Thursday, January 4, 2007

1/4/2007 Morning Market Comment

Transportation related stocks should fare well as the price of oil plumbs the depths of the $56/bbl range. Looking back at the last couple of years, this level of $56 has been major support/resistance:

An argument can be made that a drop in crude reduces inflationary pressures on the economy which is a negative for gold, which got to as low as $625/oz, leaving me holding just GLD for the time being. But it's likely that with the Fed being forced to lower rates later in the year while the ECB raising, the pressure of a falling dollar will serve to push gold higher.

If yesterday's roller coaster of being up triple digits, then down by about 50, then up again has you wondering about volatility, it has me to. I am looking at $VIX calls, probably something near the money and out into March.

Interesting, but not surprising that retailers posted less than stellar December same store sales. There were some big winners like Aeropostale with a 13% gain and Gymboree, up 15%, otherwise most were up low single digits. Hot Topic (HOTT) is one of the biggest losers, down 17% on weaker than expected sales. Still, it will be fun to see the governenment later this month report December retail sales up by a large amount, as they did with November even after retailers said that month was lousy.

Pirate Capital reports an 8.5% stake in Brinks (BCO), notifying the compamy by snail mail.

Apple picked up another price target upgrade from JPMS, going from $84 to $92. Piper also says it expects the company to announce iTV at Macworld putting the odds at 10 out of 10, and odds for an iPhone announcement at 9 out of 10. I have no dog in what has turned out to be a monumental fight between the longs and the shorts in Apple, but it seems that Piper's odds portray a pretty darned bullish scenario.

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