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Failure to Launch!

That was just pathetic!

Now they’re blaming IBD’s article that predicts that Bush intends to reduce the deficit (gasp), possibly by raising taxes (!!!) while conceding that global warming (but not evolution) might be real which "will cost the U.S. about $212 billion to $390 billion in lost GDP each year, according to a wide range of estimates. Total cost (of saving the planet) by 2020: as much as $5.5 trillion!"

I was just watching Kudlow and Company and Larry is actually making the statement "it’s just not worth it!"  Well, Larry is about 60, so maybe not for him but some of us have a slightly longer-term perspective.  Meanwhile, we already have a single budget item that dwarfs that very bloated estimate of $390Bn a year – Iraq!  We spend $300Bn in hard dollars to fight that war every year, and that’s prior to sending 15% more troops.  No one has even calculated the total burdened cost to the GDP of that mess because all the people who play those sorts of numbers games are employed by Republican think tanks in order to explain to you how taxing oil companies and saving caribou hurts the economy.

As I said this morning, if we don’t go up we should just get out.  Are you out?  Yeah, well, me neither…

Face it, we’re not that smart.  Do the markets have to send us an engraved invitation that says "Welcome To Hell" before we know we’re there?  I’m willing to bet that even if we got the invitation, even if it were literally on fire with burning letters the said "You are entering stock market Hell!", even if we could smell the sulfur, even if the card were hand delivered by vile demons - we would still  turn to each other and say "Oh, they can’t mean THAT Hell – can they?"

Are we investors or gamblers?  The difference between an investor and a gambler is that an investor knows when to walk away!  We are just 125 points into my 295 point correction (and that’s optimistically assuming we hold 12,300) ahead of my pullback prediction that could take us down to 11,500.  Our launch mission was scrubbed today and we may not get the go-ahead for a second attempt at this point so get used to the gravity – it’s not going to go away!

In orbital terms we may have just burned the last of our fuel and are now trapped in the gravity well of the primary mass (underperformance) with just one more chance to break free this week before we take a very wild ride back around the planet Zero Gains, where we will pass through all those lovely levels we broke on the way up.  We could still pull it out, we might still pull it out, we…  oh, who am I kidding – we’re going down!

We pulled out some big guns to start the week.   After great earnings from Apple, GE and IBM failed to excite the markets, today we went with AXP (net income up 24%, stock down), CSX (profit up 46%, stock down 2%), PFE (penny beat, down 1%), PETS (sales up 21%, stock down 15%) and TXN (profit up 2%) who very surprisingly are going up on good news – maybe it’s the job cuts…

As I said Friday, "it’s OK to play in Wonderland if you have a handle on the topsy-turvy logic, otherwise it is off with your head!"

altext

Clearly we are at least in the lower level of Anxiety with many of you in Denial with Fear, Desperation and Panic to look forward to.  I know many of you are waiting for them to slam on the brakes and reverse the roller coaster back up the hill to Euphoria and skip that nasty Capitulation, Despondency and Depression that most people have to go through before the market turns but THAT’S PROBABLY NOT GOING TO HAPPEN!

I’m in the last leg of contrarian optimism myself and it’s wearing thin!  Even though we had three consecutive weeks of 100% gains to start the year, I’m not going to let the virtual portfolio go negative this week and we’re already cutting it close so I’d rather take it off the table than risk more of this nonsense:

Photo

The NYMEX closed out the month at $51.20 with just 28,000 contracts remaining open for February deliver.  This is a far cry from the 77M barrels that were sent to Cushing for January and there are probably some good shorts to be had in that town!  Not to worry though, March has an amazing 393M barrels on tap and we should start tomorrow with a bang as oil opens around $52.50 on the new contract.

I can’t wait to see how CNBC pretends tomorrow that oil actually went up a dollar overnight!  It’s fun to be lied to when you know it as you can watch them keep changing the story to fit the facts.  We had a really fun day hearing how cold weather and rising demand and global concerns were pushing oil higher all morning as oil rose to $53.40.  All the pumping rhetoric suddenly failed them as crude dropped $2.27 once the NYMEX actually opened.

I said in comments this morning we have a 2 day pump-fest, likely into inventory before reality catches up with the energy traders.  They get a big break tomorrow with the new contract price but ZMan boldly predicted this morning another test of $50 before the end of the week and so far his aggressive call is looking to be on target!

Make sure you check out ZMan’s section because he made an exhaustive round-up of potential oil plays and I’ll be targeting a few over the next couple of days.  Gains by VLO, OII, OIH, CHK, EOG were somewhat delusional today as those investors are just rolling right through denial on our little chart and we will jump on top of that wagon to the short side just as Fear kicks in at the $49.50 mark!

All this oil fun came on a stubbornly flat dollar that just refused to fall below 85 as the 200 dma comes down to meet it, now at just 85.44.  Scroll down to the weekly chart and you’ll see the 40 wma has moved down to 85.16 and I’m sorry I’m not a chart guy and I can’t draw all the cool lines and arrows, but with just .11 to go, we should have a MAJOR inflection point on Wednesday morning, AFTER the State of the Union speech!  Isn’t it amazing how all these events can come to a head like that?

Gold did not like that one bit and fell sharply from the $640 mark on their morning pump, settling down $2 at $634.  Speaking of being on the wrong side of a trade - gold usually tracks closely to oil but oil has fallen away from gold by 25% since mid-August.yet the extended contracts continue to climb up to the sky, with the Dec 2011s going for $808 while oil Dec 2011 oil is down to $59.97.  Either oil or gold traders are very, very wrong!

