world).
Cheap phones in the 3rd world? Doesn’t TXN have a chip for that? Sometimes it takes analysts a few weeks to put two and two together (and even then they miss Hovnanian’s quarterly earnings by 300% with just 7 weeks to go) so I still like the calls but I’m looking at the Apr $27.50s now for $3.20(a $2 premium) which I hope to pick up a little cheaper but I will play if the Nasdaq holds 2,375 AND the SOX can get back over $460.
Let’s see if RIMM can maintain this level ($125) as an early tech indicator. I am sorely tempted to buy the Dec $120 puts for $3.90 and sell the ridiculously priced Dec $115 puts for $2.45, risking $1.45 against a $3.55 potential gain. In a real crash, we’ll keep an eye on possible November momentum plays.
SLW at $11.59 is a nice silver play and they own a big chunk of N which should pay off well for them. The company is effectively a hedge fund and they play the game very well! I’m setting a stop at $11 and will consider selling the Dec $12.50s for .75 or more.
GERN is already paying off with nice trial data on Telomerase. We’ll see how far this boosts us off our $8.38 entry but it looks like that was a pretty good bottom call! Remember, I intended to sell the Dec $10s for $1 on the bounce.
