I would love to go gung-ho bullish here but I still have some concerns.
My biggest concern is this week's Treasury auctions as we need to get a lot of international cooperation in order to offload a fresh $92Bn worth of debt to tide us over until April. As I mentioned last night, I'm also concerned about a sell-off in oil tomorrow dragging the markets down with it and Thursday we have the GDP along with the chain inflator to remind us we're still in a recession, mild though it may be.
We got good news on the home sale front yesterday as resales rose 2.9% but that is to be expected with prices down 20% from last year and, upon closer examination, it was a market driven by foreclosure sales, which add nothing to the economy. Nonetheless, the rate of foreclosures DOUBLED over last year with 2% of all US homes now in foreclosure (that's right, there's probably one on your block) while sales of foreclosed homes are up just 4.4%.
With 3.3M homes facing mortgage defaults, Moody's estimates that 2.2M families will ultimately lose their homes, think about that when we are presented with the "job creation" numbers as these displaced families are going to have a very tough time getting back on their feet in a new location. I said last week that all the moves made by the Fed and the administration will amount to nothing without meaningful relief aimed directly at the homeowners, somthing the President has been fighting tooth and nail against as it diverts precious dollars away from his cronies.
This is the kind of thing we can ignore for a week or a month but not for a whole quarter so let's ride the bull while we can but make sure we have a mattress to land on in case we get thrown!
The Hang Seng came back with a vengeance this morning posting a 1,356-point gain (6.4%) and kudos to Optrader for making the FXI April $130 call ($6.70) ahead of yesterday's close. The Nikkei seemed like they were slouching with a mere 2.1% gain but they were strong all day with a strong finish so hopefully our markets will give them no reason to reconsider tomorrow.
Europe is also going gangbusters with 3% gains in EU markets, led by the financials on hopes that the whole credit crunch thing was just a passing phase. But our pre-markets are iffy and Piper Jaffray says Google may be heading into a revenue miss, which is sending shivers up the spine of tech stocks this morning. We wisely cashed out our $450 calls yesterday but only half covered our longer calls so we'll have to watch closely in case Google starts to correct on us. Comscore will come out tonight and should show improvements after last month's poor performance by Google but Piper argues it will not be enough. Still the play will be to buy on a significant dip ($445) ahead of those numbers.
We are over 80% cash in our Day Trading Virtual Portfolio and itching for something to buy. We crossed the 100% profit line yesterday and there was no way I was going to give that back so we got out of large positions on both Apple and Google leaving us with just the Sept $450s making up 3/4 of the value of our open positions in that virtual portfolio.
The Case-Shiller home price index is showing significant declines in housing prices, this is no surprise but is being taken that way in pre-market trading (9am) so I am glad we covered up yesterday and I'll be happy to take a small loss on the index puts if we do manage to shake it off. We got a profit warning from VLO last night and we couldn't be happier as we dumped our very successful VLO calls for XOM puts on yesterday's surge in what had to be my call of the day.
My call of today will be the BIDU $220 puts at $9 (I hope) that were $27 on Friday and could easily be $15 again on even a small dip so we're going to grab those at the open and we will plan on rolling them up to the $230 puts for $3 and then the $240 puts for $3 and then we will DD on the $240 puts so let's start with 10 in the DTP. My reasoning is that the Hang Seng was closed on Monday and much of this morning's gains were catch-up so the 20% rise in BIDU over 2 days may be heading to a 5% correction ($10) before heading higher.
Let's be very careful out there today, if we shake off our morning issues, it will be a very good sign but we need to hold the same levels we watched yesterday or we can expect a pullback of about 1.5%. They were: 12,500 on the Dow, 1,350 on the S&P, 2,300 at the Nasdaq, 700 on the Russell, 8,900 at the NYSE, and 350 in the SOX. Failing 2 of 6 of these levels is no reason to be bullish and any more than that will almost certainly turn us down.
