Another kooky day in the markets.
As I said this morning, how can the markets go down with oil at $55? Well, oil hit $54.02 at the 2:30 close and the markets perked up considerably on the fall. This is happening DESPITE the tremendous drag exerted by another 2% drop in the commodity sector.
So I am very proud of the trading community for overcoming their fears and finally realizing that 80% of the market does benefit from a bursting commodity bubble (including housing). I'm still not in love with the action and I'm still going to be waving the grouchy old caution flag until we break up but you can't be too unhappy with today's action:
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The Dow closed at 12,442 but tested a lower low than yesterday and finished below yesterday's high.
- The transports finally closed above 2,700 at 2,701 – knock yourselves out there fellas….
- The S&P looked just like the Dow, finishing at 1,414 after testing below my danger mark at 1,407 very briefly.
- The NYSE barely clawed back over 9,000 and I'm still very concerned there!
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The Nasdaq was our shining star – flying straight up all day to 2,459! This gave us the confidence to make some new trades today.
- The SOX flew up almost 2%, finally punching through 480 on a big day from INTC, SNDK and MRVL
- The Russell made progress, testing 780 and finishing just a point below – big thing to watch for tomorrow!
Oil finished way down at $54.02, losing a whopping $1.62 for the day on an even more whopping 333,000 contracts traded, leaving 251,465 open contracts for suckers traders anxious to accept delivery of 10.5Bn gallons of very expensive, black, sticky goo in Cushing, OK sometime in February. At least it's cold in Cushing fellas!
My comment after the inventory report was: "Let’s remember our oil resistance levels of $54.34 (likely) and $52.88 on the way to a possible test of the $50 mark!"
Oil's fate was sealed at 12:30 when Fed Governor Moskow said inflation risks remain. My comment at the time was that it would be hard on the market, great for the dollar and bad for oil (yes even badder!).
Gold fell sllightly to close at $613 but the dollar punched through 85 to finish right at 85.10, look for more fireworks if we hold that level. As I said, this unexpected break in the buck gave oil that little extra push down below my $54.34 target and now we have to look way down to my lower targets, which I must recompute for the stronger dollar.
Speaking of whoppers, it looks like the President has recomputed just how screwed we are over in Iraq.and I am happy to hear that they are willing to make some serious strategic changes and I'm very glad the recognize the need to spend a little money on improving conditions in the country rather than on KBR catering parties.
Here's an interesting briefing from John Snow, given to the press ahead of yesterday's talk by the President which has a lot of interesting points but I have to agree with Tom Fowler, who said, "It is fascinating if not edifying to watch the guy who gave us the headache try to sell us the aspirin."
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Well at least our own war on oil is succeeding!
The energy complex is almost in free fall and, once you pick up this kind of speed, you generally can expect more of a splat than a bounce.
We did not even feel worried on today's oil action, the first time in a while and inventories showed a stunning build in both gasoline and distillates which clearly let us know that the 10:30 pump job was a total sham!
So we eneded up selling none of our puts, even though we've been meaning to do so for 2 days now, we don't look a gift horse in the mouth!
AA was very, very good to us with a 6% jump that drove it right over the 200 dma on very strong numbers. This is what I expected last quarter and better late than never as our Apr $30s jumped up to $1.80 (up 50%). Today we sell the Jan $30s on any sign of weakness to scalp another quarter or so into expiration!
AAPL $100s are doing great and we shouldn't be greedy and look to sell the Jan $100s for $4 or better, and certainly not less than $3.
EBAY was added as it just seemed too darned low and I liked the StubHub deal a lot. We grabbed the Feb $30s for $1.50 and sold the Jan $30s for .45.
I'm looking for a DD on the GOOG Mar $470 puts but it didn't come below $15 for the day.
We took an entry on the FXI Jan '08 $110s for $10.50 with a stop at $8, hoping for a Hang Seng bounce so we can start selling against.
HAS was finally entered ahead of earning with the Feb $27.50s at .95, selling the Jan $27.50s for .45.
IGW Feb $65s made a nice start at .90.
LVS was a disaster as it ran up all afternoon. I'm not going to get into it now but I think it's a huge mistake for buyers. I picked up the Feb $95 puts for $3 (avg) for the sole purpose of hoping to get $1.50 back to cover my March puts.
Testing the waters on COF earnings (18th) with the MA Apr $90 puts for $3.
We are looking for MOT Jan '09 $17.50s, perhaps $4 as our next entry.
We're keeping an eye on the SLB Aug $55s for a possible entry at about $7.50 and looking to sell the Jan $55s against them for about $3.
