8.2 C
New York
Thursday, March 28, 2024

TGIF

Wow, what happened yesterday?

I was off for the day and that sure was one rotten close on the Dow!   Not entirely unexpected though as not only did we play the SKFs Sept $125s in the morning post for a nice 35% gain (which should be taken off the table or covered, of course) but my last comment to members in Wednesday's post was: "Let’s not forget the old Wednesday is the highest day of the week rule.  The last time that wasn’t true was way back on June 18th although it was very spotty in the downtrend before it so maybe it’s a good thing when Wednesday is hump day… Let’s not fool ourselves, Thursday Thumps lead to TGIFs that we are glad to be done with and it’s crunch time in the Hamptons with just 3 weekends to go before the holiday so you’ll be hard pressed to keep traders on the floor after lunch on Friday.  Today was a great technical day with our best close of the day since Wed, June 25th, that was followed by a 350-point Thursday Thump on June 26th.  Sadly, I will remind you that that was the day after the Fed had not hiked rates and I wasn’t happy about it then either!"

It seemed important enough to repeat at the top of Thursday's post to members as well and I also went on to say that we needed to watch the dollar at 74.50 and that getting above that mark would be great as it would put another big needle in the commodity bubble.  We got that surge at the end of yesterday and I'm very proud of our members for hoding fast in yesterday's overdone sell-off, that was clearly caused by a BS spike in crude into the close.  Yesterday's ridiculous run in crude is already being reversed in European trading, the same trading that sold oil off from yesterday's morning spike until the EU markets closed and the NYMEX criminals took over at 1pm.

So dollar gains trump oil manipulators and let's not forget that US equities are also a commodity and gathering dollar strength also "devalues" our stocks to some extent, especially our export companies or companies that gather a lot of revenues from overseas.  Check out the V bottom the S&P put in when priced in Euros…  We cleanly broke through the 50 dma before yesterday's pullback and finishing above that line gives us a clean shot to the 200 dma, probably around 1,380, a solid 7.5% gain from here, which would put that index up 15% from the bottom at 1,200 and just 2.5% away from retaking the high resistance at 1,420. 

Let's not crack open the champagne just yet, we need oil to DIEDIEDIE and get down to my $110 target but things look good (despite looking bad yesterday).  Our Qs held up fairly well and look like they are heading for a test of 48 with 49 providing us a good breakout there and, more importantly, we have a great opportunity to pick up the Russell today as it got hammered yesterday, just one day after we thought it was getting away from us.  I like the $RUT Sept $740s (RUTIH) at $12.50 today, if it heads the wrong way we can always sell the Aug $720s for $7 and use that money to roll down to the Sept $720s but generally, my outlook is bullish enough to hold it naked if we can.

A lot of the pullback yesterday was, other than oil, due to a high unemployment number and poor same-store sales comparisons, both of which can be traced to a winding-down of the stimulus checks, which were made to boost the economy and push us through a rough quarter so it's kind of like pulling off a band-aid and expecting the cut to be completely healed, you are very likely to be disappointed… 

There's another buying opportunity in C thanks to the hyena pack, that was all over C and other financials over the ARS story we discussed in yesterday's post.  Sure C is paying out $7Bn of their $2,000,000,000,000 in assets to buy back the Auction Rate Securities and will have to put them on their books – but they are NOT worthless!  I know…. shocking….  Somehow the hyenas have convinced investors that illiquid = worthless.  You may not be able to sell your home today for the $500,000 you paid for it two years ago because the market is tight (illiquid) but does that make it worthless?  No, it is simply WORTH LESS at the moment BUT, if you don't NEED to sell it now – what do you care? 

The same goes for stocks.  WMT gave the usual conservative guidance and "only" had a 3% gain in same-store sales vs. the 3.3% that was expected and the stock fell (no joke) from $60.50 to $57 (6%) as if they hadn't handily outperformed the rest of the sector.  Now I don't usually get excited by WMT's stock but you can pick up the March $57.50s for $4.75 and sell the Aug $57.50s for $1 or more on a small bounce (now .75) for a nice 20% premium return between now and next Friday. 

