Thoughtful Thursday Morning

I'm really having trouble enjoying this rally.

Despite my determination to go with the flow and despite the break-out levels we've hit for the Dow, the S&P, the NYSE and the SOX I still feel like it's some kind of silly dream we may wake up from at any moment. 

We hear from retailers today and expectations are already low so they'd better not miss.  We also have a Google Gathering, which is always interesting but, at this point, Google needs to colonize other planets in order to grow any faster than they are so it will be interesting to see what they have to say today.

Shanghai is still showing no signs of worry with yet another record close and New Zealand, Australia and Indonesia also closed at record highs.  The Nikkei, Hang Seng and Bombay all took a rest and India concerns me as they have some catching up to do.  Toyota was a huge disappointment as they are having trouble controlling costs as they grow sales 9%.  Forbes makes an interesting observation that perhaps the company is just having trouble controlling expectations as the numbers are indeed far better than the guidance would suggest.  Toyota made more money this quarter ($3.7Bn) than GM has this decade (-$11Bn) and is on track to earn GM's entire $16Bn market cap this year.

China is doing their best to bail us out by purchasing $4.3Bn worth of "technology" from US companies but I was disappointed that this includes $1.3Bn worth of MSFT software by Lenovo, who need some sort of operating system on their computers anyway.  An additional $8.2Bn will be spent on China's upcoming shopping trip as they join millions of other International shoppers taking advantage of our cheap dollar this summer.

Europe's big news is that Tony Blair is stepping down on June 27th paving the way for new leadership to tell Bush he is on his own in Iraq.  Mr. Blair told supporters: "Hand on heart, I did what I thought was right." Following the Sept. 11, 2001 terrorist attacks in the U.S., it was right, Mr. Blair said, to "stand shoulder to shoulder with our oldest ally, and I did so out of belief.   But the blowback since, with global terrorism and those elements that support it, has been fierce and unrelenting and costly.  And for many it simply isn't and can't be worth it. For me, I think we must see it through." He added: "I may have been wrong. That's your call."

In an additional blow to US interests, the Bank of England raised rates to 5.5% but the ECB saved us by holding their rates steady at 3.75% but watchers there are certain they will hike next month so it's tick, tick, tick for the dollar…  "If the euro-zone economy gains further momentum in late 2007 and early 2008 … the ECB will probably raise rates further to 4.5% by mid-2008," said Holger Schmieding, Bank of America's chief economist for Europe.

We'll watch the S&P to see if we hold 1,510 today but retail numbers look weak and nothing spooks this market more than fear of a pullback in consumer spending.  SKS posted huge numbers though as the rich grow ever richer and do their best to trickle on the rest of us whenever the mood strikes them and JWN had an interesting report with stronger sales of designer wear being offset by a drop in children's wear indicating that the moderately wealthy (it's hard to be very wealthy when you have kids) may be starting to feel some strain:

Oil will rear it's ugly head again as the Nigerian news catches up with the slow traders but we are still watching that $62.50 mark with great interest.  Today is natural gas inventory day so we can expect a pointless run-up into those numbers but the damage is already done to our trade deficit which shot up 15% last month on rising energy costs.

ZMan is featuring positive plays on MCF and END, neither one optionable but at $2 per share END may as well be a leap.  If oil does break back above $62.50 both of these plays should make good hedges against our longer puts.

Criminal Narrators Boosting Crude have now sunk to new lows by promoting a ridiculous segment where they are featuring a woman who claims that she broke a florescent light bulb and the mercury inside it required a hazmat team to clean it up costing her "thousands of dollars" in damage.  Could the fact that their parent company is the World's largest seller of old fashioned, energy inefficient filament light bulbs have anything to do with it?  This is being coordinated with a PR campaign to slow the spread of these light bulbs as Congress is considering requiring them.

All this safety nonsense may be a nice boost for my pals at OLED (currently $5.18) as their diodes will soon provide another energy-efficient light source in the near future.  I like owning this stock and selling the June $5s for .75 as I consider it a great long-haul investment but if someone wants to pay me over 10% for holding it for a month, I have no problem with that either!

Speaking of exotic metals, TIE is having a great week after I told members on Monday that I liked it much better than ATI.  Happy Trading has our chart of the day on it and we'll see if they can break back over $39 on this run but shame on you if you didn't take some off the table: