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Thursday Wrap-Up

Well if that was a test we certainly failed it.

At least we can be thankful we didn’t get sucked into buying anything as everything went straight to hell right from the open.

I’m going to be short about this and just say yuch. Nothing worked at all today, even commodities sold off.

Gold held $629 and is right on the 50 dma again and I like it into the weekend while oil rolls into the September contract tomorrow which should add a buck or so to the price.

The Dow did manage to hold around its 200 dma at 10,941 but the S&P and the NYSE were firmly rejected from a short morning hop into their resistance levels.
http://stockcharts.com/gallery/?spx

I guess those guys selling the QQQQs yesterday did know what they were doing as the Nasdaq was beyond pathetic when you take into account Apple’s 12% gain.

MSFT had huge sales numbers and, although profits are off, the most important thing is that they still move product and I am very sorry I chickened out of that stock yesterday (although I was very glad I did this morning so go figure). I don’t know if this or Google’s odd numbers (sound good but can’t really tell) will turn the market as Apple and MOT swam against a sea of red today.

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As I said in comments, I got out of SNE at $1.30 (up 85%) early as the indices started to weaken – the fact that it didn’t jump up was a real red flag right at the open.

Although YHOO didn’t really move today, we had a wild ride and the Aug $25s are still $1.30.

TGT was a great call, gaining 1.6% today and the Aug $45s are well in the money at $2.45 (up 50%). In this market you should take the money and run!

JPM also held its own today and the Aug $42.50s still look good at $1.35 (up 35%) but you should have stopped out around lunch when they were at $1.75.

MOT was indeed the play of the week with the Aug $20s topping out at $1.95 (up 300%) before dropping back to $1.15 (up a mere 150%). This may be a good time to remind you to always take at least half off the table on the initial run-up after a postive surprise as you will rarely do better the rest of the day.

CBH Aug $32.50s held up nicely today but I’m setting a stop at even ($1.75) as it is up just .20 from Friday’s pick.

MAT looks like it’s done here and if you didn’t already stop out take the Aug $15s off the table at $2.75 (up 85%) and maybe wait for a lower price on the $17.50s (.30) if you still want to play.

UNH dropped off a bit but the Aug $50s are still $2.25 (up 100%) but shame on you if you didn’t stop out almost a dollar ago!

Even MCD got hammered today and our $32.50s dropped down to $2.20 (up 340%) but I know you stopped out with a nice profit on that one yesterday.

TEVA finally came back down for me but I still want it to test below $30 but I may give up and buy it tomorrow.

SBUX is heading down again and if you didn’t stop out Tuesday you will get another chance with the Aug $35 puts now at $2.25 (up 20%). This one is still too strong to keep a put on.

Last Friday I said EXPD was a bit ahead of itself and we picked up the Aug $50 puts for $2 as it rose. I don’t know what happened today but the puts are now $4.50 (up 125%) so lets absolutely take that one off the table!
http://finance.yahoo.com/q/bc?s=EXPD&t=5d

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It looks like Google will be saying Ha Ha to all the optionholders and just stay right were it is tomorrow.

The company posted a net income of $2.33 per share, a dime over expectations on revenue that was just above estimates ($1.67Bn vs. $1.64Bn expected). Do not pay any attention to the $2.46Bn revenue number as that is gross before commissions and meaningless.

Be careful getting excited about all this as the posted tax rate came in at 26% vs. estimates of 30% and so accounts for 90% of the beat. Last quarter also had a low reported rate of 27% so if they average 30% for the year (last year was higher with a 40% Q4) there will be hell to pay in the subsequent quarters.

Still hitting those numbers, even after .16 of options expensing and after hiring an additional 1,152 employees (and these are no minimum wagers). When you consider that an employee probably takes a good 3-4 months before they begin producing and that start-up costs (training, office space, funiture, HR..) it really is an amazing thing.

Google’s share of the search market is now 44.7%, up from 36.9% last year so there seems to be some diminishing returns to the earnings. I don’t know why this doesn’t seem to concern any analysts I’ve heard so far but if they are moving 21% more “product” then a 21% increase in revenue is not very surprising or in the least bit impressive.

Will the company be able to put the breaks on runaway spending when they top out at a 60% market share? What if there is a price war? What if Microsoft or Yahoo finally get on the ball? Microsoft’s report today underlines that you just cannot count that company out, no matter how many bone-headed mistakes they make along the way – just check out those XBox sales!

The bottom line is that Google may indeed earn a very impressive $10 per share this year but, unless they come up with a new revenue stream, I think they may be getting near a top for search revenues. If they double up to earn $20 a share in just 2 years and the stock price stayed the same, that would still give them a p/e of 20, higher than Microsoft is now and equal to Yahoo’s current value – that’s a pretty big gap to fill without something major coming down the pike.


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