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Monday, May 20, 2024

Tumultuous Tuesday

Well, we have a real tempest in a teacup today!

Fed days are often stock market poison but, after 14 rounds of hikes slamming the markets, Rocky may finally be ready to come off the ropes…

Just like the final round in Rocky II (because in Rocky I we were all expecting him to win), it could go either way and we won’t know until 2:20 when the markets either turn up or down, likely reversing whatever they do prior to that time.

The Asian markets are up 100+ pts (as usual) while Europe is more worried about our Fed and is trading down slightly.

Oil is dropping just a bit as OPEC made an early announcement that they will not be cutting production (what a surprise, they will keep selling as much oil as possible for $67 a barrel – gee I’m so surprised). I can scare my little girl by sneaking up behind her 3 or 4 times and still get most of my shriek premium but by the 5th or 6th time, that premium really starts to diminish. OPEC has kids too and they know there is only so long that $25 per barrel will be paid to cover jitters before people realize the monsters in the closet may just be a pile of coats.

World jitters are certainly being reflected in the POG (price of gold) as it flew up to $570 in Dubai but don’t buy yet as the Europeans have brought it back down to $565. The raise will be up to the Americans this morning and I think they just might ahead of a State of the Union message that has people very nervous. Unless the President is willing to tell the people that we will have to suck it up and take some painful steps to get the country back on track (pause for laughter) then there is a serious danger that the world investors will turn their backs on whatever dog and pony show he does try to trot out.

If gold can retake $570 then our gold plays are on. ABX is already flying in the pre-market but you might be able to catch BVN first thing. NAK and MRB don’t really trade pre-market and NAK certainly has room to grow for the next 5 years or so. Add EGO as another little company that could but BVN and NAK are my first choices.

Earnings, a ton of economic reports, a Fed meeting and the State of the Union all in one day! Don’t forget that the reports we hear today are already in the hands of the Fed so the guessing game will begin early based on the PMI (which needs to stay above 60 but not too much) and the CPI (which has to beat a high 105 or retail will panic). The most imprortant report of the morning may be the ECI (employment cost index) as Greenspan worries about wage inflation above all other forms – so you can thank him for 5 years of 2% raises!


GOOG is attempting to jump up at Apple’s expense with a Napster deal challenging ITunes so I will be taking my call profits and running pre-earnings. I’d rather have the cash to jump in with momentum after earnings than to try to guess it now. The only Google I am holding into earnings is a spread of the March $460s, which I bought for $20.50 and the Feb $450s, which I sold for $17.50. My hope is that after expiration I am left with a time premium greater than $3 (I am assuming if we close at $460 my call will be worth at least $13 as I will owe $10 to my caller). If this works I will start looking for these but this one is an experiment.

CME did beat earnings, which is really amazing as estimates are raised almost daily. The big question is, will they challenge the NYMEX (now that they aren’t going to buy them) and begin trading energy? This could double again the CME and I don’t see any reason why not so expect that announcement to rocket the stock. Look for the stock to open way up, maybe $20 or so. If it keeps this level, then expect Google to be encouraged.

ELN came through with not so horrible losses, they can easily retake $16 today.

HMC had a significant beat and raised guidance 20% to boot! I don’t know how the options will react but this is a stock that gets little US activity and you may still be able to pick it up under the radar. We called the March $30s when they were .30 but I think they will remain a good deal under $1.

MO was a big disappointment and will weigh heavily on the Dow. They will be a great buy opportunity once they settle down but 6 months of Cramer pumping have left them far above the 200 dma of $69 so there is potentially a long way to fall.

CP had a decent earnings but so-so guidance. CSX has a long way to go up compared to other rails even though it just reported a 100% increase in annual revenues in a hurricane damaged year. It is the biggest and least likely to fly but, in a shortage, every car will go out full no matter what the management screws up!

VLO did beat earnings but not by a lot if you take out a $55M gain from an asset sale so it will all come down to projections which have to be very high indeed to satisfy the street. My bet does not look safe and I will take the opportunity of pre-conference jitters to get out of the put. With Valero coming in so well (expectations were incredible and they met them) we need to take a good look at the rest of the oil patch for pre-earnings opportunities.

DUK looks nice with earnings coming out tomorrow but they got a very poor reaction to the 11/2 earnings so I want to give myself another quarter with the July $27.50s for $2 (a .70 premium).

MUR’s sale may be over so, following the Valero Rule very closely, I will be taking the $60 calls for .90 knowing that this is a big gamble and I may be wiped out so just a tiny trade.

SYMC has earnings tonight and I like the risk/reward of the Jan $15 calls for $3.90 (a small .80 premium) . This company is way underpriced but it could still go lower as Microsoft continues to target them.


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