Monday, April 30, 2007

Don't You Just Hate That Sluggish Feeling?

Economic Report: U.S. consumer spending sluggish in March.

Stock futures actually perked up after the report's release - that old hope for lower rates thing in the face of weakness. It also helped that core PCE was less than expected as inflation becomes more closely watched by investors. Perhaps the market will also be buoyed by some final day of the month window dressing? At this point, it sure looks as if someone is looking for an excuse to buy.

While this is an unsually quiet merger Monday, here's something to chew on. In looking at Trimtabs data that a friend sent along, it is amazing to see just how large the float-shrink has been this year. Stock buybacks and cash takeovers have totaled over $400 bln this year, while insider selling and new offerings total just about $115 bln. The net effect: the market float has been shrinking over $4 bln a day.

I am going to be on the road later in the day, so posting may be limited after the trading day begins.

Morning Market Comment

This week will be a waiting game for many - waiting for this Friday's April employment data; not only waiting, but positioning ahead of it. Even today a couple of important economic data points are on tap: At 8:30 the latest read on personal income and spending; 9:45 Chicago-NAPM is expected to how an April decline to about the 54 mark. March Construction Spending Figures are due at 10, and a small .1% gain is expected.

Asian markets were mixed to modestly in the red overnight following word of China's tighter reserve requirements. While gasoline is up more than a cent on the latest refinery outage in Oklahoma, WTI crude is down about 50-cents. The net effect, is a modest rise in S&P futures. I put up a post on Saturday wondering if there might be any fireworks from China or gasoline, but it appears as if it's a very dull early start to Monday.

There is NO mergers and acquisition activity above the $1 bln mark I can find impacting a U.S. company this morning, despite a plethora of takeover speculation during the past week.

The Wall Street Jounral has a big scoop on a potential deal: Deutsche Boerse is considering a bid for New York-based International Securities Exchange for about $2.6 billion, or about $68 a share, people familiar with the matter said.

Pete Stolcer's OneOption.com has a full list of movers this morning.

See the latest on hedge funds at: http://www.hedgefunds-weblog.com/.

Sunday, April 29, 2007

It Could Be An Interesting Monday

I am staying in the 3rd floor of a grand old Victorian home in Cape May, NJ for the weekend - just hangin' out, seeing some sights, etc ahead of the crowds. But I did bring the laptop and the Verizon Wireless internet access card. So with the kids asleep and as I watch a well done History Channel show about Sherman's march across Joe-ja (big Civil War buff here), I thought I would bring a few little things to your attention that have me wondering about the welfare of the stock market bulls come Monday:

Call it - Oklahoma Burning. The 50,000 barrel per day Wynnewood refinery in Wynnewood, OK has been shut down by two large explosions: Fire shuts Oklahoma refinery, no injuries. Granted, its 50k bpd serving mostly the west, but as the article notes, this latest refining loss is on top of the shut down of a Valero 170k bpd refinery. This is likely to result in a spurt in gasoline futures and send overall quakes and quivers through the energy regime, in turn potentially causing a negative impact on stocks, at least for 5 minutes or so on Monday. I can't imagine that this would be anything but bullish for the refiners in the immediate near term.

China may also cause some tension. Reader Yal gave me a heads up in the comments section of tightening reserve requirements: China raises banks' required reserves again. The impact from this may also only be briefly negative here since this is starting to become routine even as the Shanghai stock market bubble gets bazooka/bubblicious big (yeah I mixed my gums when i was a kid). Never the less, tightening in China is something that needs to be warily watched after what happened in late February.

As for this Queen Anne here in Cape May, it's magestic 1886 vintage. My first home was an 1892 Queen Anne and the place I'm in tonight brings back all the memories of the interior and exterior architecture. In that old house that I had, I was right around the corner from Helen Hayes' Pretty Penny in Nyack, NY, which was eventually bought by Rosie O'Donnell. When O'Donnell remarked the other day about her "fat ass" in response to the Cheryl Crow one sheet of toilet paper thing, I had first hand experience in seeing that fat Rosie ass strolling the streets in Nyack, NY. And talk about having strange neigbors: The first thing Rosie did after she bought Mrs. Hayes' house was to put a 12 foot brick privacy wall up around Pretty Pennywhich obscured its view. While this house I'm in tonight is superb, it also brings back memories of why I eventually sold mine for something brand new: the incredible amount of work and money it took to maintain and upgrade a more than 100 year old house. I'm still amazed I still have all my fingers after using so many different power saws and things with blades to cut wood, or cermaic tile, or pipe - sometimes using those tools in an angry state if I botched the measurements... just never good to be pissed while using power tools! LOL. The innkeeper here summed it up when she said they were done renovating until fall - can't risk starting a project as the high season approaches, she told me, because you never know what other problems will crop up with the start of a project which could set you back weeks. I remember that all too well and will enjoy my two nights here and resist the urge to even think about going back to an old house again - at least I think I will.

Saturday, April 28, 2007

Thought For the Weekend: The Back Burner

For me, at least, the dismal 1st quarter GDP (remember the consensus forecasts late last year saying we'd be seeing another 3%+ GDP year this year?) at 1.3% is a reminder that a number of weighty issues have been thrust to the back burner as the Dow surges higher into unchartered territory and the S&P moves ever closer to its all time high.


What are some of the issues on the back burner? Subprime and Alt-a for starters. If you go to the news section of Google and search for either "subprime", or "Alt-a" a plethora of stories come up. No link fests from me, but this story about comments Dick Syron made Friday is eye catching: Subprime crisis expected to worsen. If you are apt to do some good old fashioned "dot connecting", which actually many don't seem to do, the comments from Syron are eye catching because if subprime hasn't yet hit bottom, you can bet that GDP hasn't bottomed yet either since Q1 is reflective of only the start of the snowballing mortgage and housing woes.

But for now, no worries that GDP is meeting the low end forecasts accompanied by faster inflation (un pc side note: that combo of weak GDP and faster inflation reminds me of one and only blind date I went on when I was 20. The young lady and her friend met me and between them their must of been about 600 pounds of blind date horror). As I wondered on Friday whether it would be a half hour of brooding for the market and then higher, or some real worry through the day; it really ended up being about a half hour of brooding and then enough punch added to the bottom of the bowl from the consumer data at 10 to at least get the Dow and the Nasdaq to forge higher.

Lately, the Japanese Yen has languished, in particular against the Euro, but even against the dollar. The carry trade is back on with a vengeance. Yeah, you remember that carry trade thing dont you? It seems to be all but forgotten in most circles as the Yen as sunk back to close to the 120 level. So carry trade is on the back burner, but a thoughtful reader and investor from France has put this great "rainbow chart" together. It's a reminder of the pain that can come back and severely test traders souls should the yen re-strengthen. The basic phenomenon is as funds and even institutions liquidate their carry trades and buy back Yen, money comes pouring out of many assets including U.S. stocks. Yes, we've been to the gates of hell and back, according to that chart and if markets behave the way they normally do, no doubt we'll be dancing with the devil again at some point in the not too distant future (can you say "retest"? - thought ya could). It's a bad thing to fight the tape (unless you have money to burn) so these have been good times to build further wealth with well tended to bullish investments. But be careful. That rainbow chart is a stark reminder of just how quickly a seemingly forgotten back burner situation can suddenly seize the spotlight and rapidy erase gains.

