Mega Deals, Scandal, Terror – oh my! The great wheel of news is spinning like a top today and it will be great to see how the market takes it. We have, of course, the Sears Tower Plot – is it good that we caught guys or is it bad that there are guys to catch? We also have Anadarko buying KMG in a $22Bn deal that indicated the oil sector is hellishly undervalued plus we have an possible insider trading scandal at hedge fund Pequot which could rock that industry (I mean if your hedge fund can’t trade on inside information what is the point?). So we SHOULD have the oil sector rockin and rolling on this news – great for the XOM calls that we picked up right at the bottom in yesterday’s comments. With big terror back in the forefront, I am pretty confident in the oil calls but not much else today as any of those stories can be interpreted badly but I will be very excited if we pull an up day out of this mess. Even a flattish consolidation would be nice but it is possible that this news could be the catalyst the market needs for a huge sell-off that sends all the nervous types back to bonds. We still need to see the Dow close above 11.100 and avoid falling below 10,900.
The S&P is still in big trouble if it can’t get over 1,260 as that is still well below the Jan open. The Nasdaq, like I said the other day, is a lost cause until it crosses 2,230 – over 100 points away before we can say we are back on a positive track and even that would be 70 points below the year’s open. Asia is flat but had none of this news during their trading hours so there is no indication there but Europe is flat in early trading, probably waiting for the US to set some direction. If I had a few Billion under management I would certainly be waiting for at least the weekend before making any purchases as terror issues have killed the market time and again since 9/11 but also there have been great recoveries after most of those drops. So I am really rooting for a massive sell-off today that will finally put a floor in this market but I will still take the alternative as it may finally give the signal that the bottom was already made last week (although this would be a real shock to most chartists). Oil should do what it usually does into the weekend while I will be very disappointed with any drop in gold as it would seem to be an obvious play in these uncertain waters. Gold has been playing on the wrong side of my $583 line and needs to firm up in the mid $580s to avoid another price plunge.
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I’m not going to post any picks today as any position can be reversed in seconds. We may open low and plunge to a level where program trading kicks in (watch Nasdaq 2,050 and Dow 10,700) or we may get a giddy reaction to the "capture" of terror suspects coupled with a 40% premium on KMG which should ignite the S&P early on (must break 1,260). The only thing I know for sure today is APC is toast, paying the entire market cap of their company for 2 acquisitions. If oil even wiggles below $70 this deal will be viewed as a catastrophe. In a strong market with the energy sector moving I will be watching the oil stocks I feel have the most room to move: GSF NBR NOV OIS RDC THE COP XOM But I emphasize that the market may totally collapse today so I’m going out for breakfast to avoid temptation and I will see where we are around 11. Have fun, – Phil
