What the hell was that?

We had some very impressive gains on light volume and I felt like I was asleep at the wheel as the market was passing us by as we sat on a lot of covered positions and made little progress.  At least the June calls we are going to be moving our covers to went up nicely as well so we’ll be even more protected than we thought we would be next week (see how we can find a bright side!).  I’ve looked and I really can’t see any particular reason for the bounce other than, thankfully, the S&P chose not to fall below the March trend line, as noted by Trader Mike:

Well we weren’t caught completely off guard as our first quick play of the day was the QID $40 puts at .70, which finished the day at $1.45 so the day wasn’t a total loss.  We also got my long predicted test of Google $570 and we took our callers out at the dead bottom (but re-covered lower at the top) and our VLO calls finally came back, putting our spreads in the money and allowing us to get out of the ones that were still naked with a small profit. 

Our worst play of the day wound us up in the RIMM June $135 puts at $7.65 (we started with the $125 puts and got blown out and rolled up) as I just couldn’t buy into the excitement of the new Blackberry, which is pretty much the old Blackberry with a few improvements and is exciting to Blackberry users but certainly isn’t going to be an IPhone killer. 

The announcement from RIMM did have a huge positive impact on AAPL, who jumped $5 on the day as those investors also saw that the new "Bold" was certainly no IPhone killer.  RIMM is even putting up their own money to start a "Blackberry Partners Fund" to make sure no one thinks for a moment that every idea they have isn’t stolen from Steve Jobs.  Amazingly, this one-trick pony gained 7% on the day and added $6Bn in market cap, putting them at $79.9Bn, close to half of Apple’s market cap where the IPhone (RIMM’s one trick) is less than 1/5 of total revenues.  We’ll keep our money in Apple thank you!

FDX was indeed a great buy at the bottom this morning as we are less worried about their outlook than they are and oil was indeed kind enough to give us a little pullback on the day.  We took SLB June $90 puts and XOM $90 puts but were not very enthusiastic as we know they only ordered 23Mb of oil for May at the NYMEX so, unless demand is really off a cliff, we certainly have at least one inventory draw-down coming before the end of the month.

Financials came back strong today as well with a 1.7% gain, even as C fell back to $23.50, giving us cheap rolls down and nice, fresh entries.  So there were lots of things that LOOKED good today, including HPQ spending $13Bn to buy EDS but I still can’t reconcile a rally against $120+ oil ahead of what is probably going to be some very inflationary data this week so we remain cautious at the moment, despite evidence to the contrary…

CAVEAT EMPTOR - BUYER BEWARE!  This week brings retail reports….more on that later!

Monday’s Round-up!

Dow:  12,876,31 - up 130.43 points (+1.02)

S&P 500:  1,403.58 - up 15.30 points (+1.10%)

Nasdaq:  2488.50 - up 43.00 points (+1.76%)

Russell 2000:  733.23 - up 9.90 points (+1.83%)

The overall markets shrugged off a number of negative headlines today including

• High Oil Prices
• A huge earthquake in China
• A loss from Sprint Nextel (S)
• Plus a warning from Fedex (FDX) last Friday evening

Fedex was as low as $87.59 but managed to finish positive by days’ end, rising to $90.50 (+ $0.13). 

Despite relatively low volume and concerns over today’s action being a short-covering rally, the strength in the markets remained throughout the day.  This will be a very busy week with economic data and earnings reports, so we will soon find out if the strength will be maintained.

Earnings Reports

Tuesday:  Wal-Mart (WMT), Applied Materials (AMAT), Whole Foods (WFMI).

Wednesday:  Arcelor Mittal (MT), Diana Shipping (DSX), Deere (DE), Freddie Mac (FRE), Macy’s (M), Sony (SNE), Ctrip.com (CTRP), Jack In The Box (JBX), Agilent (A), PetsMart (PETM).

Thursday:  Blackstone (BX), Blockbuster (BBI), Urban Outfitters (URBN), Focus Media (FMCN), Hewlett-Packard (HPQ), Kohl’s (KSS), Nordstrom (JWN), Salesforce.com (CRM), Thornburg Mortgage (TMA), JC Penney (JCP).

Friday:  Abercrombie & Fitch (ANF).

In techland, Research In Motion (RIMM) announced it would launch the new Blackberry Bold later this summer.  This device is expected to lightly compete with Apple’s iPhone.  RIMM’s shares gapped higher at the market open and rose throughout the day.  RIMM finished higher by $9.20 today, rising to a new 52-week high of $141.97 (+6.93%). 

The new Blackberry BOLD is expected to have much improved screen resolution compared to the Curve model, dual band Wi-Fi and GPS capabilities (look out Garmin!).  AT&T will be the exclusive supplier since its network is the only nationwide one compatible with the new Bold handset.  Analysts expect to sell 200,000 to 400,000 handsets.

Apple (AAPL) also rose by $4.71 to finish at $188.16 (+2.57%).  Both Apple and Research In Motion continue to stay above their respective 5-day EMAs.  Apple is starting to look a little toppy but the bulls still remain in control of this high-flyin’ stock.