I'm off to Cape May, NJ for a quick trip. See You all on Monday.

Friday, April 27, 2007

Jeffries (JEF)

It's becoming a habit for options in Jeffries (JEF) where volume exceeds open interest in the call front month contracts. The Options Doggy blog has been sniffing out possible takeover potential with this one. Rumored suitor said to be Mass Mutual in the low 40s. May35 and even May40 calls have exceeded open interest. Heaven help those call buyers if nothing happens on Monday... instant move to about zero for those options.

Applebees (APPB) Eatin' Bad In the Neighborhood

I really dislike Applebees (APPB), and I've blogged about that in the past, so no sense rehashing the reasons. Investors like it today: Applebee's gets early offers for company. The upshot is more interest than expected and options players are thinking a price north of $30/shr.

Quick Screener Update

A quick narrow screen of the options market is coming up with a few little things: heavy volume ahead of the weekend in calls of Palm (PALM) and Nortel (NT).

Heavy out of the money activity with wide spreads (eg. .35 bid, $1 offer) on the Visicu (EICU) June 10 calls as well is also taking place.

Above info for informational purposes, not recommendation, or even suggestion to buy, but interesting stuff.

GDP - No Surprise, IF...

... No surprise GDP would be weaker than expected at a 1.3% annual pace if you've been reading Nouriel Roubini, or John Williams. If you've only been looking at conventional soft landing views then with all due respect you are driving with the blinders on.

But it's not all about waning growth. We're all going to be having a 'Stag' party, as in Stag-flation if the data keeps coming in as it has been: Growth cools as prices jump.

Oh, don't forget, this is only the 1st guess of 1st quarter GDP. Remember what happened with 4th quarter GDP? By the time they finished revising it, growth was cut in half from the first estimate.

So SnP futures are down 4... not really so bad. Who knows, maybe some brooding for an hour that growth is cooling and inflation is becoming a very mean monkey on Ben Bernanke's back, and then back to the races on Wall Street. But then again, maybe not since a double whammy of slower growth and higher inflation is just, well... pretty negative even for this market.

Bullish on Baidu (BIDU)

The stock is already up above $138 this morning. Piper just upped its target on the stock from $131 to $160! Piper says better than expected earnings confirms its belief that new products from BIDU are driving higher search usage. Congrats to the longs in this stock - it's a great feeling when you're in a big winner!

RBCM has also upgraded BIDU to Outperform from Sector Perform.

Morning Market Comment

This won't come to a shock to regular readers, but stock futures are lower which may mean a spell of further consolidation of recent gains is ahead for the market. Say, it ain't so, Joe! Yes, it doesn't go up all the time. Clearly the rally that pushed the stock market past the 13k mark earlier in the week came with a lot of new faces that had been boycotting the market since the late February swoon but who just had to get in once 13,000 was broken. Volume that accompanied the rise in the broader market really confirms the sudden broader participation, going from tepid (as the market was being propped by whomever in the weeks following the Feb swoon) to heavy once again.


Don't get me wrong, I'm not waving a bearish flag and looking for a huge correction today (I'm actually thinking crash when the whole thing falls apart, lol) but it looks like we're in for further consolidation, which in the case of yesterday still led to further intraday gains. Ultimately, if more serious selling comes into the picture Dow 13,000 and then 12,900 are key areas of support given how they were launchpads for broader participation. It's the recent 'broader participants' and what their staying power that has me quite intrigued.

Just for fun, here's a chart of the S&P 500.

While the chart is clearly bullish notice the steepness of the recent surge from the lows of this year. Also notice what happened (Oct 2005) the last time the S&P slammed down through its 50 day moving average only to bolt back above it in a few months: a similar steep uptrend (into November 2005). These steep upward moves don't last forever and it will be interesting to see if the market becomes more range bound somewhere above 1500. I suspect that with the the type of momentum underway, the 'go away in May' rule could be scuttled and that we're headed for the old all time highs up at S&P 1550, unless something big blows up somewhere in the world, or we get an even great dose of bad economic reality.

The star performer of the day is going to be.... Baidu.com (BIDU). The Chinese web portal company posted better than expected earnings and it's up a stupendous $27 a share.

Microsoft posted its results and its stock is managing a 5% gain. Revenue from Vista, Office boost Microsoft sales, profit. Smith Barney upgraded MSFT to Buy from Hold with a $36 target. CIBC upgraded to Sector Performer as well.

Broadcom fell on its face. Broadcom earnings dip 48 percent. UBS downgraded it to Neutral from Buy with a target of $39. AG Edwards reiterates a Buy saying Motorola (MOT) is impacting the company and 2H will be better (promises, promises). AGE cut its price target on BRCM to $39 from $41.

Gross Domestic Product comes our way at 8:30. Obviously, it could be a further day at the races, or a real wet blanket. More after the report. Q1 growth expected at 1.8%. Yep, 1.8% annual growth with the stock market above 13k., pretty cool, huh? Pricing components will also be closely scrutinized.

Thursday, April 26, 2007

The Options Screener Needs More Work

That small number of calls bought in Trident (TRID) is not going to do so well given the way the stock is reacting to the 8K tonight. This is the problem with these options systems - bad discernment. Even services that I have been subscribing to as a benchmark have this sort of trouble where the volume and volatility looks like its saying something, only for a totally different outcome. So the Screener will need another kick in the pants and more adjusting.

But, no matter - my large put position against Broadcom (BRCM) looks good to go tomorrow morning and will absorb the $1000 loss in TRID. How's this for guidance from a CEO...

"Mixed outlooks from a few of our larger customers are causing a lower than normal level of visibility into our near-term results. We believe that these issues are near-term in nature and we remain optimistic regarding our prospects for the second half of the year."

Yikes. BRCM is down over 3% and we haven't even gotten to the conference call. I decided on BRCM not because of options activity, but because of having followed this company for a while and the recently bearish comments from a variety of analysts.

MSFT beat on the top line by 3 cents, but guided a bit lower for this quarter and the year. Still, the stock has managed to get above $30. Will the CC make a difference. We'll know soon enough. Here again, the read on the options was murky with put and call volume about neck in neck, BUT given the channel check buzz for Vista and Office 2007, it seemed like a no brainer to be long.

The one that we all should have been in: Baidu (BIDU)... back to $130. Shoulda, Woulda, Coulda. Amazing.

Trident (TRID) Last Minute Trade

After seeing volume swell to over 6k, i had to buy a small 20 contract portion of the May25s just to have a little skin in the game. We'll see what happens.

High Profile Earnings

At some point this market will run out of gas. Then again, it could further be juiced up by some important numbers after the bell by companies like Microsoft (MSFT) where 46c a share is expected. Oddly enough, I am long in MSFT, the company that I love to hate. On the chip end of things KLA Tencor (KLAC) and Broadcom (BRCM) are posting as well. I am short in BRCM. Before the bell Friday, AT, BKC, CVH, CVX, CMI, GT, IR, ITT, KSE, NOV, GAS, SPG and WMI all report their numbers.

A Real Beta Test

Just an FYI.. i did not do anything with TRID... going to see what happens and whether I need to further fine tune the options screener with different volatility parameters.

