Archive for February, 2006

Terrible Tuesday Wrap Up

Wowie! What a day!

I am very sorry that I was right to be bearish but I hope my sour mood saved you some money…

As I’m sure you could guess, I could care less what happened to the markets today once I cashed out my Google puts at $27 and $24 this morning (250%)! I came so close to selling them right before the drop as they bumped up to $397 but, lucky for me, it pulled back sharply and gave me the courage to hang on for the 10:30 disaster. It was exactly what I expected, a bad word out of the CFO’s mouth was all it took to send it spiraling…

http://finance.yahoo.com/q/bc?s=GOOG&t=1d

It was a very weird day with Oil up but oil stocks down, commodities up and commodity stocks flat, and everything else in the toilet. The housing number was in line and the GDP seemed OK so I guess we can blame the whole thing on one stock? We’ll see tomorrow but let’s be super careful until the market shakes this off.

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Apple showed a Mac Mini thing and a boom box that didn’t wow the masses and the stock got clobbered for it, down 3.5%! I don’t know what happened to MSFT’s announcement, maybe it’s Thursday.

Let’s see who didn’t lose today…

CY held flat – Man I love that stock! This is a real buy if tomorrow looks like a recovery as SPWR went up another 1.4% so CY needs to catch up. I like the $17.50s for .80 at the moment.

HAL had exactly the day we expected on that news, opened up $1, then plunged. I was way too wrapped up in Google to take advantage of it.

INTC did not go down! That’s a big sign so I’m getting the Jan $20s for $2.65 and I will sell the Apr $22.50s when they get to .50.

NT was flat – a good sign.

NOBL dropped right to the 5% rule, those CEO resignations are murder!

SPLS actually went up 6% today! Those earnings were better than I thought… The Apr $22.50s shot up to $2.15, almost a daily double.

CMCSA held up.

Today CSCO broke $20!!! I think they were trying to sneak it in when nobody would notice. Now that the cat’s out of the bag I like the Jul $20s for $1.40 to take a look at…
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Telling Tuesday

Europe took a big hit this morning on rising unemployment and Asia looks flat so it will be a tough road up for our markets this morning.

There is snow on the ground in NY and it’s chilly so oil may hold steady as bull traders hope the groundhog was right but inventories are tomorrow, with Iran in the background we may see a huge reaction to tomorrow’s report. OPEC meets next week so that will be interesting as well.

Any kind of up day today and I go back to bull mode (and cover my ass on those Google puts!).

Google may be a market mover today as the CFO speaks at a conference this morning (after the Cramer super pump last night). He will also be speaking at another conference on Thursday but the Thursday analyst meeting will be the finale. Microsoft rolls out the next big thing and Apple has something to announce as well so there is the outside possibility of a big tech boom today.

Today is data day with the GDP Chain Deflator (Greenspan’s favorite indicator) expected to come in at 3%, the GDP itself which better make 1.5% or panic may ensue, Chicago PMI which needs to stay over 58, Existing Home Sales (at 10) will really kill the builders if lower than 6.5M and the Consumer Confidence which has possibly too high expectations of 105.

Home foreclosures are up 45% from last year with 103,540 homes in foreclosure in January alone, this is up 27% from December. Rising rates will exacerbate this trend as ARMs are already up 1.3% from last year.

Last week, when I took a cash position, I said that if this is a real rally we won’t be missing anything – I’m glad I reread that because I was right… If we are going up here, we are going way up and we can make our picks but if the market snaps off the resistance it’s sitting on, it could get ugly.

Let’s hope Apple and Microsoft really have something good to say but keep in mind that they may both have a product aimed at each other, doing little good for either company.

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

A WMT spokesman made a shocking statement on CNBC yesterday as he was defending the company’s questionable health care practices. He said that 25,000 people applied for 1,200 positions at a California Wal-Mart…
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Monday Wrap-Up

Ouch!

A good day on the whole but my damn Google puts closed down 20%. I guess I will be gutting this one out through next week but I really believe there is no possible way they will turn in a $1.99 quarter after last quarter’s $1.54 and Q1 ’05 of just $1.29. The Google bulls will have you believe that, even though they missed last quarter by 12% and even though their best quarter last year was that $1.54 (up just .25 from worst quarter), that they will suddenly have a 30% jump in profits during this one.

