Apple is still trading down pre-market (6am)!
They beat earnings by .36 (48%) but that somehow isn't enough to get people excited. Cramer made a bearish call on tech in general yesterday, especially cell phones, handheld products, storage stocks, semiconductors and software (I guess that leaves just cappuccino machines and treadmills).
He did give his blessing to our holdings of AAPL, HPQ, GOOG and MSFT as well as CSCO, which we just dumped and LVLT, which I disagree with until they pull back to the $5s.
I think it may be just a little premature to write off tech just yet, although I warned yesterday morning that the ides of March are nigh, I still think we are too near escape velocity to cancel our moon shot after just one orbital pass.
Not to pick on Cramer but seriously, the man just spent Tuesday morning telling people this is the year of the Nasdaq and then a day later, he reads my headline and changes his opinion 180 degrees – Jim, don't take me so literally! I'm cautious but I haven't thrown in the towel just yet…
Both the PPI and the Fed Beige book indicated the economy is still moving along nicely and I strongly believe the entire tech cycle is being dragged down by the delayed Vista launch. While a late winter will dampen enthusiasm, I think an early spring will get CEOs to whip out their checkbooks and pump up IT spending sooner than expected as you tend to want to get your year into focus before you start thinking about summer vacations.
As with yesterday, the Asian markets shrugged off our lackluster performance and turned in some very nice numbers with the Nikkei climbing another 109 points back near the ATH at 17,370 while the Hang Seng added another 212 points to finish at 20,277.
I jumped the gun yesterday as I should have said, there will be no way the BOJ raises rates tomorrow when I said "The BOJ backed off raising their rates for this session." Sometimes I'm so sure something is going to happen I think it's already news! As I said to someone yesterday, the problem with being a fundamentalist is sometimes it takes the markets some time to catch up with you…
China put a NASTY profit-tax on real-estate profits which developers and hurt the banks, which will keep the FXI in check despite strong gains from CHL and manufacturers. I am still loving the Chinese leaders as they move towards a deal with the IEA (Europe's EIA, only not a as much a covert pumping operation like our energy agency has become) to "increase the transparency of China's plans for its strategic petroleum reserves (in order to) ease uncertainty and volatility in global energy markets."
Europe is practicing the old adage that "slow and steady wins the race" as the DAX and the CAC continue to grind higher in small steps most days. With the US indices pushing up against the 20% rule, we can see why Cramer's getting nervous (look what happened at the 10% rule in May!) but we're not going to get off a train every time it pulls into a station until we're sure it's turning around.
This will be an easy market watching morning for me as nothing really happened yesterday so I just have to repaste yesterday's levels:
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Dow 12,550 needs to hold, with luck we can make progress towards 12,600 but just staying halfway there would be great!
- Transports need to retake 2,800. Big sell signal if they don't!
- S&P would be great if it holds 1,430 but 1,425 would work too.
- NYSE 9,100 has to be a line in the sand. We are still unimpressed by recent performance.
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Nasdaq MUST hold 2,475! It would be nice if we could break 2,500 again and the reaction to Apple’s earnings is just plain wrong!
- The SOX are still in real danger of falling through 470 – and, as I said yesterday: "breaking 475 would be bad already!"
- Russell did not hold 790! That makes two very sick canaries!
8:30 update: The CPI is in-line, housing starts are up 4.5% (but that's because it's warm, no other reason) and jobless claims are down 5% – certainly no reason to abandon ship on the markets! We may get a "fear of Fed" pullback but, on the whole, these are great numbers… Don't forget Bernanke speaks today.
One thing we held onto yesterday was most of our oil puts as we did not believe in that "rally" at all! Not being fools we did take our big winners off the table but we were content to let our longer plays ride a bit and we'll see how that inventory report works out today!
Let's keep an eye on our $52.10 mark and see if they can hold it through the report at 10:30, if they can't, we need to have our list ready for some new entries and DD opportunities! Remember, with 3 days of trading and just 30-40M barrels to get rid of, shenanigans can again be played at the NYMEX.
CNBC is already pushing it as hard as they can, saying that "this COULD make 2 out of the past 3 days that oil prices are rising." Are these people for real??? This DOES make 999 out of the past 1,000 days that this "news" service has serviced only the oil interests in this country at the expense of the viewers who look to them for reliable information.
Sharon (the CNBC weather girl/energy expert) says we could have a volatile day and they (Platts) are predicting a 1.5Mb draw in crude with a 1.95Mb draw in gasoline and a 1.45Mb build in distillates. The call for a build of that magnitude in the middle of the winter is unheard of but what really cracks me up is the additon of the second decimal point to projections that Platts routinely misses by well over a million barrels!
For more on energy, check out Zman's new section on our main site, witch is in Beta this week!
Today could be the day that traders finally give up and realize I've been right since August – THE FED IS NOT GOING TO EASE RATES! Aside from the fact that the economy is too strong, the will of the White House to reign in spending is too weak and it will take quite a while for the Dems to get a handle on things. While Bush's plan to send 15% more troops to save the 130,000 that are currently trapped in a quagmire is very unlikely to solve anything, it certainly will cost an additional $50Bn per year while ensuring that we keep spending $300Bn a year on the Iraqi war (or occupation or nation building or whatever that thing that we're doing is being called).
Since we are determined to stay the course in order to insure whatever it is we're trying to insure this week, it means we need to borrow another $100Bn this month and next month and the month after that. Just see how fast our lenders dump us if we start paying less interest on our treasury notes!
So, now that the Fed is back on the table, all it will take is a word from Bernanke (and he will be saying approximately 10,000 of them to Congress this morning) to pop the dollar over 85.5 and drop both gold and oil like rocks. No guarantee but let's keep our eyes open and see how it plays out!
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Brother can you spare 130 Billion dimes? EADS needs money, about $13Bn to cover development expenses of a plane they can't deliver yet. "We are in discussions with our core shareholders on how to strengthen our capital base," said CFO Hans Ring. Those shareholders are DCX, the French government and French media group Lagardère SCA, which together hold almost 60% of EADS. Perhaps BA could buy them, they've got orders coming out their ears! Needless to say, I'm in no hurry to cover our BA leaps!
Speaking of Cramer – Soleil joined him and drank the Kool-Aid on LAMR (see my notes), issuing a Buy and causing the stock to jump a buck at the open. We ignored it and held our puts as it gave up half the gains by the day's end.
Thank goodness we got out of those MER $95 puts Tuesday as earnings were great! Following rules = saving money.
The LSE continues to "just say no" to the NDAQ, now buying back $500M worth of their own stock to stave off the unwanted advances or the Nasdaq. I think this is a good gamble (but emphasizing gamble) with earnings on 2/13 and the Feb $35 puts at $1.70, taking advantage of any quick pullback if they start overbidding on the London exchange. Bear in mind these guys are a triple from Apr '05 and anything less than stunning growth will dissapoint.
I have to pick up the RTP (2/1) Feb $190 puts for $2.85 even though they are already down 10% from last month. They are cutting back output on rising cost pressures and collecting 30% less for copper than they were in November. Even if they have a good Q4 – they simply have to cut guidance as next year is projected to be a 5% improvement over this year. They are flat for 2006 after being up as high at $250 but they were at $110 as recently as mid-2005 so I think it's worth a gamble, just looking for a buck on a pre-earnings dip.
WIT had a huge bump in earnings and it will be interesting to see how they perform as, like Apple, you really can't have a much better quarter than they did.