Dendreon (DNDN) Followup

While my entry into DNDN was in mid single digit territory and I took a good chunk of the profits back in early April, I have rolled out of May calls and into the November calls; there's no sense in risking the remaining profit to whatever high jinks may occur because of interests trying to protect the chemo industry. We'll see what happens.

Dendreon (DNDN)

Another swipe at Provenge and Dendreon (DNDN).

Call them Frick and Frack. Read about the latest antics of Drs. Hussain and Scher via the Forbes article. As usual, crappy journalism with NO balance by way lacking disclosure on conflicts of interest of Scher and Hussain, no rebuttal from an expert supporter of the drug and no attempt to get a comment from DNDN itself - just conjecture on the part of the reporter about some cat that's both dead and alive. Reporters, I thought, were supposed to report.

Is this the Scher/Hussain plan: Keep giving prostate cancer sufferers the bug spray they call chemo and let's just completely stop the good faith efforts at trying to get something less harmful to market? We know Scher and Hussain hate Provenge, why is there no reporter to probe them for what they think would be a good next step beyond the bug spray, poison, killer concoction known as chemo?

As to the point that Scher's wife is an HR employee, that could be true, but at one time she did work in the world of high finance: http://query.nytimes.com/gst/fullpage.html?res=950DEED7153CF932A35756C0A96F948260. Of course, that NY Times marriage notice goes back to 1989 so it's possible that employment status has changed.

I canceled my subscription to Forbes a long time ago... Their website is a travesty of cluttered internet ads... best to avoid it. I rarely link to Forbes because of the spam-vertising and pop ups, but today's DNDN article is a good spectacle to check out.

disclosure: long position in DNDN.

Raw Screener Data

A bunch of stuff dumped into my Excel spread sheet from my Options Screener today.

There's follow through buying of AMR calls on the takeover rumors.

Folks also can't get enough of Amazon.com calls. High 60's at present post split levels would be $400 pre split internet boom days for AMZN, but no matter.

There's also a good sized bunch who think if WEN can find what its looking for strategically, its shares will rise above $40.

A whole smattering of out of the money Apple (AAPL) calls are also attracting big interest today.

NE has been on the takeover rumor mill list for quite some time.

Time Warner Telecom January options activity is captured a well. It;s the only volume in the entire TWTC chain, calls and puts, aside from 1 May 20 call that traded earlier today.

TRID options also active ahead of earnings tonight, as noted earlier. I'm still not sure how bullish I can be about the HDTV business in light of what's been happening at BBY and CC, but then again there is demand in commercial applications as well so BBY and CC don't tell the whole story. Amazing how the GLW and TRID charts almost match over the last year.

Nutrisystem (NTRI) also pops up, though according to the optionsdoggy website, it appears there have been some large sellers of calls today.

Again, these are not recommendations, or suggestions to do anything, but merely take a look at the system that I'm developing.

Options Screener - Trident Micro (TRID)

Today 5,221 TRID May25 calls have traded vs open interest of only 598. Earnings are due this evening. The stock has recently broken above resistance in the 22.50 area, can it make a run for the roses towards the $25 strike?

As the chart shows it's been several months since the stock has been up at $25 territory. This isn't a one way bullish bet. While the May25 call volume has overwhelmed open interest, about 3 thousand puts of various strikes in May have traded as well; that's still a 2 to 1 total May options volume favoring the calls. TRID makes components for HDTVs and digital set top boxes. No recommendation is being made here and I am myself mulling whether to jump in and there is no assurance I will.

Options Screener

Since there's been so much odd options activity of late, I thought I'd draw your attention to another example of 'strange things are goin' on'.

United Rentals (URI) sees daily option volume of just over 1,400 contracts. Already today a couple thousand have traded in the May chain and out of the money and eclipsing open interest. This isn't breathtaking volume like AMR or others yesterday, but curious. Nearly 1700 May 35 changed hands vs open interest of 414. 171 May40s have traded vs open interest of 1 contract. Implied volatility has also been creeping higher.

Again, not a recommendation or suggestion to buy, but interesting given the speculative froth recently in various takeover names. URI is up about 3% today.

Sunoco (SUN) May85 calls also pop up on the Screener again with more takeover talk. Sunoco shares are up nearly $3.

Morning Market Comment

Wall Street's bulls look set to build on yesterday's gains thanks to strong earnings from companies like Apple, Xilinx, F5 Networks and 3M. Still, I can't imagine some profit taking attempt not being made very soon.

Options trading in Wendy's (WEN) was unusually heavy at over 23,000 contracts yesterday versus average daily options volume is around 1,500. I thought it odd ahead of earnings but moved on. Now we know why: Wendy's to Consider Sale, Shares Jump. The stock is up 13% ahead of the bell.

The latest Jobless Claims data isn't giving the bears much to work with this morning, at least bears in the stock market. The dollar has been rebounding following the claims data, which has pushed June gold below $680 and once again I am neutral in futures - meaning I stopped myself out.

Options volume in the May8 calls had be heavy in Ford this week. Ford posts narrower 1st-quarter loss, shares rise past the $8 mark.

3M posted solid results. The Dow component says EPS amounted to $1.22 vs est $1.12. Revenue also beat the street at $5.9 bln.

Other earnings:
Exxon Mobil grows first-quarter profit by 10%

Detroit Free Press: New bids for Chrysler expected next week

WSJ: The amount borrowers owe on home-equity lines of credit fell for the first time since 1999.

See the latest on hedge funds at: http://www.hedgefunds-weblog.com/. Today a very interesting write up on some strategies that hedge fund managers use!

Wednesday, April 25, 2007

Computer Sciences (CSC) To Buy Convansys (CVNS)

Here's a deal that no one knew about as gauged by almost ZERO options trading in CVNS. It's a $1.3 bln cash deal with a near $8/shr premium. CSC to Acquire Covansys for $34.00 per Share. This is why it is so important to understand that while rumors can move the options markets, often times the real deals happen without any indication in the options markets. Of course, many times things get leaked a la 'loose lips sink ships'.

The system of looking at trading volumes in options vs open interest is not a fool proof one in the M&A game - even in the earnings game. There nothing noble about it; it's still all guessing and grasping for a buck unless you have insider info.

Is a Big Merger Monday Coming?

... or a big Merger Something coming?

In the age of the $100 bln deal (the level of the latest bid for ABN) it seems anything is possible. Today was one of the bigger days for merger speculation in quite a while. Is it a sign of a market top, or are things going to heat up on the M&A front ahead of a top?

In the world of options trading, the speculation was rampant today.

In no particular order:
  • There's been the ongoing heavy options activity in Bristol Meyers (BMY). May options trading was heavy and biased to the call side ahead of earnings Thuesday, but the eye catching activity for the sake of merger speculation was the 11,400 contracts trading in the June35 calls vs open interest of 3575.
  • American Airlines was the subject of rumors concerning a potential bid coming from a group including British Airways (BAB) and Goldman Sachs (GS), among others. Nearly 30,000 May30 calls traded and more than 10k May35 calls also traded. June call options activity was also heavy in AMR.
  • This blog noted heavy options trading earlier this week in Sovereign (SOV), International Game (IGT) and Xerox (XRX).
  • Options trading was heavier than usual today in Louisiana Pacific (LPX), St. Joe Paper (JOE), Joy Global (JOYG), Eastman Kodak (EK) and Accredited Home (LEND) -- all attributed to merger 'chatter'.