OK, moving on from that silliness…

Well we got everything I wished for when I was in rally mode: The Nasdaq did take the lead and broke the 2,300 mark. The Dow almost broke 11,100 but looks safely above 11,000 and the S&P is just a hair under 1,300.

The rally was especially strong (and indicative of my Global Rotation theory) as it clearly was held today without any of the commodity players participating. Even homebuilders sat this one out so you can tell how well the rest of the market must be doing!

Oil crashed all the way down to $61 and continued down in the overnights (currently at $60.76, where we made our short plays last week). Gold stocks tanked as expected with NEM dropping 6% and gold finishing at $556. I stand by my statement that we need $570 to move again.

So why aren’t I happy? I don’t know, something is bothering me about the way this is forming up. Maybe the fact that we never had a big sell-off to test the lows or maybe it’s the way the Dow pulled back from 11,200 the way a vampire pulls back from a cross…

I need confirmation before I can feel comfortable with overnight positions again. Sure it would be nice if Iran resolves itself or if terrorists stop attacking oil production or if bird flu doesn’t wipe out more people than the black plague but we can’t have everything can we?

So I find myself in the very unusual position of being more bearish than most people this week and I’m not going to excuse it or try to justify it, just want you to know so you can see where I’m coming from.

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

Obviously everything I recommended worked on a day like today (other…
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Monday Morning

Asia reacted well to a bomb free close to the Olympics and easing oil tensions, their markets are up across the board. Europe seems kind of non-plussed about the whole thing so far today, probably because oil is holding $62 in early trading. Last year the Dow hit 10,984.46 in March and promptly fell off a cliff to just 10,000 in April (remember how fed up you were?) before settling down in a channel between 10,250 and 10,750 through November. Much as I don’t like the Dow, by the way, its easier to talk about because everyone can relate to the numbers as they are followed so closely and it’s not entirely disconnected from the other indices. Since mid November, 10,700 has become more of a floor but 11,100 is looking like a ceiling. We established a top in early ’04 as we did last year so, without a major breakout, we can expect traders to treat this as more of the same. A failure to break 11,200 by mid March will likely lead to a catastrophic sell-off so lets be prepared! I am not saying it will crash, I am just saying it will if we don’t get a real rally soon (subtle difference). There would be no logical reason for oil to fall below $62 today, other than general sentiment moving towards the outlook that this is all a farce engineered by the oil producing nations (we are one too) to prop up the price of oil against the largest oversupply of crude in 20 years. One could wonder how oil can go up 5% in one week but XOM goes down .13 but that kind of thinking can only confuse us so we’ll just move on for the moment. This also will go down as the biggest crisis, measured in oil prices, that had the least movement in the price of gold (+2.5%). So this week we can expect more of the same and, you’ve guessed it, I am advocating a cash position in a daytrading mode. We get new home sales today and tomorrow we have a ton of inflation gauges but the big deals are next week when Iran heads into its UN deadline so this week should be iffy at best. The best mover should be googol, coming into its (I’m predicting disastrous) analyst conference on Thursday but we should probably wait until Friday…
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GOOG: To spread or not to spread?

I worked my way into a heavy helping of GOOG $370 puts today as I am more and more convinced that, not only has the current run-up been totally manipulated, but that the manipulators are running out of ammo and time.

As the stock languished around $390 I was strongly considering the spread of the $410s for $5.20 and the $470 puts for $6.60 as it does seem unlikely that the stock will avoid a $20 move in one direction or the other for the rest of the month.

So as Google touched $388 around 11am, I racked up order after order of the $370 puts, averaging around $6.50 for the bunch but then I waited to see if the calls would come down a bit and as they did and I sat there with my finger on the buy trigger I JUST COULDN’T DO IT!

I started thinking, “What the hell am I doing?” Do I really believe this stock will pop back up to $420+ in the next few weeks? I just don’t see it. I looked on the Yahoo Google Message board and found no intelligent support for a price rise. Checking the technicals, the stock looks pretty overbought at the moment but it was the fundamentals that killed the trade.

Google is a great company with a great idea and a great product but that certainly hasn’t been enough for Yahoo, who beat them by 10 years nor did it stop Microsoft (who have 2Bn more daily users than Google) from languishing at 1/2 their peaks for the past 5 years.

Heading into Thursday’s analyst meeting Google will need to justify a $388 (at the moment) price tag. The presumption in the 75x p/e is that the company will earn close to $9 a share this year, bringing the year end ratio down to about 32. There are 30 analysts covering this stock and only 1 has a sell rating on the stock while just 8 have a hold. The other 21 analysts are all currently telling people to buy the stock.

