Wednesday Wrap-Up – Did You Want Fries With That Shake?

Did you want fries with that shake?

That was my official market summary for the members today.  I saw noting in the overall markets that took me off my morning premise, that the mainstream media is a useless tool of market manipulators and you are better off flipping a coin to decide what to trade than to listen to the "experts" they parade out all day in order to "prove" whatever suits the management's purpose for the day.

I'm not getting 100% bullish just yet, we have a very hairy earnings season ahead of us, but I'm not ready to throw in the towel.  Unlike yesterday, we held fast to most of our positions today and my two comments on our boatload of DIA puts were right on the money today:

• Posted October 3, 2007 at 9:58 am | Permalink
  • I’m not racing out of DIA puts, just putting .25 t-stops on 1/2 but I want to be shown something before I go all bullish.
• Posted October 3, 2007 at 2:26 pm | Permalink

  • Now may be the time to take those DIA puts off the table, brokers are making a mild comeback and oil stopped going down so at least use stops. XXX

That was 10 points off the day's low and 20 points below the day's finish, we'll see if I was really right in the morning.  I wasn't confident enough to take calls but our protects had done their job and allowed us to keep a much more bullish virtual portfolio open during the dip.  Due to the heavy load of Index puts and a lot of callers that suffered greatly, the STP had one of it's best days of the year, jumping over 30% (off the basis) for the day.  FXI and PTR puts were huge winners and we left those as additional downside protection but we'll stop those out too if we get a good bounce in the morning.

The market performed very well considering there was a continued sell-off in the commodity sector (Yay!) and MS decided to put an "underweight" rating on INTC (are they nuts?), AMD (I agree with that one) and NVDA, pretty much making it impossible for the SOX to to hold 500 and dragging down the Nasdaq as INTC sold off 2%. 

On the whole, materials were off 1.3% after an 8.1% run since 9/17, a neat 20%(ish) pullback that, like China, is nothing to worry about.  How much of that can be attributed to the resurgence of the mighty dollar, which climbed back over 78.5 for the first time in a week as better economic data has led to rising rates, which is strengthening dollar demand.  Can the market survive a dollar recovery?  That remains to be seen…

Tomorrow is likely to be a quieter day as we head into Friday's jobs numbers (last one showed a decline!).  The ADP report came in with 58,000 new jobs and the government is expected to come up with 100,000 in their report but it's the revisions that usually thow a wrench into the works.  Meanwhile, as I said, there was nothing that happened today to make us change our stance but there also also wasn't anything to give us the all-clear.

Here's a storm cloud that's not getting much press:  TOA, a Florida-based builder with 2,000 employees and a $112M market cap (down from $1.5Bn in '05) has withdrawn all guidance.  "Conditions in all of our markets weakened more than we anticipated due to a number of factors including: recent severe liquidity challenges in the credit and mortgage markets, diminished consumer confidence, increased home inventories and foreclosures, and downward pressure on home prices," President and Chief Executive Antonio B. Mon said in a statement. "All of these factors have contributed to lower gross sales and higher cancellation rates."  I find this notable because TOA was a strong grower with great prospects for many years and then COLLAPSED in a way that was stunning.

I don't want to rain on the parade but I do want to remind folks that there are very good reasons to keep an umbrella handy!