DIS will be the story of the day this evening as this mega-conglomerate and Dow component is a bellwether in television, movies, travel and hotels. Although I expect the mouse hose to beat pathetic expectations, their recent high-priced (and very necessary) acquisition of Pixar is too scary for me to take a current position. They have held the 50 dma at just below $25 all week and can break well above the 200 dma of $25.25 with little trouble so the spread of the March $25 put and calls for a combined $1.45 is a pretty good play.
Speaking of Mickey Mouse operations, we actually lost 23 terrorists from a detention center in Yemen. This is why Bush wants to be able to torture prisoners locally – you just can’t count on outsourcing!
The headline of the morning is “Oil up $1 on Iran concerns.” The actual headline should be “Oil only up $1 on Iran concerns” but that leads to a whole different article that doesn’t sell newspapers the way good old fashioned panic does.
Another headline should be, “Dollar continues to crush other currencies – if everyone in the world thinks the US is strong, why don’t we?” Sure commodities are rising, more than you think, in fact as the Dollar was at $1.41 to the Euro last winter so, in general, prices would be up another 15% had the dollar not been rising all year.
That’s right, while we fret and worry over our economy, other countries would rather have our money than their own. This will be extremely painful for us when the sentiment changes!
If you look at the pre-market numbers you might say “Oh good, the markets are going up” but it’s the oil sector that is leading higher at the moment and that is certainly nothing to jump into. Gold is back at $575, if it holds this level our usual gold plays are offering very attractive entry points at the moment.
The reintroduction of the 30 year bond will complicate matters this week as any new instrument takes money out of circulation which can hurt stocks. If the notes go out above 4.7%, then demand is strong and we need to be extra cautious about the markets, which only returned 2% last year.
While we are worried about Iran and China and 500 other countries that don’t like us, I think it is very interesting that there is barely a peep about the fact that we are selling Westinghouse’s Nuclear Fuels Division to the Japanese (Toshiba). Now I love Japan and have no problem with it but I know quite a few friend’s parents who will probably having flashbacks over this one. My point is, things change so dramatically in just 60 years – how can we get apocalyptic over every new “crisis” that comes along?
Cash, cash and more cash is the way to go, probably all week but let’s see what happens. I stand by my statement that oil will collapse but they will try to milk this for at least another month, hoping to get into the summer usage season and maybe more hurricanes forecasted before allowing “tensions” to ease.
What should be most remarkable to diligent reporters is the fact that oil is still down 5% for the month and, even with a $1 rise today, natural gas, heating oil and gasoline are almost totally flat – even though I believe they are all still made out of oil! The bottom line is that demand cannot be faked and all the fear pumping in the world cannot force people to sop up the excess supply that is flooding the markets.
Just like the price of Google though, you have to accept the price of oil for what it is because, if people want to keep buying it at irrational prices, all the logic in the world won’t stop them. We will just have to keep our eye out for the highest flying Led Zeppelins to place our puts on for the day when gravity finally takes it’s toll.
Fuel costs have hurt Ryan Air and Japan Air Lines today so expect some backlash on the high-flying US stocks like AMR, LUV, AAI and CAL.
UNH is either turning up or head faking, you could wait a week to be sure but I’m taking a 20% initial position in Jan $50s for $13.60 (a $4.20 premium) and selling the March $60’s for hopefully $3 but no less than $1.75 if it goes the wrong way on me. HUM had a nice report today which should move the sector forward but Medicare Part D enrollment is not going as well as people thought so I feel more comfortable selling against the position until it all settles down.
YHOO, if you do not already have the Jan $30s you have an amazing chance to pick them up for the $7 we originally entered at on the 7th. People seem to be actually willing to pay them to send Email, this will benefit MSFT’s hotmail as well but YHOO earns much less money than Mr. Softie so it will have a bigger impact on their bottom line. Don’t even get me started on Yahoo, with a p/e of 26 vs. Google, with a p/e of 86! For a quick fix, the March $35 calls are just .90 but you will sweat it out a lot more than with the Jans.
I implored you to buy the TXN March $27.50s on the 30th when they were $3, that was a bad day to buy but they are back to $3.10 now but below the 200 dma of $30.50. If it has trouble with $30.50 this week, then get out. If it breaks over on volume – get in.
TM has earnings tomorrow last quarter (11/4) the price went down $2 into options expiration before rocketing up $10 the following week. As the stock is up 30% for the year I like the Mar $105s for $3 with perhaps taking some Feb $100 puts for $1.20 to cover just in case.
SYMC lost little value on the Jan $15 calls we picked for $3.90 on the 31st, even though the stock lost over 10% on earnings disappointment (ah the joy of leaps!). While I now think that position is overpriced and should be sold, I think it is a strong indicator that SYMC has bottomed.
BUD moves now or never – I still like the Mar $40s for $1.50.
GM has a big board meeting today where the most holy dividend will be on the table! At $2, it is the main reason (only actually) to buy the stock, especially on the dips towards $20. Any indication that it may be cut could send people flying out of the stock while holding the line would have to be backed up by some pretty fancy projections that make it seem reasonable.
Has SIRI bottomed? Earnings are today and investors seem prepared for the worst, leaving the $6 calls at .10, a level that can be crushed or wiped out on tomorrow’s opening bell. Worth a small bet to me though… $5 puts are only .15 which indicated not many takers on the downside.
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Spreads are a nice way to park some money in uncertain times:
On Friday we looked at buying “X” DIA Mar $110 calls for $1.10, now .85 (-.30) and 1.5″X” Mar $106 puts for .65, now $1.05 (+ .40). Since we bought 1.5 puts for each call we made .60 for each .30 we lost for a net profit of .30 on a total investment of $1.70 (just under 20%). Now this wasn’t meant to be a day trade but 20% is not bad for any day!
On the QQQQ spread, after Friday’s action I would now enter with the March $41 calls and puts each for $1 and just hope for a 5% ($1) move in either direction.
COP has set a nice spread as it rests at $62.50 giving us an opportunity to take the March $65s for $1.60 and the March $60 puts for $1.50. The trick is to find a 6 week period last year where the stock did not move $5!
MOT is nicely resting on the 40 wma so the Mar $22.50s at .40 balance nicely with the Mar $20 puts for .45. As with COP, this stock is simply much more volatile than this…
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Speaking of Google (aren’t we always?), the only sell rating on the street, Stiefel Nicolaus, has just upped their rating to a hold and says the stock should be “bought aggressively” at $314. They put a $400 target on the stock (don’t forget, that’s a year end target) and were the only analysts besides me to call a sell on Google into earnings.
I agree with their assessment other than the timing, I don’t think this is a time to advise people to hold onto the stock at $380, especially when they are talking about $318 in the same breath. If GOOG drops below the 200 dma of $330, it may get some panic selling before correcting but I would buy at $318 on the way back up.
There is a small rumor brewing that the SEC will be looking into click fraud but if you try to Google an article on it, strangely it can’t be found!
Homework Assignment: Type the words “Google SEC Click Fraud” into google and into yahoo and compare the results – then please explain to me how we are supposed to trust these people to index the web!
