Last Thursday was a disaster!
Keep that in mind today as last week was a canary catastrophe when BRK.A dropped below $110K, down 5% for that week and we lost levels on the Nasdaq, S&P, SOX and transports.
In the wrap-up that day I said I wasn't worried and that has worked out nicely for us as we played this rebound correctly but I'm now concerned we are going to ping-pong off these highs and fall into a toppy looking range. It's very difficult as the markets just don't want to consoilidate any more, it's either up or down with no rest in between.
With almost 200 Dow points added on in 2 days we can only conclude that the traders who left (volume is down 40%) felt confident enough not to place a lot of sell orders. Just holding half of yesterday's gains would be great today and any positive move would be spectacular:
Dow 12,480 would be nice to hold, it was the resistance we fell off last Thursday.
Transports are much improved but MUST break over the 50 dma at 2,617.
NYSE 9,140 is our soft spot but I think falling below 9,150 is an early warning.
Nasdaq MUST firm up over 2,425 and that is no big deal at all.
SOX are a big deal if they don't turn up! They were at 475 last week – this is pathetic!
Russell is well above last week's levels and needs to pass 800 to lead us into a real rally.
Last Thursday I also said that $60.80 was my downside oil target and here we are so let's not get our hopes too high ahead of inventories today. As usual, we will keep right on top of the action in comments but we are already being set up for failure by "analysts" who predict:
A 1.2Mb draw in crude (despite the ship channel closure)
A 220Kb BUIILD in gasoline!
A 590Kb BUILD in distillates!
A 60Bcf draw in natural gas (about half of normal for this time of year).
Keeping our expectations ridiculously bearish allows them to make hay out of the actually bearish facts. Not only that but wait until we get a quarterly adjustment to inventories which is almost certain to show an additional build as oil is just proving to be far more abundant than Mr. Pickens would have you believe.
We won't know the story on the dollar until we get the existing home sales report at 10 but, as I said last week, the dollar is a report card on our economy, which seems pretty weak compared to Asia and Europe.
Gold still has to wrestle with that $630 mark so good luck to the gold bugs, one would think a booming Asian economy would create some sort of demand for their favorite metal – one would think…
Speaking of Asia, the Hang Seng added another 276 points today and finished at 20,001 – the Dow must look awfully small from way up there! All of Asia continued up with huge gains in steel stocks that should bode well for our X Feb $75s, currently at $4 (up 50%).
Despite large gains in the financial sector in general, ICBC fell 1.2% as someone besides me finally thinks they may be a bit overvalued for a bank.
Europe is taking a pause today and is likely to coast into the holiday around here, just under record highs so we should be in for another interesting day in US trading.
This is old news now but this video on the "Kramer Incident" is hysterical if you're a Seinfeld fan.
Just like a good football game, this market is best watched from the sidelines.
I've got a busy weekend ahead of me lining up some long-term picks for next year but I'm not likely to get suckered into making new year's predicitons as I make predictions all the time, but only when I have enough facts to make good ones.
This silly game of getting otherwise reasonable analysts to make half-baked predicitons based on whatever facts happen to be available on December 31st is one of the most damaging indicators that are followed by individual investors! It is perhaps even worse than "lists" of future picks, also hastily assembled to make arbitrary deadlines that have nothing to do with market conditions and everything to do with getting people's names in the paper.
Reviews are another story, I think reviewing what worked and what didn't work throughout the year is a vital tool in laying the groundwork for future success. "Those who forget the past are doomed to sit through reruns of American Idol" or something bad like that…
We are either being handed a huge gift by AAPL today or on the road to doom but I am very likely to take out our callers this morning back near yesterday's lows as we will have this matter resolved tomorrow and we may get a chance to sell them all over again before the day is up. If not, perhaps we will just take our profits off the table as they are substantial on these Apple trades!
I know I'm a radical but, rather than listen to a bunch of half-assed analysts on CNBC ("Can Not Be Checking") and 4th party accounts from pretty much every other news source, I took the 45 seconds it takes to actually track down the actual Financial Times article all this new nonsense is based on.
It turns out this story originated from San Francisco, the same city as yesterday's PR attack on Apple began. It also turns out that, like yesterday's attack – there is no new information here, just a repackaging of the original story and facts.
"According to an Apple filing in 2002, the options under review were handed to Mr Jobs in October 2001, at an exercise price of $18.30 a share. However, the purported board authorisation was dated near the end of the year, suggesting that the benefits were both not properly authorised and were backdated. Mr Jobs later surrendered his options before they were exercised, implying that he did not gain any direct benefit from them. He was later given a grant of restricted stock by the company instead.
Under Apple’s rules, the chief executive’s remuneration must be set by a compensation committee of independent directors and later authorised by the full board."
I know – that's it! The top business news story of the past 24 hours, all the non-stop pontificating by every analyst with a pulse since this story broke last night and that is all there is. As Reinharden said yesterday in comments:
"It’s kind of like saying “Local police are examining radar gun displays to determine whether speeding tickets should be issued”. Local officials say that speeds more than 20 mph above the speed limit could result in reckless driving charges. Reckless driving is often associated with driving while under the influence which carries a mandatory jail sentence. Killing someone while under the influence is often prosecuted as manslaughter.
"And this morning the markets decided that that means that Mr. Jobs was going to jail for manslaughter ’cause the police looked at their radar gun…"
We made a lot of money on this nonsense yesterday and we will excercise caution but let's be on the lookout for another great opportunity today as all this negative Apple news seems very oddly timed ahead of MacWorld, the Friday filing of the actual SEC statement, the fact that PC magazine wrote a glowing article re. the 30% increase in Mac sales (thanks Kustomz), the fact that ITunes traffic increased 400% over last year's holidays…
With plenty of positive Apple news to report on, I find it very interesting that the Financial Times' other Apple headline yesterday was "Apple remains unfazed by march of Microsoft’s Zune." March of Zune? I don't even think Microsoft's own PR division would have the nerve to call a 1.9% market share a "march."
Unfortunately, in today's media saturated world, it is not enough to just check our sources – we also need to check the agenda of our sources!
A guy on CNBC just pointed out how far SHFL has fallen and I have to agree that they are now way underpriced. Never underestimate the inability of traders to read an earnings report. SHFL had a fantastic quarter – sales were up 39% and income from continuing ops was up 32% but net was just .14 vs. .19 expected due to a .07 investment write down on their purchase of Stargames and .03 for the usual options nonsense.
There are 2 plays I like here, one is to just take the May $30s for $1 and wait for earnings and the other is to take the Jan '08 $30s for $3 and sell the Aug $30s for $2.55 and let mathematical nature take its course.