Dow all-time high!
Microsoft shot up 3.5% today as Vista won the "Best of CES" award – that's over $10Bn in market cap so one could only hope someone on that design team gets a raise!
DNA had huge earnings and INTC added 2% as poor AMD is firmly back in 2nd place. Apple pulled back a little but not much and Google is brushing back up against $500 again.
That means we have ignition on our main Nasdaq thrusters and we could get a major rally with all engines firing as they can once again burn a limitless supply of cheap(er) oil to propel the markets on to new heights.
It was another exciting day of trading as we jumped on another round of oil puts despite (or because of) a very big, and very fake, morning pump. Considering I started yesterday determined to cut back on positions, we sure opened a lot more of them as we certainly don't want to miss any of this!
At 1pm news crossed that Cathy Minehan (Boston Fed – voting member – Dove) was resigning. I noted at the time that if the market didn't mind that uncertainty, we were probably going to have a huge rally.
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The Dow closed at 12,514 an all-time closing high.
- The transports shot up to 2,741.
- The S&P flew up to 1,423, 8 points below a record!
- The NYSE hit 9,063 and still worries me below 9,100.
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The Nasdaq continues to be our guiding star – closing at a 6-year high at 2,484!
- That came despite a poor performance by the SOX, which at least held up at 482.
- The Russell moved right along to test 790, finishing at 788.
"THEY" attempted to rally the oil sector ahead of the natural gas inventories but the 10:30 report gave a paltry draw of 49Bcf, nowhere near enough to encourage buyers and the whole "rally" was over by 11:15. As I said this morning as they were pumping oil up to $53.90 pre-market: " I don’t know if there is anything they can do at this point to stop the slide with 150,000 February delivery contracts in need of selling but we’ll certainly keep a close eye on it!"
I guess there was nothing they could do – Oil fell from a high, pre-inventory pump of $54.70 and blew right through my $52.50 target for the day to finish at $51.88 on huge volume.
Trading was again fast and furious at the NYMEX but they did manage to pare off another 25,000 contracts from contracts, bringing the total open down to just 226K with 6 trading days remaining. It cost them $2 to sell those 25,000 contracts, even though March was pushed up to 261K, a pretty hefty total this early in the cycle!
The front month contract was supported (if you can call dropping $2.14 to $51.88 support) while longer contracts collapsed at an accelerating rate. The March contracts dropped just $2.12 (as they were rolling Februarys into them) but the April contracts fell $2.26, May $2.46, June $2.62, July $2.73, Aug $2.82 and $2.90s through Jan '08 which are down to $57.87 after testing $55 in today's trading.
Yeah, remember in August when people were trading the Jan '08 contract for $80 a barrel on Goldman Sachs' recommendation? Ah, good times… Strangely this destruction of $800Bn worth of shareholder value in commodities and commodity stocks that were touted by brokers all summer has done nothing to hurt them as apparently every single brokerage and hedge fund on the planet was on the right side of this trade except Amaranth! Good job boys!!!
The dollar pegged slightly higher but, as I said, there are plenty of people on the wrong side of that trade! It finished the day at 85.28 and seems to be taking aim at a test of the 200 dma at 85.5. If the dollar breaks through there… you know, I don't even know what will happen if the dollar breaks through there – it's almost unfathomable! But it will be something, I can tell you that….
I can tell you that gold will fall right below $600 the minute the dollar takes out the 200, unless of course something blows up (other than the things that usually blow up in Iraq, Afghanistan, Nigera…).
All in all, an incredible day to be in the markets – hopefully the start of something really spectacular!
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Our stops saved us from a tough morning in oil but we kept many plays open and at 11:35 I said: "…these are likely to be good buy-in spots for fresh moves so let’s watch the Valero group for signs of a real downturn as crude is not holding $54.34, our last significant barrier" as we opened some fresh trades at pretty much the perfect spot.
I personally took a beating on the HB puts as I stupidly did not set stops on them and was too busy with other things until it was too late to fix! Oh well, they made good plunge protection but I'll have to lighten up tomorrow if they keep going up – silly though it is as the fundamentals for that industry haven't changed at all… Amazingly though (and I'll do a review on the weekend) we had amazing gains on virtually everything else we picked! I mean really amazing – check the spreadsheet – you'll be amazed. I'm amazed and I picked them!
