Tuesday Morning

Not much to report today.

Yesterday was dull as toast and there's not much to look forward to this morning other than more bad news from the housing market, which is certainly expected.

Asia was flat this morning as China began cracking down on banks, which are lending money to state-controlled firms who in turn are throwing it into the markets (still not a sign of the top?).  China Shipping, for example, borrowed $354M from 6 banks and used 90% of it to buy stocks!  "The banks' chief problem is their failure to do proper due diligence before making a loan, failure to be cautious in their assessment at the time of lending, and a failure of supervision and control after making the loan," the China Banking Regulatory Commission said.

Microsoft is learning to play the "Duh" game (buying Chinese stocks whose name alone sounds like a winner) by taking a stake in Sichuan Changhong Electric, a television maker.  Gosh, will Chinese people buy TVs?   Google is also making a move.  Now that they've attracted international complaints for violating user privacy the Chinese have decided they are A-OK with them as they received preliminary regulatory approval to provide Internet content in China.  This may explain Google's rally yesterday but what was up with BIDU?

There is literally NOTHING going on in Europe but they had a rotten close yesterday and that downward momentum is continuing this morning as the indices pulled off fresh opening highs.  Nothing to worry about yet but let's keep an eye on them as Europe draws to a close at noon.   If Europe closes down a point today and the US markets are down as well then today will be a great day to play the FXI $124 puts, currently $3.50 as a gamble that the Hang Seng may open significantly lower when they come back from vacation tomorrow.

We'll see how we hold up today but here's the big chart with some brand new levels:

As usual, we are being weighed down by the transports and, if energy costs truly didn't matter then they would just pass those costs along to their clients who are so busy getting themselves or the things they are selling from point A to point B in our economy that they would happily pay the small increase – but THAT IS NOT HAPPENING.

I don't know about you but the prospect of GE and Pearson bidding for DJ and the WSJ seems just as bad to me as Fox News taking them over.  We see what kind of slant we get on a daily basis from Criminal Narrators Boosting Crude (who, strangely, still haven't invited me on!) and the prospect of the WSJ turning into the print arm of the energy industry is mortifying.  Oh well, just have to give up and start putting my money into BP Capital Management I guess…

Kudo's to Happy Trading for catching EXPE yesterday at 2:17, saying: "PCLN and CTRP have been jumping; EXPE has some catching-up to do!" a follow up from my Friday morning observation: "EXPE is down, PCLN is making ATH – very strange things."  We have now confirmed that it was indeed a flush ahead of the announcement that the company would be buying back $3.5Bn (50%) of their stock.  Mega Kudos to Happy for Sunday's precient chart of MA, which gave us a great entry yesterday:

Happy also continued his hot streak with Thursday' s selection of the FFIV $85 calls at $2.75 (closed at $4.30) as well as Friday's still open NE $100s at $2.05.  PTR July $40s were taken off the table yesterday at $5.60 (up 100%), nothing to complain about in a dull market!  Speaking of not dull, check out the Trading Goddess, who is writing a post for us over at Wang's World and who is rightly proud of her previous picks of SPTN (up 27%) and CAM (up 13%), both made on 4/29.  The Goddess has selected 5 summer stocks set to climb higher and, with her prior record, I think we need to take a serious look at these if the market gives us some buying opportunities before the month's end.

Happy if focused today on FMCN and I like them too but the options are a bit pricey so the wise move is to own the stock for $46.19 and sell the Oct $45s for $5.50 or better for a net basis of $40.69 where getting called away at $45 would be a 10% return in less than 4 months.  Chinese ADRs scare me (and this makes a nice balance to the FXI put play) but we have plenty of room to roll these guys down if things go south on us and Microsoft's with Sichuan should shift a little investor focus to FMCN so the move is to buy the stock and set a $5 sell-stop on the Oct $45s, which should give us about a buck of wiggle room:

Last Tuesday we had a pretty nasty sell-off led by Shanghai and the solution today was to close the markets in Hong Kong, forcing investors into other Asian markets but BBY had a poor report and it's a really good thing I sold the $50s yesterday as it will at least take some of the sting off but the bottom line is they sold more stuff and made far less (.39 vs .47 last year vs .50 expected) money.  This indicates that companies may not be able to continue to absorb inflationary pressures and soon we will see that spillover that the Fed insists isn't happening.

Be very careful out there!