Will We Hold It Wednesday?

Levels, we need levels…

And what levels do we need?  How about last Monday's?  Last Monday we were hoping we had found a bottom at around 12,200 and were hopefully consolidating for a move back up to retest 12,750.  Notice the Big Chart of that day indicated the Dow was still above the "Feeling Better" line at 11,808 that we had drawn back in January as a key resistance point and holding it (more or less) Thursday and Friday is what kept us bullish last week.  New members (and welcome by the way) need to learn to love the Big Chart.  The Big Chart is wise and good and keeps us from panicking for no reason as well as telling us when we SHOULD be panicking.   

We added a green box in the Transports (surprising with oil up 5% since last week), the S&P held 1,311 and when I say held, we are looking at this chart week-to-week like a long-term investor, not like day traders – a bad habit I see many members slipping into!  The SOX remain the sector that NEEDS to rally and losing a level on the Russell was very painful but they also snapped back nearly 5% yesterday with a 29-point gain, another day like that and we will have nothing to complain about! 

Simiarly, the NYSE held it's line (more or less) as 24 hours below our line is simply a spike an nothing more in the grand scheme of things.  The Nasdaq made a real run at our 25% terror line on Monday but has snapped back 100 points in 24 hours off of that spike and is now just 34 points away from some real progress at the 20% line.  I'd say that will be the line to watch this week, we NEED that Nas 2,289 very badly but we are unlikely to get it if we don't get at least a 10-point move on the SOX that sticks.

The BSE is heading the wrong way to save Asia and (going back to last night's Churchill theme) if the FTSE can turn the EU markets around it will, indeed, be their finest hour.  Asia is up nicely this morning with the Hang Seng (427) and the Nikkei (202) both adding more than 1.5% but that will be a disappointment to FXI traders, who bid that ETF up almost 10% in what did seem like some very irrational exuberance yesterday afternoon.  Next time we'll remember to take those puts!

I mentioned yesterday that Japan's lack of an acting Central Banker is stopping them from chipping in with the financial relief so we'll see what else the World Bank's have up their sleeves to prop up our economy.  The BSE has been kept nervous by the unrest in Pakistan, who had a two-fer today with 25 dead in two terrorist attacks that are likely to continue until the public begs Musharrif to retake power at which point he will become far too busy to order more attacks – ah democracy!

Europe is up another 2% this morning as the ECB and the Central Banks of Britain, Switzerland, Australia and Canada all made moves to pump liquidity into the markets.  England is having their own housing slowdown, with home price surveys hitting 18-year lows and mortgage activity at the lowest measured levels (began in 2002).  This is being spun as a negative but don't forget the BOE RAISED rates to fight inflation – this is what's supposed to happen!  The ECB's rate is currently set at 5.25% after having run up to 5.75% in December (remember the letter the ECB had to write to the Prime Minister explaining why inflation was too high) and the only reason they lowered theirs was to bail us out a bit.  While they may have overshot the mark just a bit, they have certainly deflated their housing bubble with much less apparent damage than we have done to ourselves over here.

We'll see if we get any follow-through today and, if not, we'll be covering up a bit but next week is going to be on wild, quadruple witching, end of quarter expiration period so we're going to want plenty of cash available for fun plays.  Speaking of fun plays, I'm already being punished this morning for not getting all out of HUM yesterday, which went from .75 to $1.35 on the April $55s but will be knocked from a near double to lucky to be 1/2 today as HUM cut guidance even farther than WLP did yesterday.  As we took some in the $25KP and those were not day trades, we'll have to work our way out of that jam but let's ask for .50 at the bell and be happy if we get it, otherwise we sell and roll most likely.

Anyone who thinks we don't need nationalized health care needs to take a look at the SHOCKING numbers being put out by the benefits providers.  We are only in year one of the Baby Boom generation turning 65 and already we're seeing cracks in the dyke of the private care system.  If we do not do something about it in the next administration, we may miss our chance to ever stop the slide into chaos that faces our country's health care future.  Rising costs, declining payrolls and companies cutting back on benefits even when they do offer them is not going to be very reassuring to the 80M Americans 55 and older who are just moving into their prime "needs" years.

I almost hate to say it but I love AET at $40 this morning as they already guided down 10% and just reaffirmed that, which makes them the star of the sector!  Let's see if we can pick up the Jan $40s for about $6 in the morning panic.  We can sell April $45s for $1 so I like the odds of this trade working out but we can hang out for a bounce and sell March first (.55 as of yesterday).

The hyena attack of the day is aimed once again at Apple as the news sources (including the WSJ) are splattered with the news that "Japan Investigates Possible IPod Defect" and AP carries the lead "Japan is investigating a possible defect in Apple Inc.'s iPod after one of the popular digital music players reportedly shot out sparks while recharging, a government official said Wednesday."  You have to go pretty deep in the article to find out that this was a single incident that happened way back in January.  This is a typical hyena tactic, dredging up old news at critical times in order to influence a stock, in this case aimed at stopping Apple from retaking key bullish levels at $132.  A bonus with attacking Apple is it has a very big effect on the Nasdaq.

There is a fantastic article in the WSJ about the psychological aspects of getting information on the Web that I HIGHLY recommend as it gives us great insight into the principal tool that hyenas use to turn investors into lab rats who punch the sell button at the first sign of trouble.  USC neuroscientist, Dr. Biederman, effectively accuses us (yes YOU, and me) of being information junkies, saying new and richly interpretable information triggers a chemical reaction that makes us feel good, which in turn causes us to seek out even more of it.  It is something we seem hard-wired to do, says Dr. Biederman. When you find new information, you get an opioid hit, and we are junkies for those. You might call us 'infovores.' "

I myself am a terrible information junkie and I've discussed with members how I can't have things like a Bloomberg terminal because I end us just staring at it all day and can never get enough.  I channel my energy into reading as many different news sources as possible, looking for the bigger picture but I could run a clinic on the different ways you can get sucked into data overload.

Today is very much a wait and see kind of day and we'll be looking for signs of strength and weakness in our individual holdings as well as in the broader markets. there is no major market-moving news to deal with so it's going to be a sentiment day more than anything else. 

Let's watch our levels and, as I said last night – GET OUT OF MARCH POSITIONS –  the last thing we need is a quick reverse wiping out all of yesterday's gains with no time to recover.  We WANT to sell calls, we need to have a good reason NOT to sell calls as the premiums we sell will be gone in 7 business days no matter which way the stock goes and we will still own our longer positions.

Turn down the opportunity to collect 50 cents a few thousand times and it starts to look like money – keep that in mind!  As I said on Monday though, I'm feeling good about the markets and it's starting to be fun again, that's somethng we haven't been havign for the past month so let's root for some follow-through or it's going to be a long, cold winter!