Wednesday Wrap-Up
by Phil - December 20th, 2006 6:04 pm
Another ho-hum Wednesday.
Just like last week, same as it ever was… Nothing much happened, we could have gone shopping (some of us did!).
Our levels did nothing so we’re not going to discuss them, there was a bit of excitement in the morning but the VIX was quickly sedated and slipped back down to 10.3 for the day.
Oil jumped a dollar on a 6M barrel draw but then Zman and I alerted the markets that the number was, in fact, a major disappointment as we are now in day 7 of the Houston Ship Channel shutting out 80 ships and tankers which have failed to deliver over 16M barrels of oil since last Wednesday.
The new contract finished at $63.72, down .75 from Friday’s close. Let’s look for $60.80 as our downside target with $62.40 as our nearest waypoint resistance. On the upside, breaking above $64 would be bad and $65.60 would signal a new uptrend. No current oil contract has seen $64 since October 1st.
So, although CNBC was "shocked" by the draw in oil, we calmly continued to buy puts today while all the oil roaches bounced around in their little traps. As millions of barrels of oil kept piling up in storage:
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There are 303M barrels on order for February (vs. 77M needed in January).
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OPEC has been sending (they claim) 1M less barrels per day for a month now.
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16M barrels are backed up in the Gulf
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Demand is falling due to the weather
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Millions of SUVs have come off the road
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Airline consolidation means less flight using less fuel
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and the less economical planes get scrapped first!
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Our 2 MILLION BARREL A WEEK war may actually end one day
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The Democrats are coming!
The reason the global economy runs on oil is because it is cheap! For over 100 years we used oil because, if you make a hole in the ground where there is oil, it comes "gushing" out and all you had to do was scoop it up and pour it into something that could burn it for energy.
There are many, many, many other ways to…
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by Phil - December 14th, 2006 6:56 am
So low, it seems that I’m not even going to discuss the non-movement of the indices other than the SOX (the HORROR) who are assassinating the Nasdaq. Actually, the Nasdaq was amazing against a 1.23% SOX drop but I don’t see them keeping that up for very long – one has to snap soon.
Just be warned that the last time volatility bled this low was Thanksgiving weekend and we got a heck of a drop(300 pts) as the VIX came back up.
Oil didn’t do much either today (up .35) which you would think is surprising against a 4.3M barrel draw that was 3x analysts estimates but as long as we hold $61.69 through Friday, I’m happy.
I’m going to wait to hear what OPEC has to say but I am going to blow the whistle on the myth of Chinese demand this weekend (sneak peek in comments the other day) as this is the most overused excuse since hurricanes to pump up the price of oil!
I do have to say WOW to oil pumpers though. It takes a lot of guts to shove 21M additional barrels into February at $61.99 when March is Just $62.92, having fallen from $66.50 in just 8 sessions!
The dollar closed flat and gold gained a buck so there was not much point for showing up for anything today!
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At this point I feel like I was robbed taking a .15 gain on the first half of my DALRQ Jan ’08 $2.50s, now .80 (up .75!).
HD May $40s finished the day at $2.25 (up .30).
HPQ Jan $40s came in at just a buck.
LVS had a rough day, giving up 3 more dollars. The Jan $95 puts are now $6.20 (up 30%) and I’m taking them off at the first sign of trouble and looking to enter the Feb $80 puts so I can take half off the table.
I hope I was right about GSF giving me a top on the OIH. We initiated the Apr $140 puts for $6.40, hoping to sell the Jan $140 puts for $5.50 or more.
OII went nowhere, despite the huge morning rise in crude – very interesting! The Apr $40 puts finished even at $1.60.
I took another stab at OXPS with the Mar $25s…
Tuesday Wrap-Up
by - December 5th, 2006 8:54 pm
Look, we’re floating!
Is it just temporary or have we finally entered The Final Frontier? If so, our 5% Rule mission is to seek out new highs and investment opportunities – to boldly trade at market levels where no trader has invested before!
This morning we talked about perspective and I set some pretty greedy levels, but we hit them!
- Dow 12,331 – 31 points over goal and strong all day. Can we do better? Absolutely, we are still eating the Nikkei’s dust!
- Transports finally kicked in but fizzled at the end of the day at 2,650.51
- The S&P was strong all day too, finishing just under 1,415
- NYSE finished at 9,064, very nice!
- Nasdaq was not as strong but held 2,452
- The SOX closed at 487 so we blame them but it was good progress!
- The RUT did not hold 800 but finished at 797
So we have to keep an eye on the Russell, the SOX and the Transports tomorrow, consider them the last small tugs of gravity as we finally leave this tiny planet and all it’s annoying problems behind us and become Space Traders!
Oil dropped a penny. As expected they tested $63.09 (made it all the way to $63.20) fell all the way to $61.55 (surprising) and finished back at $62.48.
