Woo hoo, what a week!
You know it was an amazing week when our remaining oil plays got toasted at the open and we just didn't care…
How amazing was that? I feel the thrusters burn and we are definitely heading off into space, just one or two more strings to cut and we will be free of the gravity of all previous market levels and on our way to uncharted waters:
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The Dow rocked and rolled to 12,556 – finishing near the high!
- Transports trounced the 2,700s flying to 2,778!
- S&P tested 1,425 but finished at 1,430 – VERY serious!
- NYSE finished at it's HOD way up at 9,140.
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The Nasdaq out gained them all! Tacking on another 20 points and finishing at 2,502!!!
- SOX are our last major obstacle and barely took out yesterday's low to finish at 482.
- The Russell made a nice run up and finished at 794.
Oil came roaring back in the last hour of trading as it bounced off an early low of $51.60 (15% down from $61) to gain a full dollar in the last 90 minutes of trading and finished up at $52.99. This was well short of yesterday's high of $53.90 and exactly $4 down from Monday's open for a neat 7% loss for the week.
I'm not even going to pay attention to the move this afternoon as it was pure pump but the oil sector certainly acted like they won a prize and came roaring back allowing us to take a few new put positions. Always remember though "the market can remain irrational longer than you can remain solvent" so we stand ready to give up on oil for now if they keep up the shenanigans next week.
27,000 February contracts were disposed of at the NYMEX leaving 199,000,000 barrels of oil open for February delivery. What did they do with the 27M barrels? Did somebody want them? No… They did the same thing we do when a contract moves against us and we want to give it another shot – they rolled into March! There are now 295M barrels scheduled for delivery in March and, while I feel this is an interesting way for oil traders to put their heads in the sand, I'm very concerned about where this will end with 500M barrels now trading open over a 5-week period!
I guess we can roll into April (but there's already 72Mb there!) or May (49Mb) or June (84Mb) and July through August are pretty light but, oops, someone got all excited and already ordered 140M barrels for December delivery – gee, I hope they didn't overpay!
Gold surged $13 to close at $623, just under the 200 dma as the dollar was rejected off its 50 dma at 85.5. We'll see how this plays out over next week but the miners were less than enthusiastic about it, picking up only about 1.5% on gold's strongest move since November.
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I have little to wrap here as we are now doing our moves live during the day (see previous post) and I hope everyone is happy with that plan.
Today's moves of note were:
I can't figure out what's wrong with AXP and my working theory is that people charge a lot of oil and this may hurt them in the short run but let's let them come in and then BUYBUYBUY as I think consumer confidence will come roaring back if we can keep oil under $55.
Our VTS puts were delisted as the merger with GGY went through, we'll keep on top of the symbol change next week but the new combined company will probably trade under the symbol "CGV" and we'll just have to wait and see how this affects the value of our VTSNP Feb $80 puts, last valued at $1.85.
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Big Mac Attack
We tried to be responsible and sell the AAPL July $100s but it never came down that much so we added the April $100s at $6.10 and sold the Feb $100s at $2.80 (the best we could do at the close). Here was my Apple logic that led me to be even more bullish:
There is nothing reflected in Apple’s projected numbers that account for 2008 sales (the upcoming quarter is Q107 – they have a funny year) which will include 15M $500 phones and accessories for $7.5Bn in new sales, 20% more than ’08’s projected $29Bn in sales which is quite a jump from the just closed ‘06 total of $19Bn.
Apple does not discount and everything has 25% gross profit. They’ve done a great job controlling cost so we can expect to see last year’s $2Bn in profits easily double by ‘08. Even with that, we’re not even discussing ITV or ITunes (2Bn songs is a lot of quarters) IMovie (just signed with Paramount) or the fact that $1,500 average Mac sales are very likely to be the surprise of the decade when they announce the numbers on Wednesday night..
They’re the first tech company that’s gotten anyone excited about anything since Tivo and they’re going to get about $5Bn in free press this year. Let's remember that I'm the guy that shorted Apple in September when I thought $70 was a bit much (ouch that hurt!) so I'm no perma-bull, but I am a convert as the IPhone is a long-term game changer and I think we owe this entire tech-led rally to that neat looking piece of technology that was unveiled this week.