[Chart]Pending home sales were up 5.3% for the month vs. a 1% decline expected and you would think the builders and financials would be doing cartwheels (these are the homes that are being marked down as worthless!) but there was simply no way anyone wanted to believe in good news yesterday.  The things people do believe in just crack me up sometimes.  Today the WSJ is featuring a story that the lack of seats is delaying BA and EADS's production schedules.  Oh my gosh!  SELLSELLSELL, they have too many orders and the suppliers can't keep up…  (end sarcasm font).  I guess the cancellation rumors didn't pan out so now the hyenas have flipped back to delay stories.

According to the WSJ: "Boeing recently missed its second-quarter earnings projections partly because three big wide body jetliners couldn't be delivered on time due to unfinished interiors."  THREE!  Wow, you don't say…  The company has orders for 900 aircraft over the next 6 years and you say 3 were delayed?   Gosh, this being the first time BA's ever sold a plane and all I'm sure they'll never get things running smoothly,  Even the chart pictured here is misleading and ridiculous, showing that both BA and Airbus are AHEAD of schedule this year and the text on the chart says delays "COULD" put deliveries at risk.  This is why we buy leaps and sell calls, you can't make investors smart, they fall for this nonsense every time.  What you can do is pick a good company and make a long-term investment, like we did and will continue to do with BA.

The timing of this "news" is interesting as we are right about at the date where BA will incur penalties for delivery delays of some of the first 787s ordered.  That means you will hear about some cancellations but most of them will be substitutions for other aircraft as Boeing is able to crank out 767s and the drop in oil prices may make some airlines brave enough to take a deal from BA to swap out for the otherwise very similar, older plane.   Don't forget the tanker deal that is still up in the air was for 767-style craft and, with that decision a year away, BA will be highly motivated to keep that production line running.   So too bad for our $65 callers, who were looking pretty good until yesterday and let's keep an eye out for a nice opportunity to make some short-term BA plays ourselves.

Go to article.Asia was mixed this morning with the Nikkei having one of their famous afternoon rallies, running up close to 300 points over the opening low but settling the day up just 42.  Exporters led the Nikkei higher with TM jumping 5.5% but the Shanghai composite took a nasty 5% hit as airlines plunged on higher oil prices (it doesn't take much) and consumer stocks were "sold on the news" as the Olympics finally begin today.  Hong Kong pulled back 1% on the day. 

Europe is flat ahead of our open with (and aren't the markets funny?) airlines leading the markets higher as oil pulls back in early trading.  RBS had a net loss of $1.5Bn and wrote down $11.5Bn in loans but shares are trading higher. "The results we have published today demonstrate progress in a number of important areas, and it is all the more unsatisfactory, therefore, that they record a loss as a result of our credit-market write-downs," Chief Executive Fred Goodwin said in a statement. "We are determined to ensure that the inherent strengths of the group's diverse business model are not obscured in this way again."   

Congrats to GS for placing yet another employee into the Treasury Department as Ken Wilson "retires" from GS to become "Paulson's trouble shooter."  He won't have to give up his GS stock because he's technically a "consultant" acting as a contractor and not a government employee so everything is just fine

As I said on Wednesday, I'm not expecting much of a market move into the weekend.  FNM had a loss and is getting beaten down (probably Wilson's first assignment will be FRE/FNM) but MBI did much better than expected and is resuming buying back shares.  I love FRE on today's dip, now at $5.50 and we already sold puts that force us to buy at $6.20 so todays play is to buy around $5.50 and sell calls $5 calls in the Stocks Virtual Portfolio, maybe $6 calls if we get a good bounce but $1 for the $5s is a good deal.

Let's keep an eye on the Big Chart and make sure we don't revisit our "Horror" levels of 20% off the highs.  The NYSE is very close to 8,310 and the S&P is just over 1,261 while the Dow has a 100-point cushion before hitting 11,354, as with earlier this week, if sub-$120 crude can't get the markets going – we've got problems!

 

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