Options Trader: Friday Morning Ideas

by: Philip Davis

Well it’s been a while since we’ve been glad to get out of a week, but let’s get this one over with!

Please make a post-it and put it on your monitor. It should say two thing:

• It is NOT my job to save the market
• If it doesn’t bounce over 20%, it’s not recovering!

This is no time to be a stock picker; this is the time to be a trend spotter. We have our Nasdaq calls as a general call on the markets, but it’s a long way to go before we are "back on track" for the week. Happy Trading has several market watching charts up this morning over in Wang’s World, but I placed my bet on the Nasdaq (if anything is going to recover at all):


This will be an easy day to make a decision as anything down is very, very bad!

Asia was not too bad this morning with the Nikkei and the Hang Seng dropping "just" a little over 1%. Of course, export companies took a big hit as worries about the weakening U.S. consumer dominated trading. Over in Europe, the markets are trading down at their open other than the U.K., which is being led back up by merger mania in the mining sector.

Eni S.p.A. (NYSE:E) posted a 13% decline in profit as oil prices fell. Gasoline demand dropped even though the shadow cartel member cut production 5% for the quarter. "Lower European gas demand pulled worldwide gas sales down 10%" and you will see Criminal Narrators Boosting Crude scrambling today to tell you ANYTHING other than that truth. The IEA is doing its best to stir the pot by coming out with a drop stopping report that claims we will have a tight summer due to demand. "You’re going to end up with a tightening of the product market in June. By July you’ll have a potential for a 2.5 million barrels-a-day increase in refinery throughputs," said the report’s editor Lawrence Eagles. "You need to have supplies increasing by that amount but we’re not seeing it in shipping data" and elsewhere.

The "Core" Citigroup Funding Zero Cpn Nts (PPI) came in flat, so look for another round of traders deluding themselves that the Fed may cut rates. They arrive at this conclusion by ignoring the fact that if you do factor in food and energy, the "Non-Core" PPI is up a shocking .7% in one month. I’m not even going to multiply that by 12 as we won’t be able to sleep this weekend, so let’s just pretend it doesn’t exist - just like a "leading economist!"

Unfortunately, if we don’t close above our 50 dmas today, it is likely to be hello 200 dma next week:

US Markets

All our majors are at critical levels and if they don’t hold here, Monday could be very exciting - but in a bad way…

Oil still needs to get back over $62.50 and if they can’t make it on this coordinated mega pump, then they may be in serious trouble next week too. This actual glut of oil that is filling every nook and cranny in this country runs headlong into the fantasy of an oil shortage that is being used to prop up prices.

Oil and Dollar

That’s the July contract by the way. Notice that it, too, is near a critical failure for the week. It has been mainly supported as unused barrels have been rolled out of June and into July by traders who actually have no place to put them. They are faced with the choice of canceling contracts or swallowing another month’s worth of premium in hopes that something horrible will happen in the world so they can profit from it. Best of luck, boys!

ZMan points out that yesterday’s 96Bcf injection puts us 21% above the five-year storage average, but much is being made that we are 12% below last year’s record levels. Let’s not forget that Chesapeake Energy Corporation (NYSE:CHK) had to cut 10% of their production in the fall to relieve this glut and that company is being punished for its cartel activities as the cut didn’t raise prices enough to offset the lower sales.

Let’s be careful out there today, anything can happen and we need to go with the flow!