Options Trader: Monday Outlook

 |  Includes: DIA, QQQ, SPY
by: Philip Davis

There was a huge sell-off in Asia this morning.

The Nikkei dropped 610 points (4.5%) and the Hang Seng dropped 746 (3%) and India banged into the 5% rule, down 900 points even. The dollar fell to a 3-year low against the Yen. "It seems like everyone came in today, saw the weakness in the U.S. on Friday and sold," said Pierre Gave, an analyst at Hong Kong-based GaveKal Research, referring to Monday’s trading in Asia.

Our brand new holding, (NYSE:TM), dropped 3.7% and (NYSE:HMC) fell 5.5% with SNE dropping 3.8% and financials were hit particularly hard but it was good, healthy panic selling that may firm up a bottom at some point. HBC actually posted a 21% net INCREASE in net profits for 2007, with strong growth in Asian operations offsetting the impairment charges that first panicked the markets in the Fall. This does not fit in well with the catastrophic predictions that have been giving the financial media huge ratings this year (although not in their key demo as old people and soccer moms are tuning in while target investors are tuning out - sick of the shenanigans and the truly terrible advice).

In their key demographics (men 25-54) Neilson shows an absolute catastrophe for Clueless Narrators BS’ing Consumers in Jan 2007 to Jan 2008 comparisons so when you see Jim Cramer sweating a little more than usual, it may not be just his portfolio he’s worried about! The numbers are:

Squawk On The Street -19%
The Call -23%
Power Lunch -40%
Street Signs -34%
Closing Bell -29%
Fast Money -31%
Mad Money -32%

Gee, who’d have thought that allowing a bunch of fund managers to parade on camera and boost their conflicting agendas with no editorial oversight leading to chaos, confusion and losses among the viewers would become unpopular. Kudos to American males ages 25-54 for waking up to this idiocy!

Europe is also selling off Monday morning, down about 1.5% as of 8:30. NOC/Airbus won the coveted $40/$100Bn Air Force contract - something I am furious about as we’re spending $168Bn in order to send people $600 yet we’re sending 40,000 $1,000 PER WEEK jobs out of the country with another $100Bn of our tax dollars. This is the most ridiculous thing I’ve ever heard of! And when the employment situation in this country gets worse and the tax base shrinks and the government cuts the Air Force’s contract back due to funding cuts - let’s remember to laugh at these idiots who are supposedly there to protect the interests of AMERICANS but decided they’d rather defend the unemployed ones.

So we are taking $100Bn US dollars and using them to buy Euros to pay Airbus - gee, that should be a real help for the dollar right? "We should have an American tanker built by an American company with American workers," said Rep. Todd Tiahrt, R-Kan., who represents the district in Wichita where Boeing would have done much of the tanker work. Tiahrt said he will try to reverse the decision.

Another big decision comes tomorrow when we may be saying goodbye to one of our Democratic candidates. Both Obama and Clinton have already spoken out and many people are blaming McCain, who reversed the 2002 award of this same contract to BA, for derailing the tanker deal that had looked like a sure thing. McCain is also coming under fire for his "Read my lips, no new taxes" idiocy that has sent the dollar down to the 7th circle of hell and he spent the weekend backpedling on an economic platform that was looking more and more Bushy every day.

In Monday’s action we’re simply going to be happy to hold 12,200 on the Dow and getting back over 9,000 on the NYSE would be nice as well. We need Nasdaq 2,300, Russell 700 and SOX 250 in order to get back on the very lame track we fell off of last week but it’s better than nothing and we’ll take it.

I sincerely HOPE the dollar can’t go any lower than it is now but that’s a far cry from last month, when I was fairly sure we’d find support at 75 (now 73.70) but a lot of traders are looking for a retest of the Jan 22nd lows so let’s not get all excited until we really establish some kind of floor 1,310 was the non-spike low on the S&P in January but 1,325 has held since then so let’s call that our danger zone. Oh, and let’s not forget, $100 oil - IS BAD!

Fasten your seatbelts, it’s going to be a crazy week!