by Phil Davis - March 31st, 2006 4:19 pm
Again, I hate to be right when I’m pessimistic but boy did today suck!
The Dow dove right back to 11,100 and the S&P dropped down to 1,294. The Nasdaq stayed flat but not the ones I was holding so I’m out of all of it with the exception of a few small ones I picked up today.
What mostly worked today was Finance, Insurance and Dividend payers, this is not generally a very good sign! On the other hand transports went up and they usually lead the Dow.
Oil made yet another spectacular recovery for no discernible reason while gold finished at $588 but you would think it was $488 the way gold stocks dropped!
Today I bought very small amounts of GM $17.50 puts for .50 (now .35) on a possible Delphi strike, I added to my ABX $27.50s for .60 (now .65) and I should have done the same with NEM but I didn’t. I picked up a few PFE $25s for .50 (now .45) and some VIA $40s for .25 (now .30). That’s just enough to make me feel better if the market takes off on Monday.
I wasn’t too upset with today because oil dragged everything down and metals were way off but the Dow never went down more than the 41 pts it finished at even though oil was far worse off mid-day.
Hopefully we can take that and a strong Nasdaq as a good sign for next week but I still get the shivers remembering last April…
Google ended up trading 35M shares today but CNBC was right (and they told us 4 different times and we didn’t listen) when they said that all the hedge funds would dump into the buyers in the final 15 minutes of trading – it’s exactly what happened. See the comments today for the whole sickening recap and how I ended up with a spread going into next week (but I lost 25% of my profits by staying in already).
5:50pm ($389.80) – CNBC’s Kudlow panel just said they expect Google to beat earnings on 4/20! LMOL!!! What a racket… I’m dying to hear what Cramer says now!
GE picked up .13 but I sold it when it dipped below .20 as it doesn’t really move fast enough to miss anything and I’d rather have cash. The same went for MOT.
by Phil Davis - March 31st, 2006 7:42 am
Asia is mixed and Europe is down, maybe the money will flow our way today or maybe everyone is like me and wants to be in cash for the weekend.
Even if our market goes up today, I still say it’s nice to cash out when your position is going up rather than cash out on the way down. Options even more as they are volatile and tend to deteriorate on weekends when they are out of the money a little more so than week days. We still have 3 weeks on these very long April contracts so nothing to worry about but also no reason to stay in things we are not certain of.
Why am I so worried? Because I held stuff last April and boy did I get fooled! The situation was different, stocks had been going down all quarter but we had a March rally to 10,940 and everyone was talking Dow 11,000 so I took a lot of long positions. In the first 3 weeks of April the Dow dropped down to 10,000 and the Nasdaq was just taken out and shot and all of my options expired worthless. That’s why!
The similarity is we are rallying into key resistances, oil is rising and the Fed is tightening and it’s the end of a quarter so funds may rebalance so I really urge caution here. It is almost completely random whether any given stock will go up or down in the next week. Once we see where the fund money is flowing, we will have tons of great opportunities to deploy our cash!
Oil is heading down a bit which is why I initiated my puts yesterday instead of waiting for today as I had originally planned (that would be the older, wiser me making a better decision than the old me) and I’m very comfortable taking the next 25% this morning and I’ll let you know in comments if I take another 25% this afternoon or wait it out. As we know, it’s crazy to short oil into the weekend but this rubberband may snap (or it may keep going up and we will cry) so I’m taking the chance.
by Phil Davis - March 30th, 2006 4:17 pm
That wasn’t really so bad…
If you read this you should know I could care less about the Dow, other than the fact that everyone else seems to care about it so we have to. The Nasdaq asserted some leadership, which is just what I always wanted and the S&P held 1,300. The NYSE was up a nice 22 pts too but you’ll never hear a word about it even though it’s a better indicator than the other 3.
I did not pack it in but I am ready to. Most of my stuff worked today but I am very scared of Monday and I don’t know if I can bring myself to leave money in the market this weekend.
Oil is through the roof so of course the Dow is down (they are industrials you know) and gold is through the roof of the house built on top of the roof that oil went through. That means inflation concerns which means more Fed tightening and tigers and bears oh my!
Another Dow downer was GM which was only saved by the 5% rule today. Those $20 puts we picked up for .40 are now $1.25 (up 300%) so take that Google! What a surprise that wasn’t for us right?
