Finally Friday

Asian markets took a dive today but the European markets seem to be shrugging off continuing high oil prices and remaining relatively flat. Now that the Japan Fed is heading into a tightening cycle, their markets may not look as attractive. It will take several years to wean that economy off of 0% interest rates! This is not actually good for us though as clever money people in Asia have been borrowing from Japan and buying US notes and pocketing the difference. While it seems like a no brainer, it’s a tricky game due to currency fluctuations (if the dollar drops, you lose as you have to pay back yen) so this game will quickly come to an end as rates go up in the US. This will push up our long and short rates as money flows out of the system and will pressure the housing market further and may force our Fed to tighten more than people are currently thinking in order to maintain foreign interest in our notes (we are running a deficit that must be covered every month). Oil in Europe is over $64 for Brent Crude, which usually runs cheaper than our West Texas brand, so do not expect a drop before the weekend. Best play on oil is to wait until we either have a resolution in Iran or plain old fear exhaustion next week to short or maybe take a spread into the weekend. Gold will test $570 today as it was the US traders who punched it up yesterday on general fear. We are still more scared of world problems than the people who actually live where the problems are are! (It’s an odd sentence but I think I’ll keep it as it’s Friday and all). I still maintain that – if the markets can ignore $63 oil, terrorism, bird flu, Iran, Iraq, the deficit, rising interest, the declining dollar and a slowing economy – we are in pretty good shape – but don’t count on it! This may be the last day I even bother to list a lot of calls. I’m probably going to be research put plays this weekend as this could get very ugly. If we don’t maintain our levels we may get a big pullback soon, this time to a much lower test and we may set this as the top of our new range. If we break through, it will be off to the races but I’m still not going to go into this weekend with more than 25% in equities as there is just too much tension. ===================================== I wouldn’t trade anything but oil (following the Valero Rule) unless the market is positive but all of yesterday’s plays are still a possibility as well as the following if we get any kind of positive movement. Only go into this weekend with positions you won’t mind taking a 10% hit on (times 5 if you are holding volatile calls) as risk factors are very high this weekend! If I’m really nervous about my positions but I don’t want to sell I sometimes cover by shorting the QQQQs in the money like the $45 puts for $3.20. If the Nasdaq goes up 1% ($20) at the open on Monday, you will lose about 10% (figure .02 per dollar) but if it drops 1% you will make about 15% (figure .03 per dollar). Revisit yesterday’s oil list and check on the slow movers if you are not already in them (I picked them because we would have more time to enter) if you want to day trade to the upside but do not hold over the weekend unless you are a real gambler! I’m hoping for a big enough up day in oil to give us lots of nice entry points going into the next inventory (depending on OPEC, depending on Iraq, depending on Venezuela, depending on Nigeria, depending on Iraq…). If Google is so great then BIDU must be good too as pretty much all of what Google says is based on overall market potential and not some specific Google product (of course you have to assume Google maintains a dominant market position). BIDU is currently lower than it’s opening day mid-price (we ignore the silly run-up) but has no options so I’m cool towards it but you can get 6 shares of BIDU for one GOOG and BIDU only has to earn .11 per share to beat estimates by 10% while GOOG has to pull off $2.20! I am now in waiting mode and I will be taking a spread around GOOG’s next earnings (late April?) and probably balancing towards the puts as we get closer. With luck it will run back to around $450 again (hopefully while I hold the $380 calls!). If you are thinking of buying Google, always keep in mind what one slip of the tongue did to the company – this is not a safe stock and my feelings haven’t changed but the momentum has and I go with the flow! SMVD is a company I already made a lot of money on but they just couldn’t keep up with the hype, causing them to drop 70% since December. This is the best video on phone technology I’ve seen and they just signed up with ABC News to deliver content to cell users. When I hear ABC News, I think ABC/Disney/Apple and I start thinking about the inevitable IPhone and how nicely this little company would fit in. The stock was at $1.86 just 2 days ago but the 200 dma was broken yesterday and makes a nice stop at $2.50 so I’m going to pick up some at $2.77. The weekly chart (2nd one down) on these guys is the poster child for why I insist on cashing out profits: http://stockcharts.com/gallery/?smvd AIR seems about ready to pop, especially if BA recovers. Aug $25s are a great deal at $2.85 ($1.05 premium). Follow TIE to make sure ATI is going up (they both are) but I’m going to start taking the Jan $50s for $12 as the close calls are so outrageous. I will look to sell the Apr $55s for $5 after which I will be very comfortable with my position for the long haul. TIE meanwhile also presents a nice gamble on the Mar $45s for $1.05 as a quick in and out. AAPL SHOULD blow right through $70 AFTER which point the $72.50s for $1 will be a nice trade as long as you take it off the table at $72.50 where it is likely to be rejected (creating another buy opportunity). WYNN should make another run at $66 today and I would be tempted to short that one into the weekend to offset a few longs if I could get the $65 puts for $1.50 or less. This mainly an insurance play on a travel stock! I’m hoping for a final pullback on AMZN so we can go long on it. They lost their toy partner in a court case but it may be a “buy on the news” kind of thing and I really am hoping for the low $30s. Was it just Feb 13th when I said: “SBUX got a Prudential downgrade to neutral. I see this as a chance to buy more but let’s see where it lands (probably well above the 50 dma of $31.50)”? Today it will hit new highs as Prudential is about as wrong as you can be based on the same store sales data. Too late to trade it now though 8-( http://stockcharts.com/gallery/?sbux Nobody gets what DENN is doing. They raised prices and lost 4% of their customers but check prices are up 8.7% – this is smart!!! At $4.36 it’s channeled between the 50 and 200 dma but I think it will break up soon (someone besides me must be able to figure this out). Just watch the 50 dma at $4.23 for a sell signal. GE is dumping the remainder of their GNW shares. I’m hoping for a chance at the Apr $30s for $2.50 or less PLUS the Jun $35s for .60 or less so I can sell the Aprils as soon as it touches $35 for a nice profit and a longer look. Warren Buffett puts out his annual letter to investors this weekend so try to read that, it will certainly move the markets on Monday (maybe I should cut back to once a year – it gets Buffet and that groundhog all that extra attention!). BRKA and B are about to bounce off the 40 wma by the way… ===================================== I’m off to Killington for some skiing today so enjoy your weekends. I’ll post the wrap-up on Sunday night as it is just too painful for me to work on just one screen (I have 3 on my desk). Have a great weekend! – Phil