I got my test and they bounced off $63.09 hard so I’m happy but the best part is that happened as the dollar went even lower! Well, it’s a disaster that the dollar went even lower than the lowest it’s been since March of 2005 but shhhhh – the children are rallying…
Oil was savaged in the early morning trading, rescued as Europe closed but sold off into the NYMEX close on this day before inventories. Once again we have one of those days where the contracts you don’t see dropped a lot faster than the contract that is manipulated for your viewing pleasure.
As expected, gold did the same nothing the dollar did and held $652 but ABX Dec $27.50s stopped us out at $3.50 (up 112%) on the morning dip. I’m looking at AU Jan $50s for $1.15 as a possible move but we need to watch that $650 line, the dollar and how AU handles it’s own 200 dma at $46.50 before getting back in a gold trade.
On the whole it was a…
Thrilling Thursday Wrap-Up
by - November 16th, 2006 9:32 pm
Wow! Another huge day.
Dow 12,305, this is almost sub-orbital. The S&P was slightly more subdued at 1,399 and that extra point might be a tough one.
The NYSE held firm at 8,894 – a little disturbing but understandable in a commodity sell-off. The Nasdaq also hit a wall at 2,449 but, on the bright side, we won’t have a hard time guaging direction tomorrow!
The Russell also flatlined but held 790 and the SOX closed right in the middle at 485. Only the transports jointed the Dow in their certainty that $56 oil was “a good thing.”
Oil was indeed a good thing today with a well lubricated slide all the way down to $56.26 blowing trough my target for the week. Was this a genuine sell-off or did it realate to the IPO of the NYMEX tomorrow as the easily manipulated market may have been taken down to free up some of the oversubscribed shares?
No matter what it was it certainly panicked the roaches! At 10:40, while we waited for a delayed gas inventory report, I mentioned that we got a good, clear short signal from our Valero Group – the first one since last week!
As I predicted, the return of volume heralded a big sell-off in Exxon. In comments, I calculated that 400M shares of XOM changed hands above $70 since 10/15. If 22M shares a day are trying to get out before they go red, these guys could be living in a 20-story Tower of Pain!
Even if there is more selling tomorrow, it may be just the expiration of the December contract coupled with a lack of cheap storage that is driving the sell-off. Tune in Monday to see where the week will take us!
Don’t blame the dollar, it moved up .18% – not enough to move crude or gold which closed at $625.
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Earnings were a mixed bag today but the market really perked up as commodities sold off but the irrational exhuberance seems to be over as poor performances are not being given a free pass.
ANF Dec 75s jumped back to $74 after lunch but then pulled back to stop us out at $2.05 (up 41%).
We need those huge profits because BEAS is a wipe-out so far!
COST Dec $55s came in at .75 on a morning sell-off and finished up 25% at $1.
I’m glad we…
Terrific Tuesday Wrap-Up
by - November 14th, 2006 9:02 pm
Well I said it was going to be a tricky day and it was – for the shorts!
After taking what, to me, was a surprising early dip, the indices perked back up around 12:30. As I said in comments when I came back at 1:20: “Holy Buying Opportunities Batman!”
In case new readers missed it, I talked about all this happening just before Halloween when I decided to flip into bull mode.
We got great entry positions on everything we wanted and didn’t have to wait long to feel good about our purchases.
Did we hit all of our watch levels?
Dow 12,200 – check. S&P 1,390 – check. NYSE 8,873 – check. Nasdaq 2,400 – check. Russell 785 – check. SOX 480 – check. Transports 2,650 – check.
Isn’t this the part where someone says “prepare for liftoff“? We used the rocket example to assess the situation back on 10/27 so I won’t rehash it here but we are certainly in launch mode and now we have to see if we have enough fuel to reach escape velocity.
One part of the economy that may be succumbing to gravity (finally) is the energy sector. XOM could not get positive this morning despite a big open for oil and it only attracted 17M shares worth of buyers for the 3rd time in 2 weeks.
Volume has been so low on XOM this past month that it has pulled the 3 month daily average below 22M for the first time in 6 months, when the stock traded at $60. Still, at $74 a share, 17M shares represent $1.25B a day.
We already know that XOM is buying about 10% of that themselves, at a cost of $100M per day but they still need to pull $1.1B into that roach motel of theirs in order not to panic the ones that are already in and starting to wonder why the floor is so sticky.
Here’s a funny chart I’ll entitle “A Tale of Two Commodities.”
Oil itself had a rough day, so we won’t pick on it. Crude tested $59.15 early but then drifted before ending the day very near the low at $58.28.
Here’s an interesting 3 year comparison chart where the heavy volume selling does not seem to bode well for crude at this level. Notice how far it’s veered from the green projected path this week!