Again, go to the comments for Google news, I feel silly rehashing it but I am out except for the far out calls ($460-$480) which won’t lose much value in a drop and represent about 40% of the profits from the lower ladder trades (we started at $420 way back on Monday!). Today’s finish made me too nervous after yesterday’s flush but that may be just what THEY want us to think. I just can’t see how that many people can hold off buying if tomorrow is going to be such a great day so I have to assume I’m wrong.
I hit MSM’s action on the head, it topped out at $55.50 and dove down to finish at $53.16. If you didn’t take 5% and run when it flattened out, be smarter tomorrow!
In comments I called GE May $35s for .45 around 10am. They finished at .65 (up 40%) as this one finally woke up! This is the kind of stuff I’d like to be able to do (intra day alerts) if I ever get a proper site…
by Phil Davis - March 30th, 2006 6:54 am
Asia is on a tear yet again and Europe looks strong too, the question is will there be any money left to be put into our markets. We can hope that chart watchers will be encouraged by the Nikkei just thundering on to new high after new high, almost without pause.
The Hang Seng had a very slow start but finished with a bang, up 135 pts (1%).
If we don’t have a good day today then pack it in! I am, in any case, very very concerned that this whole rally is a pump by the funds who are looking to put a great quarter on the books and we will really pay the piper come Monday so, other than oil puts, I will be cashing out almost everything by tomorrow. If I’m wrong, we have many, many ways to get back in with all our cash.
The dollar is pulling back, lifting oil, gold, etc. but gold is also just heading up and up. Don’t forget to get the hell out of gold trades as soon as it falls below any $5 level it passes as the stocks tend to overreact to any pullback.
The UN Security Council made a statement that Iran should suspend uranium enrichment but did not threaten sanctions. Still oil goes up… I’m going to take a fairly risky oil bet which I will detail tomorrow but I really feel this one in my gut!
Today is April contract expiration day for refined products so we will watch gasoline prices closely. Also, the natural gas inventory is out at 10:30 where we expect a healthy build.
Google Google Google – ok now that that’s out of the way…
I made a fatal mistake yesterday of spending too much time in the comments explaining to people why it would be smarter to take the Google money off the table when I should have been making sure my own sells executed. I even said at right about 3:30 that I was very concerned that no one would pay .10 over the strike for the calls I was offering up and, unfortunately, I was so right and it dropped so fast I didn’t get to sell other than my $420s.
by Phil Davis - March 29th, 2006 4:23 pm
Well, that went pretty well didn’t it? Everybody broke right back over support so I think we have a good couple of days ahead of us.
As I said this morning, positive Dow movement is both great and confusing and I am really leaning towards window dressing by funds (pumping up their holdings at the end of the quarter) as the main reason because the fundamentals are just not there.
I’m all Googled out from the comments so check the last 2 blog’s comments if you want to hear all about that one.
It was hard to miss today – Oil was up, commodities are up, industrials are up, financials are up, hell even Apple was up… In fact, if your stock was down today, you really need to think about what that means!
Once again BTU is flat while oil and gas climb so signs of an artificial oil rally are there again. At this point I hope they all double so we can short the hell out of them again!
Tomorrow could be great or terrible and again it will be up to Google as a pullback tomorrow will shake a lot of people’s faith in the markets (now that it will affect the Nas and the S&P) but the charts look good as long as nothing happens to trash it overnight.
My little military stock MRKL may be on the march again. It’s gone all the way up to .0215 bouncing nicely off resistance at .020 after a brief flirtation with .03 last week. They keep dilluting me so now I only own .3% of the company (I used to own 1%) but it’s fun to watch and I’m dying to see what happens if they actually post a profit this year! There is a very complex distribution dividend coming from a subsidiary (TCNH) which may amount to nothing and I in no way recommend a company where the CEO pays himself $4M while we are bleeding cash but it’s a fun stock to own and I thought I’d mention it today.
BIDU was the call of the day today with a nice easy entry followed by a 6.5% run on the stock! The Sept $50s finished at $10.10 (up 35%) but if you sold the $55s, they ended up at $2.70 (up 100%) but you are still $1.20 ahead (17%) and should consider buying them…
by Phil Davis - March 29th, 2006 6:39 am
Today is the day to see if we can climb back over our barriers and get back above resistance. If we do, we establish a pretty solid floor that we can bounce higher off, if we don’t, expect a big correction to start next week!