Just where do these rumors come from? If only we knew - and if only we knew which one of the above will pan out into some real, money making news. Of course, the above summary is for informational purposes and is not a recommendation or even a suggestion that you should jump into any of them - since this stuff is RUMOR. None of it may pan out to anything but significant losses for the options players who chased after this stuff today.

Thursday Curtain Raiser

It was Apple's turn to wow them this evening. Here's a breakdown of the metrics:


  • 2nd quarter EPS of 87c vs estimates of 67c
  • Q2 rev of 5.26 bln vs est of $5.16 bln
  • Sees Q3 earnings of 66c vs ests of 67c
  • Sees Q3 revenue of $5.1 bln vs estimates of $5.47 bln
  • AAPL shipped 1.517 mln Macs (36% year over year growth; 3x industry growth rate)
  • AAPL shipped 10.549 mln iPods in Q2 (24% yoy growth)
  • AAPL gross margin 35.1% Q2 up from 29.8% a year ago
  • International sales accounted for 43% of Q2 sales.

Yes, those are great numbers and Thursday will indeed be showing the gap to above $100 that was so painfully elusive after last quarter's earnings. The Apple surge to the $102 level tonight should be beneficial for the sentiment overall Thursday.

Thursday economic calendar is fairly quiet with just Jobless Claims to be released at 8:30 et.

Dozens more companies will post earnings including numbers from big names like AET, MMM, BMY, HAL, HIG, FO, HIG, F (lotta buying in F May8 calls recently), XOM, ODP, ETR, MSFT and NEM just to name a few.

The Options Screener

Folks, I've been busy further modifying my options screener. It has been time consuming, but I think it will lead to some good things for all of us.

My screener picked, and other services out there, have picked up on heavy call volume ahead of earnings tonight in Xilinx (XLNX) and LSI Logic (LSI). When I bought into these earlier they were about 25% cheaper so I'm not making any recommendations.

Someone last night in the messages asked me about Baidu (BIDU). Hambrect has a bearish call on Q2 numbers, but thinks 2H performance will be much better. SInce it is all about outlook, what good is the call? Hambrecht, I remind you, had the intensely bullish call when earnings were released last quarter which is when the company guided lower. So I don't have a clear read on BIDU. Yes options volume is heavy on the call side up to the $115 strike, but and not sure, so when in doubt, stay away.

Akamai (AKAM) for some reason, just released results at 28c vs ests of 28c and top line just a bit above expectations. The stock is down 7%. Odd, that the numbers would come out at 3:15ish. They haven't even been posted on the IR part of the company's website. HMMM. Perhaps someone accidentally hit the send key at Edgar? Apparently the figures are coming from the SEC 8k filing. D'oh!

My regular email from Stratfor came today. I found this note interesting:

"IRAQ/AFGHANISTAN: Osama bin Laden is alive and is directly orchestrating militant operations in Iraq and Afghanistan, including an attack against Bagram air base in February that allegedly targeted visiting U.S. Vice President Dick Cheney, senior Taliban commander Mullah Dadullah told Al Jazeera."

Morning Market Comment - Dow 13,000 Here We Come

It's been all about earnings, or more specifically the outlook-spin and illusion (guidance), which we discussed at the end of March as 1st quarter earnings season was approaching. Many a company has managed to post less than jubilant numbers (IBM and Altera are two that immediately come to mind this week), but then throw in some positive statements about the quarters ahead or juice up a stock buyback and its off to the races. To TI's credit it did manage to post a stronger beat to the consensus and provided stronger guidance than many others but that real icing on the cake came as it took it upon itself to declare the worst for the chip world had passed - rocketing its stock. That TI news was the final piece of the battering ram needed by the bulls to break through recent tough short term resistance at just below the 500 area on the Semiconductor Index (SOX). With chips participating, it makes it easier to see the Dow not only breaking above 13k, but perhaps making more of a sustained run above that level for as long as recently range bound members of the market like semiconductors can do their own thing, which in the case of SOX would be to go on and challenge last year's high in the 550 area. Of course, that could be a problem and gets us back to the true reality of fundamentals vs the pie in the sky promises made in the guidance that the companies had to issue.

The other huge moving part of all of this is China and what it does about torrid economic growth. As noted last night, some are making huge bearish bets that developing markets will soon tank and a wary eye needs to be kept on the Chinese stock market.

The EEM put buying has me a bit worried, but I would really get concerned if the FXI is able to take out its old high.

This morning all is well for the bulls as stock are up more than 3 points following stronger than expected earnings and guidance from names like Amazon.com (AMZN), CV Therapeutics (CVTX) and Riverbed (RVBD).

There are some analysts are not complete Kool-Aid distributors. Here's one example: JP Morgan maintained an Underweight on Amazon says shares are "too rich". Imagine that, an analyst who has some sense of limitations.

One other notable call from JP Morgan this morning: They lifted the price target on U.S. Steel (X) from $100 to $115 on expectations for continued strong earnings growth. Ema's Market Blog has an interesting note on the steel sector.

Economic data came through better than expected: Durable-goods orders jump 3.4% on planes, capital equipment. The 10-year Treasury note down 6/32 at 99-26/32; yield 4.650%. The next batch come at 10 - the Existing Home Sales figures.

Pete Stolcer's OneOption.com has a full list of movers this morning.

See the latest on hedge funds at: http://www.hedgefunds-weblog.com/. There's a $1.1 bln hedge fund deal being reported today.

Tuesday, April 24, 2007

Someone's Expecting Emerging Markets to Implode Again

Perhaps, many someones? optionmonster.com flagged this earlier on their site (which is well worth a visit to check out their services) and it did show up on my end of day option screener. The image below is most active options. EEM put volume at nearly 50k today for puts about $20 out of the money is interesting. These are the June105s (circled).

But it's not as if the EEM hasn't seen the near 100 level fairly recently...

At $1 a contract, big money poured into those puts today - almost $5 mln worth. Be careful out there, folks. Enjoy the upward ride while it lasts.

Amazon (AMZN) Wow

They just posted blow out, I mean blow out EPS of 26c vs estimates of 15c. Rev at 3.02 bln vs estimates of 2.92. Also guided a bit higher on Q2 sales. Also authorized $500 mln share repurchase.

Interestingly, put volume on the AMZN May40 went past 21k today and there was a temptation to bet against AMZN by buying those puts. But closer inspection of time and sales showed almost all trades in the final half hour were sales (bullish). I just couldn't bring myself to buy calls on a 100 p/e stock, so I just stepped aside. Let the mania continue.

The Screener - Sovereign (SOV)

Yesterday my options screener popped out SOV June30 calls as being unusual since nearly 10k traded on open interest of zero. I refrained from reporting on it thinking it might have been some sort of positioning because they were new contracts. Yes, positioning, but perhaps on takeover talk? The tell tale sign? Options volatility in the May calls has racheted into the 30+ area, up about 20% in recent days.

