Sometimes you just have to give up and join the rally!
A nice, normal, healthy pullback would have been nice but the pre-markets say we're going to go for 13,500 today and at least 1,520 on the S&P. It's options expiration day and I wrote a whole series of plays to make on our positions but let's play the momentum game IF the market is determined to rally. As obvious as this advice seems – do try to buy low and sell high!
I'm still thinking that a lot of this rally in the face of high oil prices is a result of this week's Congressional hearings on energy and that the writing is clearly on the wall to signal an end to this farce and the run-up in oil prices despite fundamental evidence to the contrary (across the board inventory builds, rising imports) is simply a last, desperate effort by the oil roaches to draw in some more suckers before they run for the exits.
Asia had a mild sell-off but copper went limit down (5%) in China, which spooked the commodity markets so a 100-point drop is no big deal (but they did close at their lows). A mosque was bombed in India and two other unexploded bombs were found by the police. This could erupt over the weekend so let's make sure we are well covered by the day's end, no matter what!
China's Central Bank will raise interest rates in an effort to cool off their economy and to please Hank Paulson. In addition to copper worries, steel exports were down 4% in Japan for March which exacerbated the decline in miners.
Europe seems to be in a good mood today as GE looks to be moving forward with their $11Bn sale of the plastics division, a move I mentioned would be made way back on Jan 19th when we reviewed their Q4 earnings and I decided that June was the right time for the sale to go through. Now would be a good time to review last month's prediction on Tech where my example from the past was — Plastics!
Airlines are, of course holding Europe back as oil prices climb back to $65 and BAB (who I got tired of shorting too soon) announced a loss for the quarter.
The Deal of the Day is MSFT paying an 85% premium to grab AQNT for $6Bn and I will offer Mr. Ballmer my services on the next acquisition because I'm really sure I could have gotten them to settle for $5.85Bn and saved him $150M. I mean really, where do they get these numbers? This makes Google look like geniuses for getting DoubleClick for "just" $3.1Bh and leaves VCLK as the last man standing in the space so I think we'll give the June $30s a whirl as a mo play.
The biggest market breaker I see is the Fed getting concerned about all the money being spent on LBOs, which have been fueling the market for 2 years. Take away that punch bowl and this party may break up at the stroke of 13,500!
It's all about the Nasdaq as we watch to see if this rally is going to be real or not. 2,550 is not a new high, or even a recent high and we are not going to sustain a move without a tech rally. While MSFT might take a small hit at the open because Steve was too cheap to hire me to negotiate this deal, we'll still pick up some more calls on the dip (Oct $32.50s maybe) as the fact that they are getting aggressive in this space is a good sign.
The dollar continues its comeback but oil is flying up regardless and the July contract hit $66 as the June contract touched $65 yesterday so we will watch both those levels closely.
We'll keep an eye on gold but I still like our gold plays as a safety but I will take all of today's move with a huge grain of salt until we can get a couple of days under our belt where we hold these levels.
Have a great weekend,
– Phil
