Options Trader: Wednesday Morning Ideas

by: Philip Davis

Is today the day for 13,000?

Thanks to another round of good earnings the futures are looking bright this morning (7am) -- even AirTran Holdings Inc. (AAI) figured out how to make money this quarter and, if this becomes a trend, may be just enough to pull XAL out of the dumps. British Airways plc (NYSEARCA:BAB) is so disgusted with the performance of the U.S. airline industry they are leaving the NYSE, which is a real shame as I was just getting ready to short them as they attempt to overpay for Spain's Iberia Airlines.

Speaking of airlines, Boeing Co. (NYSE:BA) had blowout numbers -- beating analysts' expectations by 10%, but "only" in-line with the dreaded "whisper" number, so it remains to be seen how they get treated. Boeing's order backlog is up to $262B, larger than the GDP of all but 35 countries! There are even less countries that run at a net profit, and Boeing's net jumped 27% to $877M for the quarter. Guidance is a little light as the company needs to spend a lot more to ramp up production but, on the whole, I'm very pleased with our leaps. I would be a buyer on any dip here.

No politics during the week but the Daily Show yesterday was hysterical with George Bush debating himself, Gonzales debasing himself and John McCain defending the war -- even McCain had trouble keeping a straight face trying to downplay Iraq's problems. John Stewart made a great point about how tragic the recent shooting at Virginia Tech was, and asked McCain to put that in perspective for the Iraqi people for whom 32 deaths is considered a calm day.

Asia's day was not calm as the Nikkei took a 215-point dive. Japanese investors are a lot more concerned about our poor economic numbers than we are. Still it's a pretty mild pullback, and next week is a market holiday with China closed all week -- so you can't blame them for taking a little off the table... India continued to take the lead with an 81-point gain and Hong Kong finished about flat.

Muscles 25 04 2007Over in Europe the race is on to see who can pay the most for ABN Amro Holding N.V. (ABN) with those pesky Scots coming in with a $98B offer to top Barclays by over 10%. Someone seems to be making a play for British supermarket Sainsbury, but Spanish property companies are pulling back, indicating that boom may be peaking. European indexes are coming back strong from yesterday's dip, so we will watch their finish closely today to see if we have the green light for a new record.

At home we have earnings, earnings, earnings -- but let's not lose sight of what's important: Apple (NASDAQ:AAPL) earnings! Those come after the bell today, and we'll see if my $100 by July target holds up (we took that play on the Thanksgiving dip). It's the economic data that is most likely to derail us today, that or another attack of $65 oil as the markets clearly responded to oil's change of direction yesterday. Amazon.com Inc. (NASDAQ:AMZN) sparked a Nasdaq rally in overnight trading and, over at Wang's World, Happy Trading notes that the Nasdaq still has some tough resistance at 2,525 so it will be interesting to see what happens as we gap over it this morning.

Naz 25 04 2007

We should be making a few interesting levels today but the question is -- Can we hold them:



Day's Move

Must Hold

Comfort Zone

Break Out

Next Goal

Dow 12,953 34 12,468 12,600 13,000 13,500
Transports 2,889 -12 2,825 2,900 3,000 3,250
S&P 1,480 0 1,430 1,460 1,500 1,550
NYSE 9,648 -12 9,218 9,465 9,600 10,000
Nasdaq 2,524 1 2,454 2,500 2,600 2,750
SOX 499 15 477 490 500 560
Russell 826 -1 803 820 850 900
Hang Seng 20,536 -36 20,200 20,600 21,000 22,000
Nikkei 17,236 -215 17,400 17,500 18,300 18,500
BSE (India) 14,217 81 13,200 14,000 14,725 15,000
DAX 7,314 44 6,900 7,000 7,400 8,000
CAC 40 5,937 51 5,650 5,800 6,000 7,000
FTSE 6,458 28 6,325 6,450 6,600 7,000

Hmm, this could be going better... What we really don't want to see is India slipping to follow the Nikkei down, and the FTSE is hardly out of danger so we'll continue to watch that closely. It still hangs on the Transports, many of whom report this week, but let's make sure the NYSE keeps that leadership role as both the Dow and the SOX have an opportunity to join it in the breakout column.

US Markets 25 04 2007 Chart

As more evidence of our country's race to go from first- to third-world, our global ranking of broadband access has dropped from 1st (I won't say when, as it would sound like a political comment [it coincided with the administration before the current one, which promised nationwide access by 2007]) to 15th, down from 12th last year! "It's a national embarrassment and the only way to change it is to develop a broadband strategy like every other industrialized nation has already done. These rankings aren't a beauty contest -- they're about our competitiveness as a country and creating economic opportunity for all our people," FCC commissioner Michael Copps, said in a statement.

If we intend to be globally competitive, a great way to start would be to get more than one out of 5 people a high-speed web connection! Take a look at this chart and tell me which side of OECD countries you most wish to identify with:

Broadband subscribers 25 04 2007

Notice Japan and Korea laying down the fiber! That's going to really matter in a YouTube world. Remember that Germany includes East Germany, which would be like us including Mexico. But Austria should pass us by the end of the year. If we try real hard, we may be able to catch up with Luxembourg in developing a competitive infrastructure!

Oil inventories are today, but the dollar is falling again as our very sad housing data has deflated international confidence in our money even further than the worst in two years. Zman will have the rundown on oil and a 1.5Mb draw is expected at 10:30, but suddenly they are calling for a BUILD in gasoline -- even though we haven't had one in a month. If oil breaks $65 again we should emphasize the hedge on our Suncor Energy Inc. (NYSE:SU) play, but we'll see how some of the other earnings play out during the day.

Gold remains below $690 for now, and anything below $700 is a good sign that the world isn't going to blow up soon. As expected, durable goods orders were better than expected and Pepsico Inc. (NYSE:PEP) and Colgate-Palmolive Company (NYSE:CL) had nice numbers, so the earnings should continue to trump all as the market marches on.

Oil Dollar Gold 25 04 2007 Chart

Have a fun day!

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