We’ll see if we hold…
Thursday Wrap-Up
by - November 9th, 2006 8:20 pm
That was disappointing!
The day started nicely enough but we finished up testing our lows instead of our highs. Perhaps oil testing the top of my oil danger zone mattered to the indexes – only the Nasdaq really got going and even that gave up by the afternoon.
The Dow closed just a hair over the 12,100 mark but the S&P slipped just under 1,380 and the NYSE held 8,800 while the Nasdaq held the 2,375 line - this was not such a bad day folks!
The markets have simply lost their taste for $60 oil and you can see the direct affect it had on the 10am surge as well as the 1:30 bounce that pushed the indices lower. Looking at the longer range chart, it is very clear that much of this rally is predicated on the expectation of lower oil prices.
One could say that perhaps the markets have been manipulated for the past two months in an attempt to keep voters happy and the price of oil was kept down in an attempt to boost one party or another’s chances (we won’t point fingers). Now that the elections are over, perhaps we are just resuming the natural course, which would be the correction we’ve been expecting for quite some time.
We’ll keep an eye on that, especially with the very poor performances turned in by the transports (down 1% to the 200 dma) and the SOX (down 2% to the 50 dma).
Today we blame strike threat in Norway for oil’s rise (what ever happened to Nigeria?) as crude posted a high of $61.33 in a blatant attempt to prove I didn’t know what I was talking about when I said it would top out at $61.38 this morning! Obviously, if I’m going to miss by that much I need to find another hobby…
I know how hard it is to keep the faith in a spike like this and believe me, I am losing it myself but this non-breakout 2% rise in crude came against another big drop in the dollar which shot gold up $18 (3%).
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We had a crummy start to the morning and didn’t trigger our buys although Dell would certainly have been a good one with a 3% gain on the day but a clear rejection off my $25 target.
TXN was tempting but the SOX…
Decidedly Undecided Tuesday Wrap-Up
by - November 7th, 2006 9:07 pm
What ever happened to projections?
It used to be that by the 6pm news, we pretty much knew who won and lost the election. This year it’s over 80% “too early to call.” Both sides are claiming victory and everyone is talking about the election but there are no facts…
Oh well, it was a nice relaxing day today, our calls did well and our puts improved – who could ask for anything more?
The Dow fell short of a record as it bounced back off the 12,200 mark but still finished at 12,156, just 11 points shy of a closing high, fully erasing 6 sessions of losses.
The S&P held the 1,380 line while the NYSE tested a new high before closing up just a touch at 8,835. The Nasdaq broke the 2,375 mark and closed just .88 above it, just 3 points below the May high.
The SOX did their part with a very strong 2% gain after testing the 200 dma at 472. The transports were a little indecisive but made a nice day of it at 2,618 but tomorrow will be critical.
Oil dropped $1.09 to finish at $58.93 but the untold story was the $1.40 drop on contracts from Jun ’08 on.
That drop in oil came against a falling dollar as our indecision is the worlds lack of confidence in our currency. It’s no emergency yet as gold finished flat at $625 but looks weak to me.
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We watched and waited today and nothing happened.
In comments I decided that – if I were trading oil, I would have gone long into the close as I think there are plenty of ways to spin Prop 87 as something that will increase crude prices in the short term no matter which way it ends up.
That did not stop me from adding the SU Dec $75 puts for $1.90and holding them at the close for $2.20 in hopes of a retest of oil’s low for the year. SU is still $3 above last month’s option expiration and is $13 over last November’s high. The EPS estimate for Q4 is $1 vs. $1.26 in Q4 ’05 – seems like a short to me…
We took advantage of RNWK‘s big run to sell the $12.50s for .20 against the Dec $12.50s, now .35 (up a nickel). This lowers our basis to a very…
More Momentum Monday!
by - November 6th, 2006 7:02 pm
Well that was a nice week’s rest wasn’t it?
Mr. Jones reasserts himself, wiping out 6 sessions of losses in one fell swoop but stopping just over the 12,100 line in a very impressive outing.
Who would have thought that could happen? Oh yes…. me!
Those DIA Mar $121s are already $4 (up 20%) and, of course, there was no reason to take the puts on today’s action.
Of course, had I really known it would take off this quickly, I would have gone for the current $121s, which doubled today from .45 to .90 but I was still concerned about pre-election jitters (but I guess I’m the only one).
It seem the virtual assurance of a Democratic House with the Republicans maintaining control of the Senate is just the kind of hopeless two years of gridlock that investors have been hoping for.
We all know I am no fan of a commodity rally but today’s round of merger mania left investors feeling everything is undervalued.
OSI is being taken private for a 23% premium, NVDA is buying our old friend PLAY (good move), HET is buying LCLBF (old news), MCK is buying PSTI for a 15% premium, ABT is buying KOSP for a 50% premium (nuts) and FS is being bought by Bill Gates and Saudi Prince Alwaleed for a 28% premium.