Keep watching copper for a possible bounce that will confirm that gold traders aren’t crazy, or a break below $250 that signals a multiplex of pain for commodities of all stripes.  As I’ve said, there are a lot of people on the wrong side (possibly) of the dollar trade and the December contract for dollars is trading down at 84.09You can see from this little set how interconnected all these assumptions are!

Here’s a great Forbes article on the 10 most disruptive business changes of 2006!

===================================================================

We took a DD on ADM $30 puts at .40 as that run-up was way overdone.

AXP is always my favorite with their mid-day earnings report!  We grabbed the $57.50s for $1.60 but, so far, nothing…

BA‘s drop looked way overdone and we picked up the $90s for .75 – down a dime already.

I couldn’t take it anymore with EBAY and stopped out of the $30s at $1.45 (up 23%).

I gave up the protection of the GOOG Mar $470 puts at $19.20 (up 13%) as it either bounces here or I need to get out of those calls anyway!

IBN March $50s were picked up at .80, also not worht the bother and down a dime already!

See the Virtual Portfolio Moves section for the rest of the day’s action – good luck to all of us tomorrow as we have a heavy day capped off (or botttomed out as the case may be) by the President!

 


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  1. john_the_other_one

    Pretty doggone amusing for you Pink Floyd/anti-Bush fans:

    “Wish You Were Gore”

    http://vastleft.blogspot.com/2006/06/wish-you-were-gore.html

  2. Phil

    That’s great! It would make a great youtube video!

  3. Phil

    That reminds me – this bit on SNL cracked me up this weekend: http://youtube.com/watch?v=RjtVnqZCndo

  4. Gordo

    Phil, If the markets are broadly and generically heading south for a bit, what do you think of DIA and QQQQ puts to protect ones remaining unhedged long call positions?

    Is this a reasonable way to hedge without getting too tricky about it?

    Gordo

  5. Gary

    Phil,

    ROFLMAO funny tonight! I almost woke up my son.

  6. michael

    news that jobs was qeustioned by sec and us attorneys office on jan 19 is on bloomberg and cnbc this am. now that the news is out its possible a bottom will be formed. perhaps we open down one last time.

    neil minnow quoted as saying that the internal investigation does not matter its what law enforcement decides and she is right – but if the legal guys were happy with the answers jobs gave there is one hell of an up move coming in aapl. if they prosecute their is plenty of downside left in spite of last week. straddle or backspread is only logical position imho…………(needless to say im long but hoping to follow my own advice by end of day if implieds in aapl not too rich)

  7. Phil

    DIA and QQQQ puts, I’m almost there – today I’ll set some downside watch levels if TXN. CSX, XRX and UTX (already beats) trade down. Then we’ve got JNJ, STX and BAC and I guess we’ll have to give Bush a chance to save the market (although he is generally one of the biggest buzz-kills the market ever has!).

    CSX actually had surprising numbers from grain and ethanol shipments – it didn’t occur to me that’s a double win for them! It’s hard to deny the economy when the rails are doing well.

    ===================================================

    Thanks Gary! I always like to keep a little comedy on this side of market tragedies!

    ======================================================

    Yahoo – that’s a great article and makes me wwant to buy Yahoo at this depressed level. Of course they are going to have some problems switching millions of people to a new system but what strikes me is the fact that they are actually able to help their customers – something Google never does!

  8. Phil

    Apple – personally, I have enough calls to agressively short them at the bell as it won’t hurt me if they go up. This is usually smarter than hoping you’ve found a bottom!

  9. John

    Incredible, UA (Under Armour) plunged yesterday because of Barron’s article over weekend. . This morning it is upgraded. . Talk about games people play. Glad I didn’t buy any Puts yesterday.

    John

  10. Jacox Boy

    AAPL
    Phil,
    What are you thinking of as a stategy of shorting AAPL, as I also have several calls as well left from last weeks plays?
    JB

  11. digger

    Prof – We can kiss those HB puts goodbye.

  12. John

    Would it be safe to say the Nasdaq will want to test 2400 by this Friday?

  13. juliet

    John, Cramer had a phone interview with the ceo of UA on his mad money show last night and said “buy buy buy”.

    j

  14. michael

    phil – point noted on the aapl shorting. thnks

    jb – im interpreting phil comment to mean short at open into delta neutral backspread vs long calls. but im also mindful that one could see a first half hour news reaction. also with the lead prosecutor on aapl having quit its possible the successor attorneys will be glad to be able to say they met with jobs and have decided they have other cases needing their attention. (that is unless there boss is short aapl or in bed with the shorts……….not to get too conspriatorial as phil says)

  15. Phil

    I’m not jumping on Apple right away but I will take the Feb $85 puts as a momentum cover as I will get paid a lot more on the way down than I will lose on my calls at this point.

  16. karmcon

    You mean al GORE v. eGore :grin:

  17. nltd

    new post is up
    N

  18. Mary

    AAPL or does nothing get said for now and the cloud hangs over Jobs and company for the time being….

  19. Jacox Boy

    AAPL
    Nasdaq bounces off 2425, and AAPL is heading to yesterday’s 87.25. Good place for the FEB puts?
    It does not seem like there is any near term catylist for the stock to move up much. One could think that this rise is short covering. Just bought a few of the 85′s. Nas is also at yesterdays high.
    JB

  20. John

    TRIN and TICK,

    Anybody follow these? I enjoy reading them, 2 minutes ago the TRIN was at 1.13, and the TICK at around 800. Normally the bulls like to see a TRIN of 1.0 or less for some good volume buying. .

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