We are looking for Nasdaq to stay above 2,300, S&P to retake 1,300 and, most important, the Dow to get back over 11,300. The Dow will have a very tough go of it with the GM problems (subpoena’d today) and a UBS downgrade of CAT while MCD is falling off a cliff and no one is excited about AIG or IBM or GE or VZ or C or… well, you get the idea!
So I would take any positive Dow movement to be a great and confusing sign. We are now so far behind the Nikkei I’m thinking of moving to Japan as that market gained 280 pts today to bring it right under the 17,000 mark which it should shatter handily, they just ran out of time today!
They used to track quite closely (we sell to the same people, have similar economies) but since September the Nikkei has left us 30% behind, that’s 4,000 pts!
Europe is up today, possibly on the strength of the dollar which now assumes at least 2 more rate hikes and again I find this amazing with France shut down and rioting in the streets.
The oil con will likely continue through Monday unless inventories are much higher than expected but THEY have done a brillian job of getting the oil stocks over the January 1 levels which is all that counts when you book the quarter. If oil stocks stay up today, we will look to enter some serious puts on Friday afternoon. I’m not going to be a hero and will set very tight stops on my current puts on what could be a very up and down day in the sector.
Today, if you can believe it, they are blaming a refinery outage in the Virgin Islands for today’s prices! I didn’t even know they got a turn. The only reason for this must be that there is some progress in Nigeria and THEY had to scramble to come up with something new to worry about…
by Phil Davis - March 28th, 2006 4:13 pm
I hate it when I’m right about negative stuff…
So you see what I meant about cashing out, we got a good chance to exit positions all day but 5 minutes after the Fed announcement and everything was in total hell! The cash also gave me a nice chance to take advantage of the oil puts that developed during the day.
Imagine how you would feel if you owned XOM (down .5%) or CVX (down .6%) or BP (down .8%) or SUN (down .7%) on a day when oil is up $2! XOM has 50Bn barrels of reserves – a $2 rise in oil should add at least 10% to the market cap, what kind of BS is this?
The only explanation is that the run-up in oil is fake and these guys know it! Funds were selling these things all the live long day while retail suckers where jumping in to take advantage of “rising oil.”
Another reason for the big pump is that the AMEX is launching an oil ETF on Monday (assuming it gets approved which it shouldn’t but it will). This is a way for the oil traders, who are stuck with ridiculous priced contracts, to pawn them off to individual investors who will get caught holding the proverbial bag when this international game of hot potato comes to an end.
Much like the run in silver as a new fund opened up, oil is running in anticipation of new participants coming into the market. “This can only end in tears” as my Grandma Lucy used to say!
I’m so angry at this screw job I can hardly think straight, I really hate it when rich guys come up with new ways to rip off average investors!!!
Speaking of being ripped off – gold took a nosedive on the rate hike, not because people sold gold, but because the dollar rose .5% (.5% of $600 = 3). How dumb are people who sell off gold stocks based on that? Again the total ethnocentricity of this country will be it’s downfall…
As we expected, only the Nasdaq held it’s technical mark at 2,304 while the S&P slipped to 1,294 and the Dow dove all the way to 11,154. I’m not worried about the S&P as 12 points of selling is attributable to the reweighting and should flow back in by next week but the Dow…
by Phil Davis - March 28th, 2006 7:08 am
Asia is up and Europe is down slightly, which is amazing with a nationwide strike in France and an imminent strike in England – if that were happening here the markets would be in a nosedive!
Our pre-markets are down and will stay that way until the Fed announcement this afternoon, as if something unexpected will happen. I think the only real issue is can Bernanke be as obfuscating as his predecessor, which is a tough act to follow.
I am hoping Bernanke takes my advice to raise rates a full half point and say they are done through the Summer, this will punish and relieve the market at the same time and give the Fed a chance to measure the impact without pushing things too far.
It would be so easy to crash the markets with a poorly chosen word and I’m sure Ben knows this and will be very careful but be warned that the markets are currently looking for almost any excuse to sell off. The Dow is in the weakest position and if it breaks 11,200 I will seriously be considering moving back to all cash!
