That went very well for a Thursday!
We've had a lot of trouble with Thursdays and this was a pretty good one. Last year we opened January with a 350 point gain in a 4 day week so I'm not going to do any victory laps just yet (especially as the entire gain was wiped out 2 weeks later) but that was coming off a very choppy year where no gain went unpunished.
Is it different this time? Last January oil led the rally, with crude surging from $56 in November and December to $68 at the end of January. Today we crossed back to $55.59, the lowest price for oil since June of 2005, when a 600 point Dow rally was killed by rising crude prices. When oil settled down at $56 in late 2005, the Dow picked up 800 points.
It was a surge in oil back above $60 in the last week of December '05 that halted the Dow at 11,000 and a surge in crude to $75 in April that drove the market from 11,500 back to 10,700 in June. We did recover so, yes, we can afford higher oil prices – but we certainly don't like it!
Today we liked it! We tested and held all my levels early on which gave us the confidence to call a buyfest during comments as we added a bunch of new positions, even as we continued to short oil:
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Dow 12,400 held after a brief test.
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Transports led the way, testing the recent high at 2,720.
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S&P must hold 1,410 or it will be testing the 50 dma at 1,400.
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NYSE was our weakest index, falling below 9,100 twice, and not getting back over 9,150 should be considered a problem.
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Nasdaq took a brief dip below 2,425 but bounced back to lead us higher! As I said this morning, "tech must take leadership."
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The SOX did very well (up 2%) but failed to hold yesterdays high. They broke out of the range though finishing above 470!
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Russell held 780 exactly but still needs to take us to 800.
Oil was once again the star of our show, plunging 5% to finish at $55.59, just .06 under the level I predicted at 10:53 when I said "Oil resistance levels are $57.65, $56.20 and $54.76 but if the dollar holds 84 we are likely looking at .75% less so the key numbers here are $57.21, $55.66 and $54.34."
I know you guys think I make these numbers up but I don't! 😉
Inventories did not go well today with a slight draw in crude offset by a huge and surprising 5.6Mb build in gasoline. My 10:33 take on the situation as they tried to pump the oil sector: "This is insane – they are trying to spin this on CNBC and the oil stocks are rallying on what amounts to a 5M barrel build in the middle of the winter. I’m not selling anything on this news – I’ll double down anything they want to give me a bargain on! "
We not only stayed in oil through the BS (and short-lived) run-up, but we picked up some additional bargains along the way!
We were helped by another up move in the dollar, testing the falling 50 dma at 84.35 – tomorrow will tell the tale as it will take a lot for us to break back up. Gold hung on to the 50 dma at $631 but looks ready to give up hope…
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Another busy day for intraday trading! Today for a change we had a lot of early picks with a full slate of builder shorts on the members site, all of which worked out very well!
ALK was added as I thought the combination of a 2% rise in traffic and a transport rally would serve them well. The July $45s are off to a good start at $3.80 (up .30).
COST Feb $55s finished at $1.25 (up 47%).
CVX gave us $70 puts as late as 12:30 for just $1.05, they finished at $1.20. The Mar $70 puts came in at $2.55.
We took the DIA $125s for .85 after getting out of the $125 puts for $1.45 (up 45%). We also picked up the $126s for .50 as I became enthusiastic about tomorrow (see below).
DHI Feb 25 puts gave us a cheap entry at .80.
EWZ was suggested by Hari as a Brazil ETF that is tragically weighted to energy and commodities so we picked up the Feb $45 puts for $1.20.
FD was added to our long-term plays with the Jan '08 $37.50s at $5.40 and they dropped 10% fast! I did say at the time: "with the early stage of these that we buy some to get started and don’t really care if it goes down 25% as we just buy another round but this seems like a good entry spot for round 1" but it still sucks to lose!
I was thrilled to get back $1.40 (up .35) on the INTC $20s so we cashed those out and rolled into the Feb $22.50s, which are a free ride at .30.
JOSB Apr $35s finished at $1.30 (down a nickel).
JOYG $45 puts were taken off the table at $1.40 (up 229%).
KBH Feb $45 puts held .90 all day.
LEN Aug $45 puts finished the day at $2.45 (up a dime).
MRVL Feb $18.75s were added at 11 and finished at $1.95 (up 18%).
MW Feb $40s seemed cheap at $1.35 and jumped to $1.65 (up 22%).
NCS Jun $55s didn't come down but we do want a cover so let's keep an eye open!
PLCE dropped too fast for our original play so we switched to the Feb $60s for $2.75 and $2.25 for a $2.50 avg. entry.
RDS.A $70 puts were taken half off at $1.60 (up 146%).
We thought the drop in SRZ was a bit overdone and picked up the Apr $27.50s for .60.
WCI went the wrong way all day and the Feb $17.50 puts only cost .55.
XLE $56 puts were added pre-market and finished at $1.45 (up 21%). These were a roll that allowed us to cash out half our $58 puts for $2.80 (up 383%).
XOM $72.50 puts were added on the run-up and exceeded our expectations by finishing at $1.25 (up 47%). We called the top to the minute on that one as I said at 11:12: "Can XOM break $74? That is almost the exact 5% line from $77.50 that they’ve been around since Dec 1. More likely they will work their way down to $72 next week (barring global shenanigans) so the $72.50 puts s are a good deal at .85 if you can be happy getting out at $1.15."
I also took a DD for protection on the XOM Apr $80s for $1.20. This helped offset the leap of the Jan '08 $72.50 puts which finished at $5.60 (up 10%). The Feb $72.50 puts came in at $1.95 and finished at $2.30 (up 18%).
YRCW had a heck of a first day and the Jan $40s finished at .90 (up 80%) and I apologize for the typo this morning. The Feb $40s opened at $1.40 and finished at $1.70.
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Why I got enthusiastic about the markets (3:42):
"I think oil will not go down tomorrow so that’s .75% of drag off the markets tomorrow. As they’ve gained .2% for the past 2 days despite the drag from commodities and as all this commodity selling went into cash that is now on the sidelines – we are positioned where a little boost in the morning can launch a buying frenzy.
There is no news that is likely to derail us and many factors that can ignite a huge rally, including an XOM bounce that rallies the Dow. People (us included) look at Google today and worry we’re missing out – Mary just said she thinks she’s missing the tech rallly – GS just told their clients to up stock exposure from 50% to 70% (a 40% increase) and oil is posting $55.59. "