$9 per share is more than 160% of this 2005′s earnings but revenue estimates by the same analysts are for only $6.5Bn in revenues, just $400M (6%) more than 2005. You can scratch your head all day and this one still won’t make any sense!

http://finance.yahoo.com/q/ae?s=GOOG

To get from $3Bn (2004) to $6Bn (2005)…
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Weekly Wrap-Up

I am so glad we stayed out of that one!

At least the markets continued to hold on, with the Nasdaq and S&P coming back strong in the afternoon. The best thing about today is that the markets seem to be at that fear saturation level we talked about where even all this horrible news didn’t keep them down.

Of course most of the market gains came from the oil sector and the commodities exploded in general (hmm, who said that would happen Thursday morning?) so it’s nothing to get too excited about but we’ll take it.

We had to call off the oil trades and I’m very glad we did as they were beyond tricky to make money on – never buy into a strong open!

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

Since we are supposed to be almost entirely in cash at the moment, except for longs that are working well (like my Toyotas, CBHs, Apples, CYs, YRCWs and Pfizers) or spreads we are waiting on, I’m not going to do a big review this week.

I grabbed the BTUs I missed yesterday for the price I wanted yesterday ($1.50) because the oil action did not look very sincere. If all they could get out of today’s events was less than $63, then I think we have a huge sell-off if the weekend turns out calm.

I am holding the Golds, of course, as follows:
GG (+3.25%) $22.50s at $3.40
ABX (+2.4%) $30s at .30
BVN (+4.1%) $30s at .55 (up 30% today)
NAK (+2.7%) $6.08
MRB (+10%) $3.12

PD and the miners also had a heck of a day but they’ve been too erratic for my tastes.

RIMM and PALM both had wild days but, as I thought, no resolution. I did successfully short RIMM at $78 mid-day as the run-up was just way too overdone for what little good news they got.
http://finance.yahoo.com/q/bc?s=RIMM&t=1d

Speaking of overdone, Apple’s last 2 days are exactly the reason I like to sell against my long positions! http://finance.yahoo.com/q/bc?s=AAPL&t=5d&l=on&z=m&q=l&c=

BF looks good for next week, it’s held up well the last 2 days.

CME continues to look very good while Google continues to show weakness. GOOG has analyst day next week and they will be facing a hostile crowd who wrote “GOOG” on their fingers with permanent markers…

With oil up $3 the SU $75 puts are only down…
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Friday Update

Holy Crap, something did blow up!!!

Don’t buy oils at the open! Too risky as it was an attempt.

Wait until oil breaks $62, if it does, otherwise just stay away.

Trade very, very carefully if at all as this is starting to look like a James Bond plot to spike the price of global oil.

Can HAL really be worth $72 if they have to start paying hazard rates all over the Middle East? Would it really help XOM if 10% of their capacity is actually blown off-line?

Everything I hoped to gain for the day on oil has already been hit in pre-market, I don’t like this one bit…





Friday Morning

Asia is flat again and Europe is up but not too much so money should find its way over here today. We will have to see if this rally is oil sector driven (therefore a negative) or if it has real legs but I urge caution trading today as the markets look very weak at this height.

The oil manipulations that we discussed at length in yesterday’s comments have borne fruit and driven prices up $1 to $61.73 at Europe’s open. We will have a good test of the trader’s resolve today but their timing is good as people tend to go long on oil over the weekend as it is much more likely that something will blow up vs. someone perfecting cold fusion. In fact, if just one thing does blow up we can get right back to $65 so be prepared!

Also helping oil and driving gold up as well is news that Iraq is now under a daytime curfew (yes, we had to shut down the whole country!). This come after 100 people died just yesterday in Shiite and Sunni clashes. This situation is very, very, very bad (did I mention how very bad it was?). We flat out cannot control a civil war if it breaks out.

Iraq and Nigeria (where they are also rioting) produce 5M barrels of oil a day (and don’t forget Chavez with 2M barrels) and this is just a little too much uncertainty to absorb. I will not go into the fascinating timing that coincides with a mild inventory report (1st in a month) but let’s just say I will be more than a little suspicious if oil stocks sell off into this news.