The Screener - Xerox (XRX)

My options screener is fairly quiet on the call side today, though it has picked up activity in Xerox (XRX). Nearly 7,000 May 18 XRX calls have traded vs open interest of 3786. Recent chatter on the street includes Buffett's Berkshire Hathaway (BRK/A) taking a stake in XRX. I have no confirmation. This is not a recommendation, but an FYI.

Existing Home Sales

As usual, mainstream media has it el-wrongo. Remember, since the sale is recorded at the time of escrow by the NAR, these figures reflect deals made in January and February which means subprime is still largely not factored into Existing Homes Sales equation. But for fun... here's a write through: Existing-home sales plunge. In the words of BTO - "Baby, You Ain't Seen Nothing Yet." Tomorrow we get the latest on New Home Sales.


Also, Confidence at lowest since August.

Earlier the VIX was closing in on 14%, though didn't make it there. Still, a VIX above 13 while perhaps reflective of rolling portfolio protection into higher put strikes, or short call covering by bears, should still be watched with a wary eye. The two aforementioned examples are more concoctions imho of the purveyors of bullish Kool-Aid. Be careful out there, folks.

Morning Market Comment

Stock futures have been on the rise this morning following last night's rosy outlook from Texas Instruments (TXN) though not all analysts are convinced. Goldman this morning said that while fundamentals are better than expected, it maintained a Neutral on the stock and told clients not to chase TI. But Jeffries raised its target to $41 from $36 and Piper upgraded to Outperform.

As noted last night, Target (TGT) issued a weak same store sales forecast sparking guessing and concern about consumer demand. Incidentally, the first read on 1st quarter GDP is this Friday.

Just a few quick news and notes:

A GM demotion: Toyota Tops GM in 1Q Global Auto Sales, subprime commotion at GM: GM's subprime woes.

For the moment there's some Turn Around Tuesday cheer, we'll see if the eco data changes that later this hour.

Bank of America on Dendreon (DNDN)

Bank of America this morning maintains a Neutral rating on Dendreon (DNDN).

BofA says it is expecting approval of Provenge by May 15th after chats with folks like a former FDA general counsel and CBER panel members. BofA sees upside potential to their target of $29 on approval. Downside is to $6 if an 'approvable letter' is issued. It maintained a Neutral as it awaits the longer term IMPAC trial.

disclaimer: long Dendreon calls.

Monday, April 23, 2007

We Lost A Great Journalist Today

David Halberstam
1934 - 2007

Blue Monday - Tuesday Curtain Raiser

Texas Instrument's (TXN) CEO, Rich Templeton, may be the Master of Ceremonies for Turnaround Tuesday festivities should overseas markets not roll over tonight. Templeton says, "We believe the inventory correction that began in the second half of last year largely ended in the first quarter. Orders are beginning to rebound, and we expect sequential growth to resume in the second quarter." The company says it sees earnings of up to 45-cents a share vs previous estimates of 37c.

So, TI's bullish comments have helped to lift stock futures following post expiration Monday weakness helped along by another spurt in the price of crude oil.

Nigeria - not so lovely this time of year: OIL FUTURES: Nymex Crude Ends At Week High; Nigeria Violence.

While TI will help tech avoid a wreck (and will keep my ALTR puts under water), the "For Every Action, There Is An Equal and Opposite Reaction" rule was also in effect. Target (TGT) surprised: Target lowers April sales view, shares fall. Egads consumers what's going on here? Gosh, could it be $3+ gasoline in many locales, or maybe the popping of the Bazooka Housing Bubble?

If we get a hurri-kin (as some are apt to strangely say) in the wrong place in the Gulf, $5, or $6 gasoline is not hard to imagine now that $4 gazzoline is likely a reality by Memorial Day with presently calm weather along the Gulf. What would $5 gas do to sales at Target or Wal Mart? And could it be that already $3+ gasoline is helping to push more subprime and alt-a laden home borrowers off the side of the cliff let alone impact foot traffic into the box retailers? GM seems to think weak housing figures cause weak car sales - gosh, there could be some spill over at those red check out aisles (er, point of purchase stations) at Target - ya think? GM's Lutz says mortgage 'meltdown' hits US auto sales. The brew here is on the septic side and just doesn't leave one feeling warm and fuzzy about consumer demand and robust GDP in the weeks and months ahead.

But then again, There's Mr. Templeton of TI telling us things are about to brighten up in chip world. Interesting. Perhaps folks are condemning purchases of things like makeup, or clothing, or even Campbell's Chunky Soups at Target, but will buy stuff at Best Buy with DSP chips made by TI? Yep, that's it.

Two important economic reports are due on Tuesday: The Conference Board's Consumer Confidence. Confidence has been trending lower, but with official figures showing continued low unemployment, confidence is expected to fall only a few points to 105.

Existing Home Sales, which I feel is a pretty flawed data series from the National Association of Realtors (see my diatribe from last month), are due Tuesday as well. An annual rate of 6.4 mln is expected. Will sales miraculously jump again?? On Wednesday, New Home Sales come our way. Here's a forecast for when the new home market might rebound: US new home market may take til 2009 to rebound-S&P. Reminder, it's 2007; for a feeble mind like mine, I had to think about that for a moment - yes, it is 2007, S&P thinks new home market won't rebound until 2009.

While I am still in a variety of long positions, I will close out this post with this chart which is making the rounds on web 1986-87, vs the last couple of years. Good night.



The Options Screener

Has been picking up all sorts of things today, but since it's a Monday after expiration, I'm going to hold off on publishing some especially noteworthy activity until I can see whether it's not all just new contract rollouts.

Altera (ALTR) posts earnings tonight - interesting, earlier, that put volume on the May20s exceeded open interest. Call volume has finally exceeded open interest on the May 22.5 calls, but its the put side that has my attention. Will it be Altera, or Alterror?

Millicom (MICC) nice rise ahead of earnings tomorrow morning.

This Really Made My Day!!

Medicare, Soc. Security funds to see extra year of solvency. Kewl. Can you say, 'hyper-inflation'?

Where Would The VIX Be If This Happened?

PAPER: Al-Qaeda 'planning big British attack'; on 'a par with Hiroshima and Nagasaki'... Being complacent is a choice that participants in the market can freely make. Not me. One loser in my bunch of April options - out of the money puts on the SPY. I just bought more this morning and hopefully they'll be losers again on expiration day in May.

New Feature

Now you can get stock quotes right on the blog. Just punch the ticker into the quote box in the right column and your quote will come right up!

Morning Market Comment - Is 1550 The Target?

1550 would a record high for the S&P 500 which is now perched at the 1484 level. I can't help but to wonder about 1550 when AstraZeneca (AZN) feels it fit to take out Medimmune (MEDI) at more than 70x forward earnings with its $15.6 bln transaction. Rich valuation is one of the reasons I jettisoned the MEDI May 50 calls late Friday thinking the stock was already richly valued and that low options implied volatility wasn't pricing in much more of a rise. Well, my expectations were too low and I wonder if my expectations for the overall market, even in light of the extreme negatives that lurk out there, are too low. Could the bulls really put the peddle to the metal and surge the S&P to a record in the weeks ahead? Heck, if you're going to game the market why not make Dow 13k the appetizer and go for the whole enchilada? Is MEDI a unique situation or are other deals previously thought impossible due to valuation suddenly more than possible?

