Goodbye annoying week!
We should have just extended that Thanksgiving vacation as I don’t know anyone who had a great week this week.
While an optimist may say there was something for everyone, the whipsaw action of the markets has given us nothing at all and really hurt the daytraders. As I said last week: “the play of the week next week may be on those VIX calls” and it sure perked up on Monday and Tuesday!
On the bright side, the S&P is actually positive for the week (at the moment) but that is due entirely to a 5% rise in the energy sector, which makes up almost 20% of the S&P.
In comments someone postulated that strong oil is good for the markets but I think it’s generally a short-term illusion as the tug of the massive energy sector may move the market but there is a lagging effect that is much more powerful.
Although nothing really happened yesterday, something encouraging did happen. I will repost yesterday’s levels with results:
- Dow MUST hold 12,200 and needs 12,300 to be taken seriously (it did).
- Transports can NOT go below 2,650 (they did).
- S&P MUST break and hold 1,400 (it did).
- NYSE MUST hold 8,900 (they did) but needs 9,000 to impress (made 21 pts towards it yesterday).
- Nasdaq needs to get back over 2,450 fast! (oops!)
- SOX MUST retake 480 and 490 is no big deal (oops, but did gain 2.6 to 479!)
So, other than the Nasdaq, who were held back by MSFT, we had a pretty good day…
What does concern me (and should concern you) is that we are almost in the EXACT opposite situation that we were in when I first called for a record breaking rally back on August 17th.
The Dow Bullish Percent Indicator hit 90 last week. Ninety. 90! Nine-Oh. 90 – so if you are a bear, you are in very small company (that would be 10, Ten, One-Oh). How long can we sustain that?
Nasdaq bull sentiment is “only” at 70and that’s why we will be looking for the Nasdaq to lead us one way or the other as the bear party over there could gather steam fast if our pals at Microsoft can’t break $30.
Remember your Lincoln: Some of the people can be bullish all of the time and all of the people can be bullish some of the time but all of the people can’t be bullish all of the time!
He should know – he’s on money!
Oil is falling despite the dreaded OPEC meeting and the even more surprising cold winter that seems like it may finally hit the US in December. This unprecedented event is being talked up on CNBC every hour in an effort to sustain that tricky $63.09 mark but there’s a lot of profit taking at the 5% rule in early trading.
Oil needs to avoid $60.35 like the plague for the next week or this week’s rally will become a blip on the way down. We may have thought there was a lot of money backing high oil prices before, but another $400Bn has poured in since I first posted the Roach Motel Theory and, as D said in comments – it looks like the roaches have built a whole new wing!
David Fry published this very interesting USO chart yesterday which shows a classic 5% rule bounce off the dip that took the index from $75 in July to $50 earlier this month, really nothing to get all bullish about on the whole:
We’ve generally pared back on oil puts as they have just been no fun at all but there is no way I’m ready to go long on a sector that I can only describe as being a sham.
Speaking of shams, gold is looking less like one as the dollar is looking more so. For the first time in a long time I would have to say I would rather have gold in my safe than dollars as I’m not sure what this currency is based on at the moment!
Silver is actually outperforming gold this week and our SLW shares are doing quite well but I’ll sell those Dec $12.50s again (or maybe the Januarys) if it has any trouble at all at $12.
We’ll see where the day goes but I’m just enjoying watching from the sidelines and tossing the occasional bet down on some fun plays as the outcome of this particular game is way up in the air!
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MER is finally catching up to us by adding BA to the “Focus One” list so let’s hold off a little on selling those Jan $90s until we see where the boost takes us. Cramer may jump on board tonight or, if we’re really lucky, it may be a “stop trading” item at 2:30.
We backed the right horse with Boeing Buddy ™ TIE with an 8% jump on the week but let’s now consider BEAV, who have been lagging the group for the quarter. I think they may have more to drop but, if they do I’m confident they will bounce off the 50 dma at $25 so I will take the July $30s for $2 and sell the Apr $30s for $1.50 and just wait patiently.
Our man Kirk finally got himself out of those nasty GM shares. All in all he ended up with a small profit but take a look at the chart of one man exiting a position! I wonder what would happen if T Boone decides the oil run is over? Call me crazy but $27.50 may be a good spot to buy GM for a small bounce…
SIRI will have TV in cars by late 2007 according to Uncle Mel, who hasn’t missed a promise yet! It’s only up .16 from our last entry (28th) so far…
Sorry there’s not too many picks but that’s why I made a cash call last week – if I don’t know (or at least think I know what’s going to happen), I don’t trade!