Buy gold as a hedge. You can buy GLD, which is an index on the actual metal or one of the stocks we like which are 10%+ off their highs of late January. No shorting oil in this environment and no owning stocks either!!! You really, really need to be mainly in cash and taking profits quickly on trades until this particular situation calms down.

Get in, make money, get out. Wash, rinse, repeat… I would rather miss half the rally by not holding overnight than risk the volatility I see ahead. I think the indexes are rangebound at this point anyway, probably until good news from the Fed or March 20th when the Euro oil trading…
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Thursday Wrap-Up

Not a good day today at all!

The markets are holding on to key levels but it’s more of an Indiana Jones holding on to a cliff with snakes waiting for him at the bottom kind of holding, which is not the ideal kind if you are Indiana but it sure is fun to watch.

Great call to stay on the sidelines today (pat pat pat) as well as taking it off the table yesterday. I don’t know if you listen to me when I say these things but at least I listen to myself. I didn’t listen to myself on TOL because I held the silly March calls through the afternoon and lost half of my 30% gain. Now I’m only up 15% in one day and I’m pissed because I was a greedy idiot instead of just being proud of the profit. Of course, the Apr $35s held and increased their gains, although they were up more as well but nothing to kick yourself over. This goes back to a major premise of this column which is: Do as I say, not as I do – I tend to take risks more often than most people should!

Read this morning’s comment section to see how oil has been forced up today. This is just about the last move left in the trader’s bag of tricks as barrels are now laying right on the 200 dma of $61. A downward move from here could be severe.

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

Not many of our trade watches would have been worth it today.

VIA gave us the Aug $45s for $1.10 but the recovery was so anemic I’m not sure I want them!

GOOG went up so much I had to take the $370 puts for $10 right at the close. After a $30 (8%) move in 5 days, I’m hoping for a slight pullback tomorrow.

ABX went the complete opposite way due to a guidance warning that expenses are increasing. This hit the whole industry but ABX has a unique situation in Chile working on glaciers with environmentalists staring over their shoulders that may not be repeated among their peers.

I took a small amount of the GG Apr $22.50s for $3.30 but I’m waiting before committing.

OWENQ got away from me with a 26% gain today – oh well…

WMT also took off but not before yielding the Jan ’08 $42.50s
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Thursday Thoughts

Asia is up to its old tricks again with the Nikkei moving up another 314 pts and the Hang Seng rising 176 pts. placing the whole continent on a confirmed uptrend. Hong Kong’s GDP grew 7.3% last year and the province had a budget surplus, perhaps we should elect the Chinese to run our government…

Europe is not sure what to make of this and its markets are all a little off but they are pausing at all-time highs. The only country not in danger of hitting an all-time high (by a long shot) is US!

Oil prices should trade flat into inventories at 10:30 where a 2M barrel build is expected and anything under will rally the sector.

Commodities should hold up in general on robust China numbers and increasing confidence in our own GDP for 2006. If the builders continue to run up, commodities are sure to follow!

Jobless claims were a little light today, indicating a tight labor market and the dollar is dropping a bit so we may be looking directionless unless oil heads back below $60 or one of the Fed Governors drops a hint. Tomorrow is a big day with durable goods orders in the morning.

No trades today. I like keeping it off the table but here are ones I’m watching if we turn up.

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

VIA leads today’s earnings reporters with another one of my beloved “Sounds bad but is actually good” reports. The company is reporting a 70% drop in earnings when there is actually a 25% gain because the drop includes (at least) $154M in break-up expenses. Unfortunately, this stock is too widely held by people who won’t be fooled by this so I don’t think the headline will scare too many people off. The only underperforming division was movies and no one takes that too seriously. This is a very powerful company that came away clean from a huge break-up so I like the Aug $45s for $1.25 as a cheap way to get a look at the company in its new configuration.

I don’t think much of Sprint adding 2M customers last year as there seems to have been over 20M new US customers and only 5 carriers so 2M is not very impressive. Sprint has double the “churn” (loss of customer) rate of VZ and that is really going to kill them as we hit saturation but…
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The PhilStockWorld com LIVE Weekly Webinar - 07-17-19

For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here.

Major Topics:

00:02:11 Indexes Charts
00:02:59 Energy Charts
00:04:28 S&P500
00:18:48 Money Talk Portfolio
00:31:25 7 Steps to Consistently Making 30-40% Annual Returns
00:35:41 Top Trades
00:45:33 Long Term Portfolio
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Free eBook - "My Top Strategies for 2017"

 

 

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In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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