I will be reducing and eliminating on any excuse tomorrow, if nothing else but to cut down the number of positions and free up some cash!
AA went according to plan and we sold the Jan $30s for .75.
ALK had a heck of a day, our July $45s are practically in the money already!
CHK $27.50 puts for .35 made a fun little day trade, out at .60 (up 71%).
COP $65 puts were stopped out at $1.85 (up 131%).
That spike this morning gave us the CVX Feb $70 puts for $1.75 that we had on our list from yesterday, looking good so far at $2.75 (up 57%).
Despite EBAY's great performance, I was thrilled to get a dime for the $32.50s (down 85%) and be done with them.
Z man found a good one with the HES Feb $45 puts for $1.25.
GRMN Feb $55s came down to $1.60 for a DD and I'm worried already on an AH dip…
GOOG Mar $470 puts were added as a DD for $14 to make an even split with the Feb $510s, picked up for $18.75, against which we sold the Jan $500s for $7. So far, so good as the Jans have only gone up to $7.30 while the $510s are at $19… All I can say is this stock better jump $30 one way or the other at earnings!
INTC had a huge day and we took a non-greedy exit on the Jan $22.50s at .35 (up 40%).
LVS went up again and I missed the morning dip but added 2 rounds of shares on the Feb $95 puts to bring the average down to $2.40, then sold 2/3 at $3 to bring the basis down another .80 to $1.60, now $2.80 but my goal is still to get out with $1.50 to salvage the original March $85 puts, which are down $1.70.
MER $95 puts for .95 were taken on hopes of a pullback – so far, no good!
I got my wish on the MOT Jan '09 $17.50s for $4 – I only hope I don't regret it!
MRO Apr $85 puts were my advice of the day as they spiked up in the morning: "…hey, they’re April – gut it out!"
ORCL fell off a cliff near the close and we got stopped out of the Mar $17s for $1.20 (up 36%) but the Mar $18s are still open at .70 (down .15).
At 10:05 I had this to say about SHLD: "…have you really thought about what 4,000 prime downtown and mall anchor locations are really worth? How about a nationwide distribution system that has been running smoothly for 100 years? National equipment service systems that already has business relationships with 20% of the homes in this country? $1Bn a year in income, $15Bn in cash ($12bn net of liabilities) and they bought back 5% of the stock this year (and, unlike XOM, Eddie buys on the dips only, with $400M in Q1, $92M in Q2 and $300M in Q3)." Just to remind you why we've been riding out the dip on those Jan '09 $190s we took way back on 11/11! They are back at $33.30 (up 11%).
SU took to long to fall and we picked up the Feb $65 puts for $1.30, now $1.50.
We added the TXN Apr $30s for $1.40 as they were lagging the Nasdaq. Just looking for .40 as it nears $30 for a quick profit.
VLO $47.50 puts were a fun play at .35, now .45.
We stopped out of the VTS Feb $80 puts for $3.20 (up 52%) and reentered just 90 minutes later for $2.75.
XLE Feb $53 puts were added for $1.10, now $1.30.
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Cramer was buying LAMR this morning and the stock went nuts so we bought (sorry Jimbo) the Feb $70 puts for $1.40, already $1.75!
We went bearish on Lamar BECAUSE of Cramer.
That company does not and will not make enough money to justify this cap! Yes, they are growing fast – their p/e will drop from 175 (not a typo) all the way down to 100 next year! Whoa – let's back up the truck and do a 'mon back on a stock that has a NTA (net tangible assets) of -$550M and $1.8Bn in debt with no cash ($7M) and only $171M in receivables on $1Bn in revenues that will generate a whopping 50M (maybe) in profits this year!
How much would you pay for this dream company?
Cramer says $7Bn is too cheap! He says someone is going to swoop in and snap this "value play" up because nothing says lovin' like someone digging down deep and piling an additional $7Bn in debt on top of the $1.8Bn of existing debt in order to buy this goldmine. The interest on $8.8Bn in debt at 6% ($524M a year) would be more money than this company has ever made and also more money than it is likely to make in the next 5 years. Boo Yah!
