We're pretty well covered after yesterday's move, hopefully not too well covered.
I outlined my case for caution in the evening post so we can spend this morning looking forward to where we want to be into expirations tomorrow. Having a short expiration week is always a pain in the neck and there is no way I wanted to go into this weekend uncovered so I decided that yesterday afternoon was as good a time as any to cover our positions ahead of rolling to April calls today and tomorrow. Just in case we get a pullback this morning, it's nice to pick up a little extra cash from our March callers to make up for the lower rate we'll collect from the Aprils. Should we go up, our half sales are merely deposits taken in March against the April calls we were going to sell anyway. So far this morning, the covers seem like a pretty good idea.
Why are we down in pre-markets? Well there is no particular bad news, just a lack of faith on the part of foreign investors as this is the 3rd Fed bail-out of 2008 and the first two didn't work. We can only hope the international investing community hasn't adopted one of those tough "three strikes and you're out" policies or we may simply have too much riding on this week's action.
Asian stocks did well but not great at the Hang Seng and the Nikkei both gained back about 2.5% but Japan's Parliament rejected another banker to replace Fukui as none of the nominees names proposed by Prime Minister Fukuda were funny enough to hear CNBC anchors try to avoid saying. This leaves the BOJ without a Governor for the first time since WWII and indicates what a serious rift there is between Japan's slit political factions. This type of instability in the world's second largest economy is the kind of thing that can damage the markets all by itself. Also, we REALLY REALLY need Japan to bail out the dollar, which is still languishing below 72.
Europe is trading down about a point but they opened up about a point so things are pretty ugly there. BNP said they would NOT be bidding for SocGen and Sony/Ericsson said high-end phone sales are falling "on slowing consumer spending in developed countries." and if you want to see what a good analyst looks like, check out Nomura's Richard Windsor who totally nailed it last week. Notice that a large part of the issue facing Sony and others is that people are putting off purchases while they wait for the 3G IPhone! While we may be pleased with that prospect, the idea of Apple displacing European and Asian manufacturers with cheap-dollar IPhones sounds like nothing more than a loss of business to them and nothing to be bullish about.
A British judge ruled in favor of Venezuela, unfreezing $12Bn in assets AND ordering XOM to pay legal fees as it turns out Chavez was right and Exxon was trying to screw him over and using their paid political muscle to force him into a settlement that robs his people of their oil wealth (much like they rob US citizens of our oil wealth). This settlement should lower the price of oil as Venezuela needed the money to finish a refinery and INCREASE production so the whole thing boils down to nothing more than XOM trying to hamper a competitor in order to drive up the price of the crude they sell (XOM controls the world's largest reserves by far).
We're out of our XOM puts from last week but I'll be looking to get into the April $85 puts if they fall below $1.50 ahead of inventories with the intention of rolling up to the $90 puts for $1.80 or less if it goes the wrong way on us.
Oil is dropping in the pre-markets, down to $106 and change and the futures are improving quite a bit. Gold is also dropping and this is bringing the EU markets back from the brink at 9am. Much like yesterday, our plan is not to fight the crowd but we're mainly going to be working on setting up our April spreads today and not making a lot of new plays unless we see something really fun shaping up.
We'll see how the morning shakes out but I was targeting finishing the week between 12,250 and 12,500 so a breakout over that will surprise me into the weekend. I was hoping for a lower open so we could get back into Apple and Google but we have enough open calls that I don't feel like we'll miss too much and if we an rally against a commodity sell-off, that will just be great as it's the only kind of rally (rotational) that I really want to buy into.
SOX 350 remains the key to happiness as well as holding 2,250 on the Nasdaq and 1,330 on the S&P with goals of 2,300 and 1,350 as our near-term targets. MS "only" wrote down $2.3Bn this quarter with "only" a 42% drop in income, so that should give them a boost but the big news today will be the IPO of Visa and if that goes well, we should be at least testing 12,500 during the day. Our President has decided to celebrate our 5th anniversary of war with Iraq today and will be coming on TV to tell us that the war is going great, just like he told us how great the economy was going last time he saw us!
I still have a lot of concerns and it will take me until next Tuesday to stop worrying so forgive me for being cautious but we've been burned sveral times before and the dollar still hasn't actually been bailed out, which makes all this an illusion until we see where it settles.
