We are not out of the woods yet!
While it was nice not to go down for a day but there is nothing I hate more than the false hope of a commodity rally and that's all we really had in the end.
The Dow picked up 56 points but didn't we lose 106 recently? Yesterday maybe? So where's my other 50 points? We need to hit our greedy levels of Monday, not our pathetic bounce levels that we retreated to today!
If you want to chase out a bear you need to be big, you need to be loud, you need to intimidate… Taking back 56 out of 106 points is only going to encourage him to come back for more!
Who were our Dow leaders today? BA took back $2 of the $3 they lost yesterday, DIS regained .43 to get back to Friday's close, CAT clawed back to Monday's open, HD got most of the yesterday's losses back, HON retook almost half its loss, MCD retook yesterday's open… Only AA, JPM, MRK, T, UTX , VZ and XOM are actually up for the last 5 days, the other 23 components are still trending down!
I'm skipping levels today because I really can't pick apart the S&P (which had strong 5 point gain but failed at 1,430 and couldn't hold yesterday's open) as easily on a stock by stock basis or the Nasdaq which sputtered to a .34 gain. Nothing special happened today but it's all in the past now and there may be a light at the end of this forest as YHOO, SUNW and STX all gave us pretty good news in AH earnings! AMD was a wet blanket but that should boost Intel and I'd sure rather see $118Bn INTC gain half a point, from an index perspective, than see $9Bn AMD up 5%!
I don't even think any of that matters as we wait for Bush to give us the Annual Report on the United States (although technically there is an economic report next week). The market was roiled by rumors today that I won't even bother to discuss as we will hear from the man himself how great everything really is.
Oil thought things were great today and our new March contract lept up to $55.04, making that last $1.50 in the last half hour of trading! The biggest one-day gain in the year was engineered accomplished in very heavy NYMEX trading that left 401M barrels on order with just 20 trading days left until the Feb 20th close of the March contract. Even more amazing than the $1.50 jump in oil just as the NYMEX closed was the fact that 268,000 contracts had to change hands in order for just 8,000 contracts to be added to yesterday's 393,000.
Churning is interestingly illegal when it is done with stocks but it seems perfectly acceptable for the people who buy and sell on the NYMEX floor to trade 2/3 of the contracts on a given day, selling them back and forth to each other in a global game of hot potato which climaxed last week with a $13 drop (20%) from the close of the January contract on 12/19.
Keep in mind that just 33.7M barrels were open on the 12/19 close while February closed out yesterday with 28M barrels on order for March (perhaps because we had a build of 11M barrels last Wednesday). Now they are telling you they are going to take delivery on 401M barrels for March, generally a slower demand month, after the winter and ahead of "summer driving season."
While it's a little to early in the month for us to call their bluff, we are eyeing that big old pile of chips they're putting on the table and waiting for the game to run it's course so we can call them out when its time for them to show their cards – because we know they've got nothing while our inventory reports show a very full house!
Was gold bluffing when it ran up to $645 this morning? It's hard to say. Last time gold hit $645 was Jan 4th, and it finished at $610 at the end of that same week. Back then the dollar was at 83 and rose to 84.5, today the dollar bounced back off 84.5 and it remains to be seen whether that was a minor pullback or a firm rejection off the 85.15 mark.
Gold bugs have good reasons to be nervous when irrational world leaders start pounding the pulpit, making wild accusations and banging the war drum but Bush will be done in the morning and we'll see how the pundits interpret the speech in the morning.
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It was such a nothing day we hardly touched the virtual portfolio. Tomorrow is our day to panic if it all hits the fan but I'm liking those earnings, hopefully they are enough to get a fire lit under the Nasdaq!
We sold half our AA Apr $30s for $2.70 (up 170%) on the morning run as I regretted not selling some yesterday.
HAS $27.50s stopped us out at $1.60 (up 39%).
I took out my poor TSO Feb $65 putter for just .30 (up 88%), possibly looking to sell a higher put but I will probably ride it out through inventory.
TXN had a nice run and we took the opportunity to cover the Jan '09 $30s with the April $30s for $1.50 as we are well positioned with other calls and it makes a nice hedge.
The rest of the trades are available in Tuesday Virtual Portfolio Moves.
