Options Trader: Tuesday Morning Ideas

by: Philip Davis

Here comes that down market thing!

A little profit taking ahead of the Fed, I think. Let’s see what else is on the Briefing.com calendar:

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briefing calendar

As I said yesterday, it’s that big, scary FOMC statement on Wednesday that has everyone up in arms along with Trade numbers and a budget statement. Raise your hand if you think all that’s going to sound good! What, just one? OK, Kudlow, thanks for your vote…

Retail sales is behind curtain number 3 and expectations (judging from the poor retail sector performance this month) are pretty low. That’s where I think we get an upside surprise (see MA’s 1Q report). The Friday PPI can put us right back on inflation watch into the weekend, so it is indeed a good time to lighten up.

We’ve been trying to lighten up for two weeks now with trailing stops on most of our positions, but the darn things just won’t trigger. Today may just be the day and I welcome the opportunity to shift the portfolio to a mainly cash position, as it may indeed be time to pick up a few puts.

Still on tap for earnings we’ll be watching are:

• Tuesday - aQuantive, Inc. (AQNT), Bioenvision, Inc. (BIVN), Coeur d'Alene Mines Corporation (NYSE:CDE), CVS/Caremark Corporation (NYSE:CVS), Duke Energy Corporation (NYSE:DUK), Dynegy Inc. (NYSE:DYN), Expedia, Inc. (NASDAQ:EXPE), Harrah's Entertainment, Inc. (HET), Holly Corporation (HOC), Marsh & McLennan Companies, Inc. (NYSE:MMC), Marvel Entertainment, Inc. (MVL), Molson Coors Brewing Company (NYSE:TAP), Playboy Enterprises (PLA), WCI Communities, Inc. (WCI), Brightpoint, Inc. (NASDAQ:CELL), Cheniere Energy, Inc. (NYSEMKT:LNG), Cisco Systems (NASDAQ:CSCO) (biggie), Electronic Arts Inc. (ERTS) (early retail peek), Leap Wireless International, Inc. (LEAP) (my kids care), Papa John's Int'l, Inc. (NASDAQ:PZZA), priceline.com Incorporated (NASDAQ:PCLN), and The Walt Disney Company (NYSE:DIS) (biggie - need ‘em).

• Wednesday - Cache Inc. (NASDAQ:CACH), Cimarex Energy Co. (NYSE:XEC), Frontier Oil Corporation (NYSE:FTO), HEALTHSOUTH Corp. (NYSE:HLS), Legg Mason, Inc. (NYSE:LM), Toll Brothers (NYSE:TOL) (big mover), TXU Corporation (TXU), EGL, Inc. (NASDAQ:EAGL), Gmarket Inc. (GMKT), Service Corporation International (NYSE:SCI), The Knot (KNOT) (got ‘em) and Whole Foods Market, Inc. (WFMI).

• Thursday - Consolidated Edison, Inc. (NYSE:ED), Lamar Advertising Company (NASDAQ:LAMR) (is Cramer right?), Micrus Endovascular Corporation (MEND), PG&E Corporation (NYSE:PCG), Sara Lee Corp. (SLE), Station Casinos, Inc. (NYSE:STN), Superior Industries International Inc. (NYSE:SUP), Tweeter Home Entertainment Group, Inc. (NYSE:TWTR) (retail), Urban Outfitters (NASDAQ:URBN), Vonage Holdings Corp. (NYSE:VG) (should be fun), American International Group, Inc. (NYSE:AIG) (got ‘em), Cell Genesys, Inc. (CEGE) (got ‘em), Medifast, Inc. (NYSE:MED), NovaStar Financial Inc. (NFI), NVIDIA Corporation (NASDAQ:NVDA), Progressive Gaming International Corp. (PGIC) (need ’em) and THQ Inc. (THQI) (need ‘em).

• Friday - Goldcorp Inc. (NYSE:GG) (got ‘em) and Helen of Troy Limited (NASDAQ:HELE).

So plenty left to do for the week, but the Fed overshadows all until it is overshadowed by the retail numbers and the PPI. There are reports here that may give Apple Inc. (OTC:APPL) more fuel, but nothing that will really give Google a reason to get going.

Asia had a bit of a pullback today as the dollar dropped to scary levels - finally falling against Asian currencies as well. Since the dollar index is a basket study, this could trigger a whole new wave of declines and we may test 80 on a soft Fed statement. Shanghai was the great exception with a 2.8% gain as retailers and property developers in China couldn’t be doing better. Our
Mitsubishi UFJ Financial Group Inc (NYSE:MTU) led the banks higher with a 2.3% gain, but miners pulled back some as merger mania subsided.

Queen Elizabeth I

Speaking of mergers, our pals at Arcelor Mittal (NYSE:MT) put in a $4.5Bn bid for AK Steel Holding Corporation (NYSE:AKS) (30% premium) as the EU moves to cut aluminum tariffs. Interesting that their economy is going so well that they are cutting tariffs to lower prices, while our economy is doing so poorly that Congressmen think tariffs are the answer…

The Queen is over at the White House today and rumor has it they’re going to make a bid to buy back the colonies while the exchange rate is so good.

The EU also raised their economic outlook for the year to 2.9%
, up .2% from the February estimate. "The EU and the euro area remain on a brisk growth path," said Joaquin Almunia, the EU’s commissioner for economic and monetary affairs. The commission said strong domestic consumption and rising employment will help sustain economic growth this year. However, it added that the slowdown in the U.S. housing market and higher-than-expected oil prices pose risks to the EU’s growth. This is causing Europe to trade down this morning and is damaging our pre-market trading as well.

Let’s keep it in perspective today as a mild pullback would be fine, but hopefully we can hold 13,250. The S&P 1,500 is the one to watch, but we really don’t want to lose 500 on the SOX!

US Markets

As you can see, we’re a long way from testing our moving averages. Note the little downspikes we had last Monday, however, as we try to keep some perspective. Still, we want to stop out of our weaker positions and add to some that we still have faith in Toyota Motor Corporation [(NYSE:TM), for example] and I’ll be solving my stress problem by showing up in the afternoon and just seeing what positions are left as I have a morning meeting.

Happy Trading was already concerned about the S&P last night so let’s focus on this chart today:

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S&P 500 Daily-3-Months

This would be a real bad day for oil prices to try to assert themselves but we are pre-inventory, so we can expect an afternoon pump. ZMan has evidence of OPEC cheating and feels $60 is going to be tested again. We both wonder what will happen to natural gas when all the shorts have covered. Let’s watch out for Brent getting back over $65 and our $62.50 mark on WTIC. I’ll be surprised if gold can’t crack $690 at this point.

Oil and Dollar

Motorola, Inc. (MOT) is another stock on my accumulate list (’09 leaps) as Icahn got thrown out at yesterday’s meeting. While it may hit the stock short-term, the lasting effect will be to spur management to make some prettier numbers.

Be careful out there today!