We won’t really know until the end of next week, but we’ve had far too good of a year so far to take chances up at this level and I doubt many hedge fund managers will disagree with me. My comment on the subject yesterday was:
While we could drop 150-200 points by Friday I think that’s what most fund managers are expecting and NOT dropping 100 points by Friday will but me (as a fund manager) heading into the holiday weekend on the wrong side of the market. That will cause me to put money into things that seem like they will rally but should be safe like MSFT, GOOG, MRVL, UPS… solid names that haven’t rallied with the markets.
Asia held flat this morning, probably also watching and waiting to see how we handle 13,500, but more importantly, how the S&P handles 1,520 and, hopefully, 1,530. The BOJ held rates steady despite some pretty good economic numbers, cutting the dollar a huge break. It looks like we may have take those PetroChina Company Limited (PTR) calls off the table too early with "just" an 800% gain as that company continues to gather steam. Mega Kudos to Happy Trading and Zman for sticking with this one as a focus stock in the oil sector.
A weaker yen is good for the dollar and good for our Sony Corp. (SNE) position, but I’m not going to push that one too far either (1/2 out yesterday), and I’ll be happy to get out of our iShares MSCI Japan Indexes (EWJ) even if our markets start to turn down. Europe had a weak finish yesterday, but is trading mildly up ahead of our open this morning. Insurance companies lead the pack over there but BT Group (BT) (British Telecom) caused a stir with a $5B buyback.
Arcelor Mittal (MT) announced a 40% rise in Q1 profits. Fiat continues to gain market share as Europeans buy smaller and smaller cars as the well-educated European consumer "gets" that whole supply and demand thing.
It looks like we’ll be bidding a sad farewell to Paul Wolfowitz in yet another signal by the rest of the World that the US doesn’t call the shots anymore. There will be a lot of pressure on Bush to pick a non-American to lead the bank. I expect a Bolton-like " F-you " nomination from our President, but let’s hope he proves me wrong…
Today is a good day to sit back and enjoy the show. I wish I would have gotten more off the table yesterday and I will continue to pare down positions today (although this will be three days in a row I’m trying to kick the call habit!). We need confirming moves from the Nasdaq, the SOX and the Russell before I break out a new chart, tempting though it may be to put on a rally cap for 15,000 - I still think we’re at least a summer too early:
We are just 13 points away from the ATH on the S&P and I predicted on May 3rd that the Dow would break 13,500 on the same day that the S&P breaks 1,527. But we were just 25 points away then and we are only halfway there, while the Dow has made almost all of the 250 points it needed to get to its goal. Happy Trading is liking the S&P chart, but I’m very paranoid about option expiration shenanigans pulling the Dow back 100+ before we can make a serious attempt at our double breakout:
It’s all about containing oil prices and they pulled out all the stops yesterday to keep June barrels over $62.50, but it will be tough sledding into Monday’s contract close as the NYMEX is carrying 167M barrels worth of open contracts with just three days left to trade. Zman has an excellent review of yesterday’s inventory report and a preview of today’s natural gas numbers. We nailed it on the head yesterday with a top and bottom call (we even got the head-fake right at 10:30), so tune in this morning for the play-by-play!
As I predicted yesterday morning (and for two weeks), these ridiculous crack spreads cause tankers full of gasoline to race across the Atlantic as ripping off the American consumer is not the sole responsibility of Tesoro Corp. (TSO) and Valero Corp. (VLO). This is the catch-22 they fall into as they have to shut down refineries to maintain a "crisis," but that leaves a door open for foreign competition to supply our markets as crack profits quickly outweigh transportation costs.
It ain’t over ’till it’s over for dollar bears as the dollar has pretended to recover pretty much once a month for the last 5% drop. This one is starting to feel good, though, so we’ll be watching that 82.50 line with great interest. Gold $640 and copper $320, however, will be the real test of dollar strength. Will a strong dollar hurt our markets or will foreign investors be thrilled to see their dollar-denominated US equities fly up relative to their declining currencies?
Lots to think about!