Side note: A reader asked how I happened to stumble upon Medimmune in the first place. My Options Screener actually signaled attention to the stock last week. I will be paying more attention to my Options Screener, especially when other services out there pick up on similar activity; there are, after all, only so many options for us all to screen.

Stock futures this morning are less than a point lower and deals could help the market overcome any post Friday expiration reversal. There are over $100 BILLION in deals today. In additional to MEDI, Barclays is coughing up a cool $91 bln for ABN to create the world's largest institutional asset manager and one of the world's top-five banks. High OEX open interest was a key factor in Friday's rally - it was as simple as that, yet few understood it in the mainstream media. These deals are a big positive to overcome potential headwinds from any expiration related activity, especially after such a big up day on Friday.

Bank of America to buy LaSalle Bank for $21B
One small deal: Motorola to buy video-processing services company

Among the negatives out there: Pru downgraded Pfizer (PFE) to Neutral and cut the price target one whole dollar to $29 citing concerns PFE doesn't have enough drugs in its pipeline and will be stung by generic competition. Whoa? Really Pru??? Pfizer faces this problem???? Oh, woe is me - I had no idea. Thank you 7-figure Pru analyst for telling us this breaking news. LOL. Of course, you can turn lemons into lemonade by reasoning that if AZN is going to pay big time for Medimmune, then Pfizer will likely pay for some other drug/biotech to fatten its pipeline as well. Pfizer really has no choice but to buy something and to spend BILLIONS for it.

Valuation does get the attention of some on Wall Street. Deutsche Bank downgraded ExxonMobil (due to report later this week) to Hold from Buy based on its price of about $80.

Apple (AAPL) will post earnings later this week. I've been sifting through analyst comments for any that really stand out either for being overly bearish or bullish. The general theme I pick up is that most are feeling Apple will exceed but only modestly to consensus estimates and that guidance for its Q3 will be especially conservative. Piper's comments this morning are typical where they see slight upside to street rev estimate of $5.2 bln and maintain and Outperform. SJ Mercury News also reports that a criminal case against Steve Jobs is UNlikely.

Goldman today downgraded CBOT Holding (BOT) to Neutral from Buy on valuation.
Goldman upgraded the refiners, seeing tight capacity: VLO, MRO, TSO, FTO and SUN.

Ahead of earnings this week, Amazon (AMZN) was downgraded on valuation by Piper.

AG Edwards upgraded Micron to Hold, amazingly enough.

Pete Stolcer's OneOption.com has a full list of movers this morning.

See the latest on hedge funds at: http://www.hedgefunds-weblog.com/.

Medimunne (MEDI) My Bad

Not long before the closing bell on Friday, I sold my MEDI May50 calls at a small loss not liking the look of the premium. Well, it appears a big pay day may be ahead. Astra Zeneca (AZN) is the likely suitor for MEDI at around $55. Read here. Oh well, you can't when 'em all.

Sunday, April 22, 2007

Dow 13k, Let's Hope It's Not Like Nasdaq 5k

I don't even have to look it up - the infamous 5,040 closing and then how little we knew ye Nasdaq 5,000. A fleeting double top and then DOWN, DOWN, DOWN in Rock Lobsterian style. My little chart to the left only depicts the initial decline of Nasdaq from 5k at the turn of the century, a descent that wouldn't and couldn't stop until every bit of excess and then some was wrung out of the 'Daq' down to 1108 intraday in late 2002.
Is there a correlation between Dow 13k and Nasdaq 5k? Not necessarily, but the bulls with the greatest of alacrity are targeting another millennial mark - this time for the grand old blue chip indicator which has been the bellwether and barometer for market froth these days. While I'm all for being optimistic and have enjoyed making money on my long bets in recent weeks, a few things have developed since 2000: an imploding real estate market; an out of control M3; inflation running at the top end of the Fed's so called comfort zone; $53 trillion dollars in unfunded future federal spending mandates; an epidemic Japanese Yen carry trade; unknown quantity of leveraged swaps due to the explosion of hedge funds in the last five years; gold knocking on $800's door; China with $1.2 trl in foreign reserves it wants us to think it doesn't know what to do with; the Iraq war; Iran's attempt at making nuclear weapons, etc. I know there are some big, big positives these days like Hillary Clinton being able to talk in a Southern drawl, or that we now have American Idol (something so sorely lacking in 2000), or that we have such upstanding men of integrity like Paul Wolfowitz running the World Bank who like to give young women under them (literally and figuratively) extra help in moving up the ladder. So we are blessed to such great tv shows and politicians with such great diction and benevolent managerial skills these days and perhaps that's enough to get the Dow above 13k - maybe in the first hour of trading on Monday - and have it well on its way to 14k!
Here's what I want to see beyond breaching the round number of 13k - the ability for the Dow to rise more than 2% beyond the millennial mark and to avoid any type of topish formation like that above double top. Much as the mo-mo enabled the Nasdaq to slice right through 4k to 5k in 1999 to 2000, I'm just curious to see if there's any similarity in millennium marks where strong mo-mo gives a free pass to blast through 12k, but then perhaps there's some law that says when a millennial mark fall in less than a year some market god somewhere says, "uh, uh, not so fast." and puts the hammer down. Perhaps 13k is more than just a number. Recall, in 1999 the Dow finally broke above 9k, then warped above 10k barely six months later then surged to 11k where it ran into a brick wall. In the recent past, more than one millennium mark per year is not always a good thing for the market - will it be different this time?
On the economic calendar this week - plenty to move the markets:
On Tuesday - Consumer Confidence 10:00 ET; Existing Home Sales 10:00 ET.
Thursday - Jobless Claims 8:30 ET
Friday - Employment Cost Index 8:30 ET, GDP 8:30 ET, Consumer Sentiment 10:00 ET, The Bank of Japan is expected to hold its interest rates steady.
On the earnings scoreboard, a ton of earnings - Monday 4/23: AMGN, KMB, TXN. Tuesday 4/24: BNI, CME, DD, LMT, NOC, OXY, T and WHR. Wednesday 4/25: ABC, AV, BUD, AAPL, BA, CL, COP, EXC, GLW, GD, FCX, HST, PEP, PHM, QCOM, RAI, UPS, WEN, WLP. Thursday 4/26: MMM, AET, BMY, BRCM, CAH, CCE, CMCSA, CFC, DOW, EMN, XOM, F, FO, GR, HAL, HIG, KLAC, MSFT, MMM, MNST, NWL, NEM, SNDK, SO, TRV, XMSR and VLO. Friday 4/27: CVX.
A few other notable dates -
On Tues the 24th: Former Fed Chairman Alan Greenspan gives a keynote address at the "Boomertirement" industry summit in New York. On Thurs the 26th: Fed Governor Frederic Mishkin, Dallas Fed President Richard Fisher and San Francisco Fed President Janet Yellen give speeches.

2.7%, 11%, 800%, 4000%

The Market Ticker Blog has posted some downright ugly housing numbers that you should take a look at.

The 2.7% figure is the percentage the good ol' National Association of Home Builders is reporting as the number of homes sitting EMPTY in the U.S. of A. Read More here, this will knock you socks off...

Stop Coming To Work To Save The Planet?

