There's a global stock party going on and I hope we are invited!
The Hang Seng jumped over 400 points to 19,725. We can no longer ignore the FXI, an ETF of 25 major Chinese stocks that I have been avoiding due to the inclusion of ICBC, a bank with a p/e of 32. But you can't ignore this chart or what is now going on in China so we will start watching this along with our usual global indexes.
I can't bring myself to buy these stocks at the moment (we do have CHL) but ICBC jumped another 11% this morning, LFC rose 8.2% and Bank of Communications (another holding) gained 6.2%. Despite these amazing performances, the Hang Seng was out gained by mainland China's market which rose 5.7% this morning to 10,137 - Now that's a Santa Clause Rally!
"People have to realize hedge fund managers from around the world are looking at China, Japan and India as the big plays for next year," said Chris Tang, a fund manager with Marco Polo Investments. "
China is not immune to growing pains though, the CB is concerned about inflation and the auto industry may be overproducing (as Chinese demand is NOT what people tell you). And please, let's never forget how this economy is being built – it's not all fun and games at the Barbie factory!
The rest of Asia was up but a little more modest than China, who is clearly the life of the party (this is why my 2 girls are learning Mandarin!). Toyota, Honda and Mazda all gained about 2%, taking the Nikkei to a 7-month high at 17,223 and all of this went on as an earthquake knocked out a lot communications throughout Asia!
Europe continues it's slow but very steady march up, not looking much different than our major exchanges with the CAC, DAX and FTSE all just off slightly from their highs – only they are not fretting over it like our traders are!
Over here, we had a very nice day yesterday and hopefully we can return to looking at our upside targets again. I am still calling for 75% cash into the long weekend but, if we survive next week, we have plenty of positions we can add to:
- Dow has not been able to crack the 12,500 mark and is unlikely to do so on low volume. Let's just worry about how firm we can look above 12,400.
- Transports need sub $62.40 oil to get back over the 200 dma at 2,580.
- S&P needs to take out 1,425 to prove it's serious.
- NYSE led us higher yesterday and has a shot at a new high at 9,172 this week.
- Nasdaq needs to reassert itself over 2,425 and will not impress us under 2,450.
- SOX are stuck between the 50 dma at 470 and the 200 dma at 463 and the fate of the market rests on the way it breaks out!
- RUT will hopefully make another attempt at 800, failure at 790 could be our first warning sign to the downside.
Oil will face a test of confidence today at the $61 mark. It would be astounding if they can't crack that ahead of inventories tomorrow which will still be showing the effects of last week's Houston ship channel disruption. I'll be happy if we can just firm $62.40 as a nice top for the week!
Kustomz points out that our man T. Boone is on the case and the roaches are baiting yet another ETF trap through the NYMEX in order to rustle up some new money as it is (and I kid you not – they actually say this) "designed to attract small investors." This is clasic late-stage Roach Motel Theory in action as the trapped roaches must pull in new money if they are going to make it out the door.
We get the natural gas inventories as well and the warm weather is just killing that market! Zman writes that our "heating degree days" are running over 20% below normal and we were only willing to pay $4 for gas in September (no hurricanes), when we still thought the winter would be cold…
The dollar will be very interesting to watch at the 84 level and will likely be moved by the refinancing index, which shows loan demand has fallen to a 5-month low, down almost 20% in 2 weeks. Essentially, what this means is that, even at an average of 6.12% for a 30-year loan, people simply are not willing to buy homes at these prices!
Gold got very little boost from the Iran sanctions and may fall sharply if this news doesn't drop the dollar, something gold traders are getting a little tired of waiting for something bad to happen…
Oh and Gerald Ford died as our oldest President, at 93 – our only President that was never elected in a national election. He came into a very tough situation and did what had to be done and took the fall with grace and dignity.
Amazingly, he was only ever elected a congressman in Michigan by about 100,000 voters but he was reelected 12 times and gained the respect of Congress over those 26 years.
In 1975 he ordered the arilift of 250,000 Vietnamese refugees and gave them safe passage to the US, a brave, unpolitical, charitable act that changed so many lives for the better.
Two people tried to kill him yet he kept marching out in public and he was the first incumbant president to agree to debate his challenger, who beat him by 2%.
Carter aknowledged Ford at the time saying at his inauguration: "For myself and for our Nation, I want to thank my predecessor for all he has done to heal our land." Amen.
Tempting though it may be, it's another day to watch the action and see what's moving where so we can have a clear head (and virtual portfolio) moving into the new year.
Looks like we may have picked the wrong day to initiate AAPL yesterday as there seems to be some mounting options issues rolling around the boss! Word is that Jobs has had to retain counsel as the questions are heating up. While it may be old news, it's new to most people watching today so let's look for a possible buying opportunity! Here's a great WSJ video on the options scandal in general. I think it is this, and not industry fundamentals, that are holding back the SOX this year.
Not all biotech news is bad. ANX is moving into phase II with a drug that is designed to lessen the toxicity of chemotherapy. They jumped 11% yesterday to $2.93 and I'm going take the Jan '09 $2.50s for $1.25 as it's not a bad premium and I will add monthly while selling the Apr $5s for .20 or better.
I'm not comfortable just having the puts on CHKP. It was meant to be a spread and so far we only have the Apr $20 puts, which gained 50% in the past 2 weeks as a backstop to the Apr $22.50s which I targeted at $1.15 back on the 18th. It hit my target yesterday and thanks to Kustomz for reminding me why I liked them!
I like having a look at HAS as they are about to run into their rising 50 dma at $27 after 2 months of consolidation. They just got a renewal on Star Wars toys this morning, key in this 30th anniversary year.
IBM will be rockin' and rollin' today as Think Equity moves them from a sell with a $70 target to a buy with a $110 target! I've been waiting for a pullback that just isn't coming on this one! 8-(
LLY got their Zyprexa patent upheld through 2011 and should be back in good shape with our Apr $55s, which have an adjusted basis of $1.45 and may still be cheaper than that this morning.
NBR has become something brand new that I love – an oil company with an option scandal! Boo-Yah!
UNH got their stock option investigation upgraded to "Formal" by the SEC!
We were discussing VZ and the "last mile" wars in comments yesterday and I just want to make sure people get a chance to read Reinharden's very good summary of Wimax vs. Fiber Optics as we will be dabbling in this space in the year ahead.