Dow 12,510! If only this weren't a low volume week I'd be really psyched right now, but we'll certainly take what we can get and we got a lot today...
- Dow 12,500 is already in the rearview mirror -- can we hold it?
- Transports leaped over the 200 DMA at 2,580 and finished at 2,605
- S&P took out 1,425 and proved it's serious!
- NYSE gave us a new high at 9,179.
- Nasdaq beat 2,425 but we remain unimpressed under 2,450!
- SOX could not break the 50 DMA at 70 and is our only danger sign at the moment (but it's a big flashing one!).
- RUT blew through 790 and still needs another attempt at 800.
The market reacted very well to the housing news today as the earlier drop in mortgage applications (less chance of Fed hike) balanced perfectly with a rise in new home sales, meaning we may have actually cooled the housing market without crashing it! While it still remains to be seen -- mega kudos to the builders for putting the brakes on (most of them) without getting into too much trouble.
Oil was a great help to the markets with crude falling all the way down to $60.34 after failing to hold $61 early in the day. With 15 trading days left, the February open contracts still stand at 300M barrels so tomorrow's inventories will be very telling (of course, without a 100M barrel draw, they are still in trouble!).
Most of the energy stocks kept the faith today, and I just couldn't resist the ExxonMobil Corp. (NYSE:XOM) Feb $75 puts when they hit $1.70 at the close. Hopefully we can buy some more tomorrow for a little less! Here's an interesting development -- while the '07 contracts generally dropped .75 today, '09-'11 contracts dropped over $1 across the board. If you need to lock in some oil for Dec 2012, $64.80 a barrel is the going price!
Come on peak oil guys! This is the opportunity of a lifetime to be the last man in America with a barrel of oil... Demand is rising, supply is falling, Brazil, China, India... 5 more years of depleting our reserves and industrializing the planet and $64.80 is the best you can do??? T. Boone should be betting the farm on this one! So far there's only takers on 11,692 contracts, while 11M shares of Exxon were bought up to $77 today. I wonder which will be worth less in 5 years?
By the way, if Exxon buys an average of 2M shares of its own stock every day (see numerous articles) then there's no reason to think they buy less in a low volume week, so it's possible that today, a full 20% of the volume was Exxon buying their own stock back -- now we know the answer to the question "what idiots are buying this stock for $77?"
The dollar was flat but did drop slightly below the 84 mark in light trading but gold could not hold onto $630 and finished at $626.
Copper came back and forced us out of the Rio Tinto plc (RTP) $200 puts for $2.40 (up 26%). We would have done much better to follow the rules yesterday and taken the double off the table! On the bright side, Phelps Dodge Corp. (PD) also recovered and took my putter out of the money.
Despite the amazing recovery, we were cautious about entering new positions, and it was noted that big stock favorites like eBay Inc. (NASDAQ:EBAY), Motorola Inc. (MOT), Microsoft Corp. (NASDAQ:MSFT) and Starbucks Corp. (NASDAQ:SBUX) were not participating in our little stock party.
If we're going to have a blowout that finally launches us firmly into space, we need to get everyone involved and we're not quite there yet... Still we had lots of fun trading today!
Apple Computer Inc. (NASDAQ:AAPL) was amazing today! They came back enough to give me another shot at selling the Jan $85s for $2.70 and this time I locked it in. Even better was our play on the Feb $80s which we picked up right at 9:39 for $4 while everyone else was selling (25M shares in 30 minutes). At the end of the day we sold the Jan $80s against those for $4.75, giving us .75 in our pocket and a very free look at earnings.
However, based on the continuing saga, we may want to buy out our caller already tomorrow morning, as the stock dropped another 3% after hours as the scandal continues so stay tuned! Our thanks to Soccer for keeping the caution flag flying on this news which kept us from leaving these plays naked!