Thrilling Thursday Wrap-Up

Now that’s what I call follow through!

We ignored a sad 49.3% ISM report (below 50 is actual contraction) as it was 49.9 in November anyway.  "The manufacturing sector failed to grow in January" and "the signals are clear that there is relatively little change taking place in the sector, as the [manufacturing index] has averaged 50.5% for the past four months," said Norbert Ore, who directs the ISM manufacturing survey. "Manufacturing lost momentum in the second half of 2006, and is starting 2007 in a less than robust fashion," Mr. Ore added.

 How can this be good for the economy?  Well the results also show the inventories index is at the lowest level since February 2002.  Declining inventories are running right into a .5% rise in personal income as all these employed people are starting to get raises yet the PCE remains VERY LOW.

Historical comparisons are tough because we had other worries on our mind in February 2002 but what we do know is we had an amazing rally pretty much from March 2003 to today!

The markets were certainly happy about, the Dow tacked on another 50 point gain to another new record with big gains (again) from AA, BA, CAT, DD, HD, PG, UTX and XOM and big bounce backs from INTC, MRK,  & PFE.  We had a very strong finish and even the Nasdaq finally joined the party despite Google acting like a big baby sitting in the corner and dropping 20 points.

• Dow finished the day at 12,673 near the day’s high. setting a new record of course.
  • Transports were up huge again, gaining 2% to 2,870.
• S&P did even better than the Dow, finishing at 1,445, a 6-year high.
• NYSE zoomed right over 9,300 to finish at 9,327 with great momentum.
• Nasdaq gave us a scare with GOOG and HPQ dragging us down but finished like a trooper at 2,468 – still our most worrying indicator!
  • SOX turned it around at the end, up 3.62 to 462 (yay I guess).
• Russell broke 800 with little effort and gave us leadership at 807.

It doesn’t get much better than that!

The finish was so strong in most of the indexes that it was a shame they rang the closing bell. According to David Gaffen, we can blame the Telcos and IT for holding the S&P back.  Since 2000, 8 of 10 S&P sectors are up with only Telcoms (down 50%) and IT (down 63%) holding it below 1,500.

“There seems to be a lot of enthusiasm over the reports, but I think people are ignoring some of the warning flags,” says Charles Rotblut, equity strategist at Zacks Investment Research. “I’m expecting short-term weakness at some point, but it’s a bit like calling for a rainstorm in the midst of a drought.”

The well suddenly ran dry over at the NYMEX as they briefly achieved backwardation as a completely ridiculous attempt to keep pumping oil in the face of a surprisingly weak gas drawdown blew up in the trader’s faces.  We saw suspicious trading patterns building at 12:52 and it seemed very strange that close to 18,000 contracts were pared away (to 367K) without a drop but, at 2:24 I said:  "NYMEX – July is behind June again – you can buy the July barrels at $60.43 and sell June barrels at $60.65, get me 10M of those!"

Before we could even get our order filled the entire oil complex began to fall apart from a mid-day high of $58.85 to $57.30 in the last 30 minutes of trading!   

Even after the "adjustment" at the close, a total of just 14 cents currently separates the August through October contracts but the whole year has tightened up considerably leaving little or no reward for the growing contingent of barrel rollers who threw 8M more barrels into April (128M) but May (59M) and June (97M) aren’t budging as there simply isn’t enough money to get people to hold barrels there.

Gold tested $660 but settled for $657 as the dollar refused to give up any ground.

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We were really too busy to mess around today as the trading was fast and furious!

Right at the bell I decided to pare down our Google plays:

• GOOG Mar $520s, entered at a $16.19 average, sold Feb $510 calls for $13 ($3.19 spread)
  •  1/2 out at $3.50 (up 10%) – not bad as that was our old spread which clearly didn’t work.
• GOOG Mar $530s, entered at $14, sold Feb $520 calls against for $13 ($1spread)
  • 1/2 out at $3.20 (up 220%) – not bad for 24 hours!

We kept the GOOG Mar $480 puts, entered at $13.50, sold Feb $490 puts against it for $12.90  ($.60 spread), hoping for a bounce that never came but the spread is up to $1.10 (up 85%) and time is on our side.

I picked up the $530 calls for $2.25 to protect my March calls against a spike but then it occurred to me I should cover those and we grabbed the $470 puts for $2.25 which we were able to sell for $5 on the dip, pocketing .50 and leaving the $530s on the table for free!

TIE went up so fast we closed out the Jun $25s at $8 (up 63%) and rolled it into a better position, locking in most of our profits.

We added another round of MO $90s for .25 but they stayed there all day.

Half our YRCW Apr $45s came off the table ahead of earnings at $3.10 (up 210%).

Lots of other moves in our Intraday Trade Section.