What a fantastic day!

Another one we hit on the head as the covers we took ahead of the fed were bought back for great discounts in the morning and then the market was kind enough to rocket straight up all morning, allowing us a nice opportunity to re-cover (just 1/2 this time) even higher than where we fell off yesterday.  It just doesn’t get any better than that!

This has been a truly fantastic week, even our oil puts finally paid off and we finished above the levels and my EOD comment to members bears repeating here: ‘Overall I’m up to maybe 1/3 invested as I’ve made an effort to invest more this month ahead of the rally.  We’re heading up so fast I’m not too keen on chasing things until we’re safely over 13,300.  As usual, I would feel much better seeing a healthy pullback after this almost uninterrupted 10% run off the March bottom.  200 DMA resistance will be tested at Dow 13,053 but don’t forget it’s not the same Dow mix that created that line so it’s meaningless (take that TA slaves!).’ 

"We’ll watch the 200 dma on the S&P at 1,433 and the Nas at 2,524 and the NYSE at 9,480 with much more interest.  Transports just shattered the 200 dma at 2,732 with a 96 point move today and the RUT (753) and the SOX (423) have a ways to go.  Once we hang out above those numbers for a while, then we can talk about deploying another 30%."

We are on quite a roll, we even covered our June DIA puts at 11:52 with the current $128 puts for a quick 30% and $1.50 that will pay for us to roll up $3 so we’re good on our protection all the way to 13,300!  My big mistake of the day was 2 attempts to take puts on Google, the morning attempt gave us an easy escape but our EOD cover in the DTP got hit hard but it did allow us to sleep well after rolling our callers up to the $580s, sacrificing a lot of protection in order to gather more premium.

We also took the money and ran on the May oil puts and covered our Junes, looking for a bounce into the weekend - we even bought VLO calls of all things!  Overall the energy sector was off 2.2%, which is exactly a 20% bounce on the 2.5% rule so not bullish at all but since when has reality ever bothered the oil bulls so we look forward to some shenanigans that will give us another chance to go short again.  As I said in comments, you can superimpose the Housing sector from June of 2006 over the Energy sector now and you’ll be able to see the future.

Financials were up huge today (3.9%) with regional banks hitting the 5% rule at 5.1% overall.  The CRB looks well on it’s way back to my 370 target.  I missed it by 7 points after my original March prediction but I think we’ll get them this time!  The dollar gained a whole point today and just a little more and we’re through 73.5, on our way to 76 which, if we break through, will blow the commodities right through 370 to retest 350 (back at ‘06 highs).  That could mean $70 oil!

It was very, very encouraging to see money fly out of commodities and go straight into tech, it’s exactly the rotation we’ve been looking for but let’s make sure we get through tomorrow’s jobs data as I am very concerned with the string of poor economic data the market has been ignoring this week including the worst auto sales numbers since the Bush 1 recession.

Hi All - Temporarily, let’s go to the old backup site for new articles:  http://philsbackupsite.wordpress.com.   Thanks!

XOM missed!

I cannot tell you how happy I am about this because it means the world still makes sense, fundamentals ARE real and you can’t just make a stock go higher by mindlessly pumping money into it.  Profits were, of course, monstrous at $10.9Bn, but costs are out of control and they missed by .08 out of $2.12 expected despite Q1 oil averaging 10% more than Q4, when they made $11.7Bn on a 30% boost in oil prices from the previous quarter.

To be fair, XOM did spend a whole extra $1.2Bn on capital and exploration costs than last year, this is very nice of them as we (the consumers) gave them $116Bn (up $32Bn), which they claim they use to look for oil while shareholders bought $92Bn worth of XOM stock in Q1, expecting them to use some of their money to make those shares more valuable in the future.  ""Higher crude oil and natural gas realizations, driven by record worldwide crude oil prices, were partly offset by lower refining and chemical margins, lower production volumes and higher operating costs," Exxon Mobil said."

So they took in $32Bn more than Q1 ‘07 (up 38%) and made just $1.7Bn more (18%), sounds like diminishing returns are kicking in pretty hard at XOM!  Production was 5.6% LESS than last year and one of the reasons they list is (and I kid you not!) "OPEC quota effects."  That’s right, XOM is effectively a member of OPEC and abides by their rules and has cut off your oil supply in order to support ridiculous prices.  Isn’t unregulated capitalism wonderful?

In fact, upstream earnings from the exploration and production unti were UP $2.7Bn to $8.8Bn (up 30%), it’s their single largest profit center YET THEY REFUSE TO EXPLORE AND PRODUCE IN ORDER TO JACK UP PRICES! 

Another stupid, non-productive investment made by XOM was, as usual, the purchase of their own stock.  In order to keep up the pretense that they aren’t totally incompetent and driving a once-great American coroporation into the ground, the board repurchased $8Bn worth of their own stock in Q1 alone!  That’s out of $92Bn worth of total transactions at an average cost of $88 a share, close to 1/10th of all transactions!  What will happen to this company when they run out of money to buy back stock?   They spent $32Bn on their own stock last year as well, jacking the price up from $75 to $95 while not looking for oil. 

I’m not the only one fed up with this nonsense - Rockefeller family members, the oldest continuous shareholders in Exxon, added their names to a shareholder resolution to separate the chief executive and chairman roles at Exxon, and called on other shareholders to join them. While family members praised Rex W. Tillerson, they concluded that an independent board chair remains "key to Exxon Mobil’s future."

OK, enough about Exxon, they are done and I wish I had kept those damn puts but we still have our XLE puts that should do quite nicely as well as our CVX puts, which may be a goldmine when they report thanks to GS herding their sheep into the stock all week as we shorted and shorted them! 

Asia was mainly down this morning as India faces a labor shortage that is slowing the economy and the BOJ painted a gloomy picture for the year’s outlook.  Asia may sell in May and go away, leaving a lot of money to fly into the US markets this month.  Europe celebrated May day by being mainly closed as workers staged protests against rising food and energy prices leading to riots in Germany and Turkey.  Viva la revolution I say!

The British Airways/CAL talks that we bought CAL on the rumor of are now official but we took a double and ran on our June play yesterday.  The BOE says that banks are overstating their losess.  As they say in the Rocky Horror Show:  No sh*t Sherlock!  Maybe some clever government official in this country will figure this out as well….  ROFL!  You didn’t think I was serious did you?  "Clever" and "government official" together?  Not in this administration brother!

XOM and CVX will drag down the Dow so ignore the headlines and let’s concentrate on the individual components and the transports, who should do quite well.  We still want to see oil get down below $110 but not likely this week (and boy are they in trouble if it does!).  LVS had a big disappointment in Macau, that will hurt WYNN as well and, as usual - we’ll be looking for tech leadership for positive signs of rotation.

Dont’ panic, keep stops on the callers because I’m a buyer right now IF we can hold our levels!