STOP COMING TO WORK AND SAVE THE PLANET, SAY BOSSES... is one of the headlines on Drudge today. BUT you would be surprised at how resistant some companies with arrogant and dumb management are to this idea because it takes their ability to control the lives their employees away from them. Think about that. This is a far better idea than charging elitist ultra high tolls into a place like Midtown Manhattan. Just ask any Londoner trying to get around the special toll zone in Central London what the toll their has done to traffic congestion and air quality.

Thankfully, there are smart companies out there who do embrace telecommuting. I spent the day yesterday with a friend who's an IBMer and who does a lot of telecommuting. It seems to keep both employee and employer quite satisfied.

Earnings Ahead - Microsoft (MSFT)

This makes me wonder how Mr. Softee's earnings are going to look in the week ahead: Dell Once Again Offers Windows XP. Microsoft is due to report earnings on Thursday afternoon.

Friday, April 20, 2007

Sorry, Folks

After my meetings this morning, I took a stomach medication that knocked me a for a loop and sent me napping for most of the day. It not only made me tired, but just completely unable to sit here and concentrate. Some of those meds are better left behind the pharmacy counter, me thinks. I see by the looks of the Dow and other indexes that the it was a very positive expiration as previously telegraphed by high call open interest on the OEX's.

One trade that I did do before the close was to close out my position in Medimune May50 calls... just didn't like the fade in the options ahead of what is supposed to be a big acquisition on Monday. I also cashed in my AXP May 60 calls for a more than 100% gain - another great heads up on heavy options volume earlier in the week from the folks over at optionsmonster.com. I also reinitiated my long gold futures position early this morning.

As I come out of this stupor, I actually do feel better. I will be doing some full posts late this weekend to look at the week ahead.

Morning Market Comment

I''ve had some phone conference calls this morning, so a brief post. I will flesh things out as the day progresses when I'm less tied up.

It looks like the market is on its way UP this morning. With this being an expiration Friday and with the OEX not far from plenty of call open interest at 675 there could be even great bullish bias as the day progresses through computer driven buy programs.

Google (GOOG) is among the companies spreading cheer this morning, up by $20 following stronger than expected earnings.

H&R Block to sell subprime lender unit Option One and its stock has been up 8%.

Capital One (COF) missed and its stock is down about 6%. Merrill downgraded COF to neutral from buy.

Pfizer 1st-quarter profit falls 18 pct. McDonald's profit climbs 22 percent.

Caterpillar (CAT) this morning posted earnings of $1.23 vs estimates of $1. Rev was way above estimates at 10 bln vs $8.9 bln.

JP Morgan downgraded CBRL, owner of those Cracker Barrels to Neutral from Overweight

Pete Stolcer's OneOption.com has a full list of movers this morning.

See the latest on hedge funds at: http://www.hedgefunds-weblog.com/.

Thursday, April 19, 2007

Non Sublime Subprime: Big Job Cuts

GE's WMC Mortgage to lay off half of staff
Mortgage co. ResCap to cut 1000 jobs

Energy Conversion (ENER)

Energy Conversion Devices sees restructuring charges in Q4 which has led to a 6% slide in the shares after hours. Fortunately I went the 'house money' strategy and after the Apr 40 calls just about doubled intraday Thursday, I paired back enough of the call position to end with just house money, or the profit left from the original trade. Tomorrow's result will be a break even scratch since the Apr 40 calls are going to be worthless Friday.

H&R Block (HRB)

Wasn't it Gordon Lightfoot who sang something about being "In a room where ya do what ya dont confess..." Why do I think of H&R Block and other subprime lenders concocting their 8-Ks when I hear those lyrics?

H&R (http://biz.yahoo.com/e/070419/hrb8-k.html) tonight says it sees a 2007 loss due to its Option One subprime business: H&R Block charge for Option One to bring '07 loss. What a surprise and I still can't help but to wonder what's not being confessed.

And naturally, the stock is up a bit this evening!

After The Bell

Google (GOOG) is out with consensus defying numbers - bottom line at $3.68 vs $3.31 and top line at $3.66 bln vs $3.31 bln. In the early going Wall Street loves the numbers - a much better situation than what happened last January.

GOOG Networks jumped 45% year over year with a 52% YOY surge in Aggregate paid clicks and 13% sequential gain. TAC costs were up less than $60 mln sequentially.

American Express (AXP) posted better than expected earnings at 87c vs estimates of 79c. Revs look a bit light, however, at $6.7 bln vs 7.1 bln estimate.

Ugly numbers from AMD, but for the composite trading day, still hanging on to a gain: AMD Reports First Quarter Results

Takeover Talk

... or 'chatter', prevelant today. There's vague rumor again surround Heinz (HNZ) - who would at record highs?

David Faber on CNBC is expecting to hear about offers on Monday for Medimune (MEDI). More than 10,000 May 50 MEDI calls have traded on hopes for a low to mid 50's bid. DOn't forget Carl Ichan has about 3 mln shares of the company.

Also seeing busy options activity in the realm of Celgene (CELG). Pick your poison.

The Options Screener

is down today.

Yesterday it snooped big buying of ENER calls. I jumped into that ahead of tonight's CC. When the options went from .50 to 1, I sold half the position - holding just a half position today (house money) as the price founders.

Motorola - I noted heavy call buying earlier this week. It continues today out into the July contracts. Earlier this morning:

Motorola-MOT shares could experience bounce in the short-term-Hold@DBAB
Deutsche Bank believes shares could see a short-term rally due to the well-publicized ongoing proxy fight between Carl Icahn and Motorola. DBAB believes MOT's problems are fixable, but maintains a Hold rating and $15 target. -theflyonethewall.com

D.R. Horton (DHI)

DR Horton has been holding its conference call following release of its earnings earlier: D.R. Horton 2Q Profit Tumbles 85 Percent.

The most notable comments: It sees continued softness IN 2008 (not going into) and also sees an uptick in early payment defaults on mortgages - meaning folks who default within the initial months of moving into their brand spankin' new DR Horton house.

Avenir (AVNR)

Call me trigger happy, but yesterday I got into the AVNR June 7 calls at .39 and dumped this morning at .9.... I'll take a 100%+ gain any day on a company that still has another round of phase III testing to do and only $12 mln in the bank.

Morning Market Comment

With Globex futures down about 7 this morning, it's looking like the tape will be painted red this morning. A big reason? China. China's GDP grows 11.1 percent in first quarter threatens the possibility that interest rates will have to be raised, or other measures taken in that country to cool their economy. You'll recall, the "other measure" in China that sent markets off a cliff in late February was an increase in banking reserve requirements in China. The China rate increase talk is beneficial to the Yen once again, with a rise of 48 ponts and bad for gold which is flirting with $688 and has caused me to move to a short on gold futures only, but still holding GLD.

So much for my late day theory yesterday that the stock market could rise to even greater heights, but that's actually a good a thing - that there is such a thing as limits on Wall Street.

By the way, while the Chinese may be finding it tough to control their speeding locomotive of an economy, they are making strides in controlling that little ol' thing we call the weather: Chinese make first artificial snowfall in attempt to control weather...

Could it be that the departure of Sanjaya Malakar from "Idol" is the real negative that has swept global markets with the broom of gloom? Just askin'.