In other positive news today, there were more reports that the iPhone had sold out in online stores inside the US and the UK.  So, the ‘lack of demand’ story today is one we can gloss past…

The S&P 500 held a critical support level today, its 20-day EMA, and also regained its 5-day EMA (albeit barely).  For now, the up trend that was created with the latest March low is still intact. The 1,400 to 1,420 area remains overhead resistance.

Today, the Dow crept back above its 20-day EMA and is peeking over its 5-day EMA.  Again, the up trend that developed since late March is still intact.  Volume was on the light side and is a bit worrisome.

The RIMM and AAPL Composite, oops—the Nasdaq, roared higher today and reclaimed its 5-day EMA.  The 2,500 level continues to provide resistance for now.

While today was a great day to be a bull, the rest of the week offers lots of opportunities for the bears to exert influence.  Tuesday at 8:30am EDT, we will receive the Retail Sales report.  Briefing.com is expecting 0.50%, while analysts’ consensus has the number arriving at 0.20%.  The discrepancy is evidence of the ’guesswork’ in the mainstream media.  Wal-Mart also reports Tuesday.  Many expect WMT to beat their estimates and even raise guidance as the consumer continues to be strapped for cash and hence frequent discount stores like Walmart.  Finally, we rounded out our last two week’s of bearish trades with a bullish position this week, so whichever way the market goes, we should be in good shape!

Stock & Option Trades

Oh it’s going to be an exciting week!

We have a ton of economic data and still not too shabby with earnings reports that can move the market and the Fed is off their quite period so we can expect a lot of Fedspeak this week along with the usual inane "Sell in May, go away" simplifications that prove that the average analyst has more in common with my kindergartener than with Milton Friedman or Warren Buffett.  Whenever a complex economic situation is shoehorned by the media into a catch rhyme - you should probably be concerned that you may not be getting the best advice!

Yes, the statistics are there and they are very real but every year is surprisingly different and the globalization and computerization of the markets no longer favor the 70 year-old habit of fund managers shutting down for the summer and driving the Yacht to he Hamptons while leaving a staff of junior traders to trade lightly.  Of course there is nothing Wall Street tycoons like better than herding the sheep in and out of the markets at pre-determined times of year, it’s so much easier to make money off them that way…

So now we have the MSM attempting to push all the lemming out of stock in May so the people who pay for the advertising can scoop up the shares on the cheap and turn in another fabulous year so the pundits can come on TV in the fall and say BUYBUYBUY as they herd you back into the markets in time for their fund manager pals to cash out so those guys can then show up on TV and tell you how much better off you would have been if you had put your money in their fund this year.

Let’s see:  Last May 1 - Dow 13,136, last November 1 - Dow 13,930, this May 1 - 13,058.  Well, that didn’t work did it?  How about 2006?  May 1 was 11,343 and Nov 1 was 12,031 - would have sucked to miss that one!  2005?  May 2 was 10,251, Nov 1 was 10,406 - nope again.  2004?  May 3rd was 10,314, Nov 1 was 10,054 - hey, found one!  In 2003 the Dow gained 1,300 points, and 2001, and 2002 were both losers but that’s pretty much because someone blew up the World Trade Center in September 2001, not because the rhyme works.  So in the past 5 Mays, only 1 time would this have been good advice yet we are being besieged by the media with this dreck as if they were somehow trying to help you make investment decisions.

I point this out now as it’s such a blatant, obvious abuse of their position and such a totaly harmful disservice to you that hopefully you will make a mental note of which of these people are so comfortable handing out totally inaccurate, damaging advice so that the next time they "try to help you" you will be a little better prepared to see what useless, self-serving jerks they really are. 

Speaking of pundits - our favorite analyst, Meredith Whitney, is back on TV "warning" everyone to get out of C again!  Thank you Ms. Whitney, that should knock out our callers right ahead of expiration with your usual exquisite timing (coincidence I’m sure!) and will give our new members another excellent entry opportunity ahead of the next time the facts prove you crushingly wrong.  We already have the Jan $20s and $25s and this will be a great opportunity to roll out $25s down to the $20s and I do like those as a new position at around $5, but let’s let Ms. Whitney have her day and we’ll sell the June $25s to cover at .80, a nice 16% return on our $5 investment over 5 weeks!

Aside from expirations we have a very data-heavy week and here’s the Briefing.com calendar:

So lots of things to worry about along with earnings from lots of heavy hitters we can discuss this evening.  This morning’s group was a sea of red (misses) including BLG, CHTR, CDE, CRYP, DTG, EVR, HOC, IMAX, IPSU (massive miss!), MBI, RDN, TTI and XMSR.  We are waiting for SIR but they probably missed too.

Asia was mixed (big earthquake in China) and Europe has holidays so not much to be read from action over there and I’m behind schedule so let’s just watch and wait today as I see no pressing reason to put on our rally caps.  RIMM is all excited over the new Blackberry and AAPL is all excited that it does virtually nothing to challenge the IPhone so it’s a win-win for Apple and RIMM.  I am going to roll my RIMM puts higher and only cover if I have to.

Platinum fell $40 this morning (5%) but Gold only dropped $4 (.5%) so it will be interesting to watch that pair.  Most likely the dollar is on the march again and we may get some oil relief which should be good for our VLO calls (finally!).

Be careful out there!