Much better than last Thursday!
I got worried at 11:12 as canaries were dying all over the place but, after going through the virtual portfolio, by 12:59 I still couldn’t find any positions I wanted to close out. It turned out the markets weren’t as weak as the headlines made them look and the volume just isn’t there to cause us to worry just yet.
We did a pretty good job of holding my morning levels:
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Transports lost critical ground, now 20 points below the 50 dma at 2,617.
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SOX could not break 470 – still pathetic!
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Russell could not crack 800 and finished just under 795.
So we have 3 sick canaries – the Transports, the SOX and the Russell but none are actively breaking down just yet. As with any sick bird, this bears (oops – don’t say bear!) careful attention as the slightest breeze can knock them off their perches.
Oil held its perch at $60.53 but failed to get back over my DOWNSIDE target for the week at $60.80 so how can we not be happy with that? During the day it bounced off the $60 mark before being rescued at 1:30 by the pump team.
Still 299,000 open contracts with just 14 trading days before 299Mb of crude head on the way to Cushing, OK where they need to be offloaded and stored until someone is willing to buy them for $60.53 or more (but anything less than $61 would certainly be a loss). Don’t hold them too long as all contracts from July ’08 onward went negative again today!
I guess T. Boone read my article because someone bought a whopping 803 Dec 2012 contracts at $64.76 – good luck with those!
The dollar did nothing today but gold jumped a full percent to $634, a wise move into the long weekend but NEM was not impressed for some reason and lagged behind the other miners. Let’s keep an eye on them tomorrow! The March $47.50s for $1.75 might make good disaster protection but let’s watch the dollar tomorrow.
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It was another nice, dull day today but we made a few small moves:
SUN $62.50 puts for $1.80 made a pre-roll for our very nice $65 puts so we now have a tight stop on them ($3.20, up 50%).
TSO $65 puts were picked up for $1.70 and finished the day at $1.40 but I’m content at the moment.
XOM $75 puts came in at .60 as that pump is just getting silly!
I was going to wait on this but I’m going to call for this trade now as an entry for a long relationship with XOM puts. People are so insanely bullish on XOM that the Jan ’09 $80 puts are just $8.80. If we can actually get that price, let’s because you can sell the Jan $80 puts for $3 (if XOM starts going back over $78) and that would still leave you with 23 months of selling to go!
I’m not looking to sell right away, only if we start to get hurt by an upturn, and we may have to bracket round 2 to the $85 puts if the insanity continues but getting $3 back in the first 3 weeks of my $9, 2-year investment just sort of appeals to me!
A similar play can be made with the Jan ’08 $75 puts for $4.70 against the Feb $75 puts for $1.55 but the danger in being out of the money is that you will have nothing to sell if Exxon goes up to $83 as the close $75 puts will be worthless while the $80 puts will still be good for a buck or so!
My logic is that if I can recoup $4.50 by the February expiration I will be pretty happy with my $4.50 basis puts in the hopes that, at some point in 2007, XOM dips below $75. To do this XOM would have to finish Jan near $80 and then head down again (a stretch) – it will be easier to play once we get an earnings date but, for now, I just want to take a first round on the long put, knowing that I can always sell against it if things look ugly!
See today’s EOD comment on XOM which I will be turning into a fact-filled article for next week!
