Yesterday was a day I was glad I stayed away from. I’ve taken on a major project as the market is less fun than it was so I may not be making 2 posts a day, especially on a day when nothing happens worth discussing.
4 times in a row, Monday is a very bad day for the markets.
The temptation to short was overwhelming but the market may have bottomed in the afternoon with another one of those little bounces. The Dow came off the 200 dma of 10,900 but finished below 11,000 while the Nasdaq seemed to pause around 2,110 and the S&P decided 1,240 was far enough for one day. Even the NYSE broke below its 200 dma of 7,920 so that’s a level to watch on the upside.
We are back on Dow watch as it has to hold 10,900 to avoid a total meltdown while the S&P has a big climb back to 1,260 and the Nasdaq is OVER 100 points away from the 200 dma of 2,230!
In short, although we expect a bounce we are still clearly underwater and the ice above looks pretty thick and things look grim indeed.
The panic of the week is North Korea announcing they are going to test a missle that can reach the US so we have that to worry about now and, as usual, Condi is on TV warning about “serious consequences.” I think the US is starting to sound like that old man who’s always yelling at kids to stay off his nuclear lawn. He says it all the time and they do it all the time.
Another nail in the coffin of the markets was a terrible housing report that revived fears of a housing collapse and sent builders all the way back to last weeks open, erasing what little gains they made Thursday and Friday. The fact is that housing starts were actually up 5% last month although permits have dropped slightly so we don’t have quite the oversupply people fear.
Asia moved down again with the Nikkei losing 200 points and the Hang Seng dropping 160 points Europe is slightly down this morning, acting very wary of the US open (as should we all!).
It will be hard to get anything going ahead of next week’s Fed meeting and, at this point, we really need a nice healthy 700 point drop a lot more than we need a “recovery.”
That being said, yesterday’s Dow pause and the uber bearish sentiment in the market will once again keep my away from short positions today. Yesterday’s volume was low, which is also a bad sign because it means you won’t be able to read anything into a turn that isn’t huge on huge volume.
Oil took it’s own bounce at $69 yesterday but oil stocks dropped around 3% but we can expect a rally back today based on the Korea situation (yay, a new fear!). We need to see if $70 acts as the ceiling it should but inventories are tomorrow so it’s tough to play this market up.
Gold held $570 and may get it’s own bounce today and I still like GG on an up day watching GOLD as a directional indicator.
I’m looking for a week to down open today with a commodity led “rally” that will probably not be followed through by the broader market (watch NYSE 7,920). The real question is whether the Dow and NYSE can break above and hold their averages today. If not I think we will be in for a very bad week.
I’m still out but looking at a few plays, obviously puts for a down market and calls for the upside, I’m not trying to fight the tide with any trade!
CAT seems to have stalled out to the upside and I like the $70 puts for $2.55 getting out or not trading if the stock breaks above $70.
You know things are bad when McDonald’s has to play the China card to get their stock moving. They are partnering with State owned Sinopac gas stations. YUM has not been doing well with Chinese drive throughs and McDonald’s is attempting to teach people through advertising how great it is to eat unhealthy food while sitting in your car. The partnership means they are giving up a percentage of the revenues and the size of Sinaopc, China’s largest retail gas station in a country where auto sales are up 50% this year, means they may be overcommiting to a poor strategy.
This COULD be a good bounce spot for AAPL if the market turns up as it seems a little more likely that they will pull a movie deal for the IPod. I really like owning the Jan $55s for $9.40 and selling the $60s at $2.50 or better but stop out/don’t buy if Apple slips below $57.
ADBE $30s are holding up but a good sale price at .60 as long as things aren’t completely falling apart at the Nasdaq.
LVS is being held just above the 50 dma of $66, way above the 200 dma of $50 where most of their rivals are sitting (not $50, but at their 200 dma). That makes the Sept $60 puts a nice play at $3.30, especially if they can be had for under $3.
N has been slow to follow the commodities down. If AA falls below their 200 dma of $29 then N will likely head to theirs and the $55 puts are expensive at $2.10 so make a momentum trade only.
GS has held up well but can’t go against the whole market, if the market continues to be weak then I like the $140 puts at $2.70 but not if the stock moves over $145.
I am salivating over the rail stocks but I’m hoping they retest their 200 dmas as it doesn’t seem to have occurred to anyone that ethanol cannot be transported in piplines and corn has to get to the processing plants so that’s 2 trips on a federally mandated 15% of our nation’s fuel volume that has to move by ground. How does a company release a report like this and trade down? How does the market trade down on this report?