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Saturday, April 20, 2024

Testy Tuesday Morning

Another day where we will be testing our levels. On the whole, we are getting the exact kind of consolidation we were looking for in mid-August but without the sell-off. I would have rather had the sell-off so I could be more comfortable buying calls but if it does break up we’ll take it! Asia was mixed, still hammered by falling commodity stocks with steel making a downside move today. Europe is flat this morning I am very uncomfortable with the indices not hitting our numbers yesterday but I’m encouraged by the movement on the SOX and the Transports so it’s going to be another wait and see sort of day. http://stockcharts.com/webcgi/perf.html?$sox,$tranq Today we will only look to the upside; anything down will be a bad sign as we need a change in leadership to overcome the commodity sell-off. Let’s look for Dow 11,400, S&P 1,300 and Nasdaq 2,175. Both the Nasdaq and the NYSE will set direction for today but watch the NYSE very closely as it tested the 50 dma of 8,222 yesterday and needs to make a move towards 8,300 today. Oil took a nice bounce off $65 yesterday and traders were determined to test $66, which they did European trading. The test did not go well so we may be testing $65 on the downside in US trading today. I think we would make real progress in this country if we forced the same analysts that predicted $100 oil to come back on TV when oil is plunging and tell us what the heck they were thinking at the time (it was only 3 weeks ago, surely they remember!). Instead the oil pumpers rode off into the sunset and now we have a whole new batch of geniuses coming on TV telling us how the commodities markets are “clearly overbought” and now they take turns coming up with ridiculously low targets, some down to $30 a barrel… I suppose we can blame CNBC et al for lacking any editorial oversight, this is epitomized by Cramer yesterday telling viewers that CVX is far from a bottom at $62. In his August 7th show, with CVX at $67 he recommended BHI and Chevron as featured picks. http://seekingalpha.com/article/15127 I don’t want to pick on Cramer as I love the guy but this is the problem with all analysts in a nutshell, there is a lack of accountability – even when it’s the same guy just 30 days apart. When I have a TV show, I promise to have a big board behind me with all my picks so you can track my performance – it’s only fair to you! Kudos to Ben Dell of Sanford Bernstein who is on CNBC today trying to explain to the morning crew that we do, in fact, have plenty of oil and our inventories are very close to full. What’s awful is how shocked the “journalists” are at this stunning revelation (which I have been posting evidence of for six months, but no one interviews me). Gold will follow oil and both will move against the dollar, which is still looking good depending on this week’s treasury auctions. Expect gold bugs to jump on the trade deficit today (like it ever looks good) but expect the markets in general to have a good reaction to the retail numbers that come out a nine this morning. There was a huge effort in Asia and Europe to get gold back over $600 but without support from US traders this effort may be doomed. Also, we are just 10 days away from the deadline for CBs to sell their gold quotas for the year and all it takes is for one Bank to hit the sell button to knock the market down another $20. Tomorrow night we get consumer confidence, this is a survey taken on Sunday and with gas prices falling we may get a good number this month. Thursday we get more retail numbers and Friday is the CPI. Depending on the timing of the numbers gathered, we may get some huge improvements reflected in August. I must not be the only person who sees this so sideways is good. Perhaps the reason we are not going down is because there is no more down to go… ===================================== I am full of cautious optimism today but I’m not too proud to turn tail and run if we break our downside technicals. Today is a good day to reflect on some of our retail laggards and see if we have an opportunity to buy them cheap or if I was just wrong on the pick: Not entering any calls unless we make our positives and, of course, watch Apple, GE, TXN, MSFT and now GOOG to get an indication of market sentiment. BBY may give us a huge opportunity today as they sell off after an earnings beat because they didn’t raise guidance. Assuming it hangs around the 50 dma of $47.23, I want to pick up the Oct $47.50s for $1.50 or less. COH is a charter member of the Consolation Team and the Oct $32.50s have gone back to where we picked them at .80 last week (they were up 40% on Friday). I don’t think people understand how COST makes money. We did a whole post on this before but the summary is falling gas prices make them millions. Our Oct $50s are $1.05 (up 40%) but now I want to hold them through earnings with the Jan $52.50s for $1.55 as well. DIS does not sell a lot of stuff but a family vacation qualifies as a Consolation Prize. The Oct $30s are back to .65 (down a nickel) as the stock takes its time consolidating below the $30 line: http://stockcharts.com/gallery/?dis GE sells stuff – the Oct $35s are still .35, up just 40% from our August pick. JNJ Oct $65s were our bad play of the week but are back to .80, down just a dime and, heaven help me, I like them again! Imagine a rubber band between MOT and NOK (rumor has it they serve a similar market). The NOK Oct $20s are just .60: http://finance.yahoo.com/q/bc?s=NOK&t=3m&l=on&z=m&q=l&c=mot I still like RSTO at $7.04, just 15% up from our August pick. I would have liked to see SNE come down a bit more but I need to take a small entry position if it holds $42. Jan $45s are $1.75 but I fully expect to buy my next round for $1, this is just a protective play in case it pops early. STX had a nice pullback and we can go back to the well a third time on the Mar $22.50s for $1.70 but let’s get out/don’t buy if the stock slips under $20. The SHLD calls are just too pricey but TGT Oct $52.50s are just $1 as everyone expects a pullback at this point (the 200 dma is $51.25). This is a profit roll but as we are up 80% on the Oct $50s at $2.50 and up 115% on the Oct $47.50s at $4.30. Absolutely take the $3.80 profit off the table and trade into the $52.50s with a stop at .50, preserving a double on the whole trade. TIF took off yesterday, this is another Consolation Prize Team member and the Jan $35s are just $1, the same price we bought them for last time we made 70%! Someone has to ship all these goodies and the UPS Jan $75s are $2 and give us a good shot at seeing nice retail numbers. I was a little early on WSM when we took the Sept $30s for .25 as I believe the sell-off was unjustified for a company which (aside from Pottery Barn) qualifies as part of our Consolation Prize team (http://usmarket.seekingalpha.com/article/15741). We made our double early but it pulled back last week, with the call just barely getting back to .50 on yesterday’s 3% jump. I’m not comfortable with the risk on the Oct $30s for $1.15 but I’m happy to roll my profits into the Oct $32.50s for .25.

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