Monday Mop-Up

Wow, what a day!

We've owned BA for ages, TASR since it was at $8 and Happy Trading had us in CMI from Friday and STP this morning and we've all been playing with FSLR for a while so our day was about as good as it gets… 

Things were so good that Happy's 21% Google day trade and my 20% free day gainer on XLE and ZMan's very timely newsletter call on NFX are hardly worth mentioning as they didn't even give us a double yet.  Kudos to all who participated.  With CMI and TASR and FSLR there was literally no way to say you missed it as we watched them go higher and higher and higher all day.  Thanks to BMB who told us why FSLR was up first thing this morning.  It's a lot easier to get in on a good run when you know there's a good reason for it!  OptionDragon has been our biggest CMI booster, calling it his favorite on Friday while my love for TASR is well known to our regular readers.

Well, every dog has it's day and the Dow had one today with a finish at 13,650, just off the all-time high.  Strong performances that propelled the Dow were turned in by AA (earnings), AXP (done with the pullback), BA (Dreamliner), CAT (Japan machine orders), GM (insane people), INTC (SOX rally), JNJ (stock buyback), VZ (no reason) and XOM (raping you and making you love it).  The S&P turned in a small gain led, unfortunately, by the energy sector with COP sealing the deal by announcing a $15Bn stock buyback in the afternoon.

Kudo's to COP for joining the ranks of oil companies who don't waste their money looking for oil, building up refining capacity or (heaven forbid) fixing existing refineries so they can operate at full capacity for more than 5 consecutive days.  While Conoco spends $15Bn to buy back 10% of their own stock, PTR actually explores for oil and increases production and has driven their stock price up over 30% since May.  Remember when American companies used to produce something besides earnings reports???  As long as we reward this counterproductive behavior by our corporations, this is all we can expect from them but we really can't afford to allow them to line their pockets by mortgaging our future for much longer – we are literally running out of time before this country becomes an also-ran in the human race.

Interestingly, the Transports had a pretty good day as well as the oil sector, led by ridiculous FDX takeover rumors that seemed to trump the fact that the gas they use for — EVERYTHING — is up at record levels.  Barron's has become the gossip master for the buyout rumor mill and the way M&A activity has been going this year, nothing seems impossible but $35Bn for a stock that was $24Bn in '05 with a p/e of 18 seems just a bit rich for private equity.  Someone asked me about UPS today and I said the same thing, I just can't get behind them based on the current fundamentals, despite the fact I like both companies.

AA had so-so earnings after the bell and I'm very happy about that as we will get a good picture of market sentiment as you could read their report optimistically or pessimistically so it will make a nice Rorschach test for the markets tomorrow morning. 

Both DRI and CAKE has nice reports after hours and should be up nicely tomorrow.  If we continue to see signs that happy consumers are out and about, it won't take much to get this quarter off to a rockin' start.  YUM reports on the 11th and will give us a nice look at the low end of the dining market. 

Speaking of happy, Happy Trading is looking for a breakout on the Nasdaq as we finished right at my 2,670 target for the day.

Gold was rejected from my $666 target – to the penny!  Oil bounced back from an open at $73.40 but closed at $72.61 with the NYMEX pump crew refusing to lose at $72.50.  Just $1.04 separates the next 6 months worth of contracts and that's got to be making energy traders nervous and, in fact, there is NO $74 oil being traded all the way through December 2015. 

That's right T Boone – it's time to put your money where your mouth is and buy those $71.67 Dec 2015 contracts.  It should be a slam dunk, right?  How about you Phil Flynn of Aleron?  If oil is so sure to hit $80 this summer then how many barrels of December crude do you own for $73.01?  Contango is slipping folks and that may mean the pumpers are losing control of this market with over 500M barrels of oil scheduled for delivery to Cushing, OK between now and the end of October.

In order to get those 500M barrels up to $80, NYMEX traders needs to pony up $4Bn in addtion to the normal money they toss into the pits as they churn over 400M barrels worth of contracts a day in order to keep the prices up.  Tanker rates in Europe are hitting lows for the year, another sign that we may have peaked out.  "We wouldn't speak of it as a freight collapse…but it does seem to have moved into a softer summer trading market that we've had in previous years," said Clare Grierson, an analyst with Simpson, Spence & Young in London.  E.A. Gibson shipbrokers said VLCC voyage rates to Japan were trading at WS105 or $67,200 a day in June 2006 compared with WS59 or $34,750 on Monday.

While we made money on the plus side of oil today, let's remember what a crock it is!