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What Happened Wednesday?

Darn, I really thought we were going to get a nice rally but it fizzled out at the end.

The S&P was a major disappointment, going above 1,270 but then giving it up in the last half hour. Still, as I said this morning, just holding on was going to be good after 2 positive days but I would be a lot more comfortable if there had been just a little more meat to these moves.

We’ll see what the evening and morning’s earnings bring but I have an early meeting so you are on your own tomorrow! Keep an eye on the same technicals we were watching today but don’t forget the huge impact XOM will have on the markets tomorrow.

Oil took advantage of fairly strong demand numbers to run back over $75 after the inventories but gave it all back just before the close. I don’t know what to make of this as it has not happened in a couple of years!

One piece of gossip running around the oil patch is what happens if there are no hurricanes to disrupt supply? Oil we import so we can just say no to that but natural gas is produced locally and we are pretty much topped out in storage and this is the maximum possible demand (unless we have a historically cold winter). Someone did the math and, should we have normal demand and no supply disruptions through the fall, we will be physically unable to store more gas by October 1st.

That means we may be just 3 months away from gas providers having to start capping wells…

Oil is just as well supplied but, like I said, we don’t have to keep buying that but it is nice to know we’ve got a lot of it in storage in case another dozen wars break out. Crude could not hold $74 against a weak dollar today and that is giving oil bulls serious pause and we may be witnessing a power pump on the sector into earnings, possibly followed by some very heavy selling.

I took the XOM $62.50 puts for .35 in comments just for fun as a contrarian play to the now 60,000 call holders who disagree with me, see my reasons in comments.

Gold moved up against the dollar drop but again you can see that there is no additional fear crowding into the gold market so it would seem that $74 may still be a bit high for oil.

I was really encouraged by strong showings from Apple, TXN and AXP as a diverse group of sentiment indicators but discouraged by GE’s shabby performance and SHLD’s 4% dive.


We could not have played LVS any better, buying out the puts we sold for a $1 profit just before the stock dove 9% and drove our Jan $60 puts up to $6.40 (up 26%). That’s a total of $2.70 profit on a $4.70 investment in 2 days and should really be taken off the table but you could milk it by selling the $60 puts again for $2.50 or better at tomorrow’s open. We’ll track this through earnings to see how each play works out.

BA dropped right to my $80 target and hung about there all day. They will be a great sentiment indicator for tomorrow whichever side of the $80 line they decide to take.

MT performed as expected and the $32.50s moved up to $1.65 (up 35%) but selling on the opening jump at $1.80 was the right way to go.

GM didn’t hold its morning highs but held a respectable 4.4% gain on the day. I’m hoping for around $35 so I can start shorting!

TASR burned the premium off on the $7.50s but .45 was the low and that was still a little rich (10%) for me to get in and .50 on the Jan $10s seems a little rich after a 14% loss.

COP never triggered as it was rejected off $70 which means to me that a lot of people think these stocks are overbought.

BNI $70s came in at .50 and I hope I’m not sorry about this one as the transports looked miserable today. UPS was not forgiven with another 5% drop.

BTU flew down in the morning but recovered nicely (relatively) by the day’s end. The $50s finished the day at $1.50 (up 50%) but I was all out at $1.25 after only getting $1.60 on my first half at the bell. I should have followed my own comment advice and rebought at $45 but then I feel too much like a day trader.

AXP was strong all day and the $52.50s opened at just .50 before running up to .90 intraday. They dropped off at the bell and closed at .80 (up 60%) which was a stop out for me.

TEVA gained 5% today and finished strong at $32.49 (up 10%).

EBAY was so pathetic the $27.50s came in at .40 and I couldn’t resist that!

HD was a huge disappointment but at least it opened low and the $35s were just .90 pretty much all day.

PNRA was down 12 full percent for no good reason at all! They didnt hold $53 but held $52 on 10x volume well enough that I like the $55s for .80.

AMZN dropped 22% on earnings that were no real surprise. I think shareholders were just shocked to learn they paid 50 times earnings for a retailer. There has been no real change at Amazon since my November posting where I called the top and we shorted them at $50:

TIVO got my star of the day award for opening nice and low before running up 4% with a very strong finish. The stock finished at $6.69 (up 5%) and the Feb $7.50s leaped to .90 (up 50%) where a sensible person would take the money and run!

PEIX did just what you want a stock to do when you sell calls, it dropped 5% for no reason! The stock lost .90 on the day and the $20 calls gave up .30 so we are even so far.

After giving us a real scare, XLNX shot up $2 and the Sept $20s finished back where we started at $1.45.

HPQ was also scary but the $32.50s finished at $1.10 (up 70%).

LXK $55s came in at .55 but I didn’t like the sell-off at the close so I will stop out at $50 if it crosses down.

TXN stopped me out on the $27.50s at $2.25 (up 105%) but I held the $30s even though they are at .65 (up 120%) as it still looks nice and strong.

MRK added another 2% today and the Oct $40s are now in the money at $1.75 (up 190%). You should have stopped out of this one on the late dip but at least take the double off the table and roll into the $42.50s for .65!

T picked up another 2% putting the $27.50s all the way to $2.20 (up 300%).

GLW was a total disaster with a 15% loss. The $22.50s are down 90% to .15.

AMGN had a fun day with the $67.50s way in the money at $2.90 (up 140%).

VZ continues up bringing the $32.50s up to $1.35 (up 200%).

PTEN finally woke up today with a 5% gain driving the $25s up 220% to $2.55 (up 400% if you caught the lower entry on Monday!)

Not a bad 3 days on the whole, I suppose I’ve earned my day off tomorrow!

- Phil

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