That’s a $14Bn day!
The S&P blew through my 1,370 bullish target and didn’t look back until it beat 1,380 where it decided to take a quick break.
The NYSE tore through 8,800 by 1pm and never looked back while the Nasdaq took a mild rejection off my 2,375 target in the final minutes, but didn’t look worrisome.
The SOX were the real star of the day with a 2% gain right through the 50 dma finishing near the day’s high at 457 and the transports gapped over the 200 dma and closed at a whopping 2,609.
Gold was well behaved, hanging out at $627 but still not impressing the miner stocks while oil moved up .88 to $60.02 and that sector acted as if $100 oil was right around the corner.
Perhaps it is, as I see nothing else that explains the number of record highs being recorded in the oil patch. Other than VLO, the bulk of the regulars we watch have moved 35 to 50% above the trend for oil in the past 3 months.
I’m not…
Friday Wrap-Up
by - November 3rd, 2006 9:07 pm
Hey I have a hot stock tip for you!
This is an industrial producer that plays off the global economy, very heavy into consumer products.
From 1980 to 2000 this was a 10-bagger but it flatlined after 9/11 and is just coming back out of its shell at 119.86 after hitting some resistance at 120. The p/e is down at 14.71 and it pays a 2% dividend.
I like the March $121s for just $3.40 with 2/3 Dec $119 puts for $1.40, just in case.
Sound interesting?
It’s the Dow silly!
Talk about getting no respect, the DIA is the basket of 30 Dow components that has gone from $108 to $120 in less than 4 months riding on the back of a strong global economy that is not likely to go away but a pullback from $121.55 to $119.77 has everyone screaming for a duck and cover.
Of course I am no fan of the Dow as an index and I’d love to be able to jettison some underperformers like GM, but that doesn’t mean the group doesn’t have some steam left.
As long as oil remains under $60, we should be able to hold our levels, which in comments today, I determined to be 11,922 or, at worst, 11,819. Upside resistance should come at 12,133 and we should retest it some time after the election.
DIA lost .69 this week, down to $119.77 and people are writing articles like this declaring it to be all over. Gee, I’m glad I didn’t dump my TM that fast when it pulled back from $109 to $107 back on Sept 22.
In fact, if the Dow jumped up and down as much as TM on its way to new records, there would be lots of traders doing a whole different kind of jumping!
So I still like the market after this week but I’m no longer in love with Mrs. Jones and the Dow’s going to have to earn my respect again if he wants me to call him mister.
The S&P finished the week at 1,364, a little sad but well above our 1,360 worry zone. The NYSE ended up at 8,716 and I remember wondering if we could ever take out 8.700 at the tail end of a 500-point run since 9/11.
The Nasdaq finished right at 2,330, down 20 points for the entire week after gaining…
Thursday Wrap-Up
by - November 2nd, 2006 8:53 pm
Come on – is that all the bears have?
An Intel downgrade a BA pullback, WMT’s poor sales and HON pulling back .33 made up almost the entirety of the Dow’s losses. Half the components were positive but all were understandably nervous and only JNJ managed to add a full point.
Let’s remember that a true champion has to prove he can take a punch and the Dow is moving into its Rocky phase as we test the 12,000 level.
The real story of the day is the 45 point rise between 9:50 and 11:20 that almost took the Dow positive for the day. After all the nonsense, we ended up just 12 points down on the day at 12,018.
http://stockcharts.com/gallery/?djia
The S&P also refused to lose, down just 0.03% for the day while the Nasdaq cut it even closer with a 0.01% loss while the NYSE decided to show off and actually finish up 4 points at 8,722.
We got no cooperation from the SOX (down .5%) or the transports (down 1%) but that Just Didn’t Matter today – Lost your SOX? No means of transportation? Is it over? No way!
We don’t need housing, we don’t need transportation, we don’t need chips, we don’t even need energy (as they were a sad little group today), we didn’t even need the Bankers as the BKX lost half a point. Nope we don’t need any of those things!
What did do well today? As usual, the Brokers did well, as did Hospitals but on the whole it was a lack of bad sectors that kept the markets afloat – things just didn’t go down… Even retail was a mixed bag despite the bad news this morning.
One thing that went down hard today was crude oil, which dipped down to $57.88 at the close, although you wouldn’t know it from the flat performance of the energy sector.
http://futures.tradingcharts.com/chart/CO/C6
That did not stop us from going in and out of oil puts all day with several 20% gains in XOM $70 puts and XLE $55 puts. The CVX $65 puts did not work out so far and are in for an average of .45 (down a dime). The XOM $70 puts remain at an average of .75 and are even now while the 3rd round of XLE $55 puts are up a…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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