Bank of America (BAC) and Merrill Lynch (MER) are both showing small plus signs this morning. The Journal sums it this way: MERRILL LYNCH'S NET SOARED on strong investment banking, as a year-earlier charge hurt earnings in that period. Bank of America posted a 5% increase in earnings, helped by robust equity markets and the boom in mergers and acquisitions.

A few other quick earnings: Merck Net Jumps 12 Percent, Altria 1st-Quarter Profit Drops 21 Pct.

BPOP finally posted results this morning: Popular, Inc. Reports Financial Results for the Quarter Ended March 31, 2007. My reading of the results shows a loss for the quarter when the one time capital gain is factored out. But still the stock looks little changed ahead of the open.

Economic Report: Jobless claims remain elevated at 339,000.

Pete Stolcer's OneOption.com has a full list of movers this morning.

See the latest on hedge funds at: http://www.hedgefunds-weblog.com/.

Wednesday, April 18, 2007

Thursday Curtain Raiser

As noted earlier, a ton of earnings come our way tomorrow. Perhaps the biggest focal point on the earnings calendar will be Google (GOOG) after the bell tomorrow where $3.30 a share is expected vs year before $2.29. The straddle is priced at over $20, so the usual huge move is expected and options are priced to the moon. I am not participating.

After the bell, among major earnings tonight: EBAY's Earnings And Guidance.

JADE!! has been a long time holding - the July 10 calls for me, thanks to insights some time ago from Ema's Market Blog and today was a great day for shares of LJ International. I'm holding for their eventual earnings release.

Speaking of earnings - nothing as of yet from Banco Popular (BPOP)... perhaps a scheduled misunderstanding?

Jobless claims and Leading Indicators are the two economic releases on tap for Thursday.

I am still not feeling quite right, so a short post for tonight - good night.

Banco Popular (BPOP)

BPOP posts this evening - the owner of Heloc and exotic mortgage purveyor E-Loan. I have a bunch of May puts, but just for safe keeping, I also jumped in with the crowd again and bought the XLF calls. I'm sensing a blowoff on the way with the bulls intent on sending the Dow to 13k; financials will need to be a key part of the rally. Given the Teflon status of the lenders recently, it may very well be that 13K is doable and perhaps with the help of some buy programs associated with options expiration by Friday. Not to sound like the classic two handed economist, but that bullish scenario is on the condition that nothing blows up in the world, or on the earnings front over the course of the next few days. A big bunch of reports on the way tonight and tomorrow, like EBAY and GILD tonight; MER, MRK, MO, etc tomorrow.

Narrow Options Screener

I can adjust my screener to look at narrow parameters.

One search today involving open interest of 1,000 or less is interesting:

On previous open interest of ZERO, more than 24k Jan 32-1/2 BMY calls have traded today. A few large blocks of 11,000 appear to have traded at the offer, or high of the day at .65. If anyone can provide confirmation, that would be greatly appreciated.

Avinir (AVNR) June 7 calls have been active- volume of over 11k on open interest of 74. The June 5s are also heavily traded. StreetInsider.com Unusual 11 Mid-Day Movers 04/18/2007

More than 6,000 Analog Devices (AD) May40 calls have traded on open interest of 240. There is almost no other volume on the rest of the ADI options chain, puts or calls, today.

On this narrow search, only Comcast Oct25 puts come up on the put side, with 10k trading on open interest of 635.

THESE ARE NOT RECOMMENDATIONS... just fyis.

The Screener - Jeffries (JEF)

My options screener has also picked up on heavy call options volume in Jeffries (JEF) in both April and May 30 calls. There is speculation on the street that JEF could be a takeover target. One point of interest is that implied volatility has remained fairly flat. Thjs is not a recommendation, but yet another interesting FYI today.

EIA Data

For those keeping track:

DOE Crude Inventories for week of April 13th:
Crude inventories fell by 994K vs. consensus estimate for a rise of 650K. Gasoline inventories DOWN AGAIN BY A LARGE 2.72 mln barrels vs. consensus estimate of 1.9 mln. Distillates slipped by 795K vs. consensus estimate of for a decline of 926,000.

Again, these inventory numbers are bullish for gasoline - meaning bearish for the wallet at the pump.

Google and Handsets

http://www.digitimes.com/telecom/a20070417PD213.html - fyi.

Meantime on the Apple iPhone front: http://www.appleinsider.com/articles/07/04/18/apple_cisco_attempt_to_meld_iphone_technologies.html

FWIW, the Apr GOOG straddle costs about $22... the usual fun and games ahead of earnings. It sure looks like the march towards $500 continues, though whether it makes it there before expiration on Friday would best be answered by Friday's newspaper which if anyone can provide a copy of today would be most helpful! Over 7k Apr 500 calls have traded today, which isn't an extremely strong reading to give a big green light, but sure attests to many who are hoping the stock goes to $500 by Friday. After the 500 strike the volume dries up.

Energy Conversion (ENER)

http://wwww.theflyonethewall.com is reporting that ENER has scheduled a surprise conference call for tomorrow. Options volume on the soon to expire Apr 40 calls has gone through the roof on speculation the company is about to be broken up. This is not a recommendation.. just an interesting fyi.

Morning Market Comment

It was the night from hell for me last night with a stomach virus so this is going to be brief.

Stock futures are lower following the earnings shortfall from Yahoo. It posted earnings of 10c vs expected 11c. As usual the usual barrage of analysts recommending the ol' "buy on weakness". Here are a few who are going against the grain:
  • DBAB has a hold on YHOO and notes that at $29 the stock still trades at 36x 2007 estimates.
  • Needham is the only downgrade I can find - to Hold from Buy
  • While Citi maintains a buy, Citi says upside limited until 2H07 and drop justified given bullish intra-quarter company statements.
  • Merriman notes that YHOO's woes are a positive for names like AQNT, TSCM and VCLK

We've gone over this in the past, but why is Terry Semmel still CEO?

Google (GOOG) is down by a modest $1.55 following the YHOO news.

The dollar continues to get hammered: Here's a comprehensive write up from Kevin's Market Blog. The yen is catching a bid again today up 35 and back above 85. Ultimately this will further prove to be gold positive, but $700 won't easily fall. It's a big psych level and a level that shows the failure of many parties to address our financial structural problems.

Motorola (ex-items) beat lowered expectations by 100%. That's not saying much given the reported profit was 2c vs expected 1c. But that may be enough to get my out of a long call position (May 19s) with a tidy profit.

Washington Mutual (WM) - please see the comments section in the post below and the "phantom profits". I didn't like the action in the market yesterday and dumped my XLF call position and will just ride out the present situation in WM - no sense in throwing good money after bad. WIth futures down 4 this morning - glad I unloaded the XLFs at breakeven yesterday afternoon. H&R Block (HRB) has been instructive, by the way. Remember they were supposed to sell Option One by the end of Q1? End of Q1 comes along and guess what? They simply say we need more time to sell it. These companys have huge latitude in what they can do.

While everything is Mac Davis Beautiful at WAMU: Foreclosures up 47% year-on-year in March: RealtyTrac

Big Downey (DSL) miss, but only a small dip in share price. - Thanks, Mike! More later.

JPMorgan Net Income Increases to Record on Bond Sales, Mergers

RIM's BlackBerry system down: report

Pete Stolcer's OneOption.com has a full list of movers this morning.