While a pullback would be healthy and possibly even necessary, there is no reason I should sit through it stubbornly holding stocks that drop and drop. The S&P is also very vulnerable if it closes below 1,300. Ironically, the Nasdaq is currently showing the most strength.
Oil is going up and up and up for no reason other than the Nigerian rebels. I’m not sure when Nigeria snuck up and passed Saudi Arabia as the world’s most important supplier of oil (it was 8th) but you would think they did from the press this is getting. This has been going on all year and our stockpiles have gone up and up so I think oil traders should start to fear what might happen if the pipelines aren’t destroyed, if we don’t have a major hurricane and if Iran doesn’t start nuking it’s neighbors on July 4th because all of that is priced into a barrel of oil at the moment.
Let’s not forget that we predicted that oil prices would rise as part of the back door deal that took the Iran Oil Bourse off the table last week. $70 oil may be the price we pay for a stable Dollar!
by Phil Davis - March 28th, 2006 12:50 am
There are a lot of stocks that are currently running up in anticipation of some postitive signal from the Fed but oil is destroying any chance of that. Here is the meat of the statement from the last Fed (1/31) meeting: Although recent economic data have been uneven, the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures. The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives. Don’t forget this was a transitional meeting where Bernanke was moving in so he had a hand in this. Notice the statement “possible increases in resource utilization as well as elevated energy prices…” was what had them worried. Well oil was $65 and heading down from $70 at the time and copper was at $225 (now $244) while gold was the same around $565 (not really used in the economy per se). So if anything, this run in commodities will cause the Fed to tighten more, not less! In addition, the labor market has tightened further so wage inflation is a big concern. Notice also that oil stocks also ran up into the last Fed meeting and took a dive shortly thereafter so I want to take the opportunity to take the following (BUT NOTING THAT ALL TRADES ARE OFF IF VALERO BREAKS $61 AND XOM BREAKS $62 AFTER THE STATEMENT). Also, if oil breaks $66 take these off the table! Use a 20% rule and be prepared to lose it or don’t even think about this bet!!! VLO $60 puts for $1.75 XOM $60 puts for .40 SU $75 puts for $1.80 COP $65 puts for $1.55 MUR $50 puts for $1.30 SLB $115 puts for $1.50 (yes, way down there). The keywords we are listening for is another quarter point hike (obviously) and essentially the same language as above. Anything else, like a press conference or a speech by Bernanke will throw in a wildcard that could cause chaos so be very careful! – Phil
by Phil Davis - March 27th, 2006 4:03 pm
Eh… Not such an exciting day. Just what we expected pre-Fed. Sitting on 5 year highs like this, just staying up here is good news. Volume was very, very low and most of the action looked like reshuffling out of last week’s winners. Oil will not go down. It was down .78 around noon and then was rescued in the afternoon and pumped all the way up to $65.50 just before the close. It settled the day at $64.32 which is just too high for a lot of companies to get comfortable with. BTU tacked on another .60 today and moved within just $1.38 of the drop zone and COP got way ahead of itself at $63.10. Gold had a big day and copper continued to rise, both heading back to January highs (copper actually higher). TXN continues to prop up the Nasdaq but the semis are “chipping in” as well! Google picked up a point on very low volume but every large buy knocked the price right up so I think we have nervous buyers testing the water by putting a toe in and quickly drawing back as it is way too hot. ===================================== I called the dead top on TOL in the comments this afternoon but it held up well anyway, the $35s finished at $1.65 (up 50%). RTLX flew up 3.4% with a strong finish at $24.80. WAG was something for everyone today, up .60, down .60 ending up .50 – the $45 calls ended flattish at .90 but proper buying patterns would have been key here! AMR never really came down enough to buy. The stock went straight up 2.5% for the day CC shot straight up as well and the $25s finished at .80 (up 33%). N had an up and down day but the volatility drove the $50s to $2 (up 13%). BHP was not so ambiguous, up all day where the May $40s ran to $1 (up 25%). AAPL cannot catch a break, every time it goes up someone sells the hell out of it… ATYT went up 2.5% today and the $15 calls moved back to an even .90 so I feel much better! BA took a hit early as Qatar cancelled an order (fallout from the port deal?) but recovered. Wed TOTDs all did well: BXP lost another 1.5%, EOP was flat and VNO lost a point on a weak finish.…