It’s all about the Nasdaq today.
2,525 has been a very critical level for the Nasdaq since it gapped up there on April 20th and it matched the highs the index made the week leading up to the big drop on February 27th so Happy Trading and I think we need to draw a line in the sand here or we may be looking at a retest of the 2,400 mark:
2,400 on the Nasdaq translates to about $43.50 on the QQQQ, about a $3 drop from where we are now and the June $45 puts are just .43 so we’ll be keeping our eye on those today if we do fail this critical level.
Keep in mind I still think the Nasdaq should be doing better, not worse, as I think CDWC’s earnings and outlook mark a real change in tech spending. A survey done by CDW also indicates that although Vista may be off to a slow start, much of that is due to the late roll-out which has backed up IT testing of the new system. "Everything that we’re hearing from our customers is that they’re going to be patient about this and they’re looking more in the third or fourth quarter this year than the first or second," CDW CEO Edwardson said.
Asian markets held firm this morning with India jumping a surprising 197 points as foretold by the run in our IBN shares the past three days. We sold the June $45s against our Dec $45s on Thursday but we’ll be watching them today in case we need to take those back quickly. SNE (we have June $55s) reported a loss but better than expected overall and they raised guidance. Sales of LCD TVs doubled to 6.3M for last year and the company forecasts 10M units for 2007. "We expect profits from TVs to get a boost this year, led by LCDs. We had a huge cost for the battery recall, but we won’t have such expenses this year," Sony Chief Financial Officer Nobuyuki Oneda told a news conference.
Hmmm, 10M LCD TVs time 40 average inches diagonal is about 100M square feet of glass for Sony alone so I’d have to say that the GLW Jan $22.50s for $3.35 are a BUYBUYBUY. I would expect to be selling the June $25s for $1 later this month so they are a buy too at .22 but I’d rather be sure the Nasdaq is behaving before playing with short calls but the leaps I would be happy to double down on if they go lower. We also still have our TXN leaps but let’s wait for a pullback to go back on the short calls there.
Europe is very flat ahead of our open. Airlines led the decline over there as oil ticked up yesterday but with most of Nigeria’s production already shut down by various rebel events there is not much new bad news to prop up the price of oil in the face of huge housing inventories and a 9% drop in building permits (worst since 1997). Builders will jump on the news that housing starts are up but they should get a reality check as well once investors dig deeper into the data.
The Dow is going to open up this morning as Eddie Lampert took another 15M shares of C but AMAT got is getting killed in the pre-market on what seemed like a pretty good earnings report so I’m still gravely concerned about the Nasdaq but we also have oil inventories today so the Transports will weigh in at a critical juncture:
|
|
|
Day’s |
Must |
Comfort |
Break |
Next |
|
Index |
Current |
Move |
Hold |
Zone |
Out |
Goal |
| Dow | 13,383 | 20 | 12,468 | 12,600 | 13,000 | 13,500 |
| Transports | 2,870 | 3 | 2,825 | 2,900 | 3,000 | 3,250 |
| S&P | 1,501 | -2 | 1,430 | 1,460 | 1,500 | 1,550 |
| NYSE | 9,764 | -1 | 9,218 | 9,465 | 9,600 | 10,000 |
| Nasdaq | 2,525 | -21 | 2,454 | 2,500 | 2,600 | 2,750 |
| SOX | 498 | -1 | 477 | 490 | 500 | 560 |
| Russell | 814 | -8 | 803 | 820 | 850 | 900 |
| Hang Seng | 20,937 | 69 | 20,200 | 20,600 | 21,000 | 22,000 |
| Nikkei | 17,529 | 16 | 17,400 | 17,500 | 18,300 | 18,500 |
| BSE (India) | 14,127 | 197 | 13,200 | 14,000 | 14,725 | 15,000 |
| DAX | 7,488 | -17 | 6,900 | 7,000 | 7,400 | 8,000 |
| CAC 40 | 6,034 | -15 | 5,650 | 5,800 | 6,000 | 7,000 |
| FTSE | 6,560 |
-7 |
6,325 | 6,450 | 6,600 | 7,000 |
We gained green boxes on the Nikkei and the BSE and the Hang Seng is a hiccup away from hitting its break out number. Europe is waiting to see what we are going to do and as long as we hold our levels we should be in pretty good shape as options expiration should turn this week into a nice consolidation pattern.
Oil inventories are at 10:30 and they are expecting a 500Kb build in crude and suddenly a 900Kb build in gasoline, which I’m not sure we’ll hit. We’re still watching the $62.50 mark as critical failure but we need to drop the June contract to $60 by the week’s end in order to get the July contract to open well below that line. ZMan thinks oil will hold $60 and that’s bad news for summer drivers but I think that the $35 crack spread (historical average is $10) cannot hold up as tankers full of gasoline are heading to our country to take advantage of our insane RBOB numbers which ZMan points out are in heavy backwardation.
We’ve got puts on VLO and TSO and if we can get past this inventory I think we’ll get that $2 plunge I’ve been waiting for. The dollar is still weak and gold is still at $670 and we’re still waiting for one of them to make a real move!
It’s going to be another fun one!
