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9:05am (EST)
We got two words for you today. Keanu Reeves.
Folks, a lot of traders, even the seasoned vets, must feel like they are in the Matrix as the current market continues to look for the “Oracle”. In the movie, she was the woman people in the Matrix went to for her foresight and wisdom.
The political uncertainty of “Obamanomics” has created a lot of volatility right now and has added another dimension to the market that is giving mixed signals. This was evident again on Tuesday after the Dow gave up nearly a 100 point gain to finish with a 3 point loss. The index finished the session at 10,194 and the bulls have got to feel deflated.
The S&P 500 closed at 1,092 and was down 6 points while the Nasdaq ended the day with a 7 point loss to settle at 2,203.
The uncertainty about Fed Chairman Ben Bernanke’s reappointment is also weighing on the market and it’s time for him to speak up on his own behalf. We think the dude did a great job considering the circumstances and he held up well session after session on Capitol Hill.
We hope he just walks away and tells whoever that he doesn’t want the job anymore. The Fed Chairman’s job is a thankless one anyway. If Washington really wants to give it to someone, give it to “Jimmy”. Last name starts with a “C”.
The positive 4Q earnings numbers we are seeing pour in from some of America’s finest companies are mind-boggling. There are still 400-500 companies that have yet to announce and normally this type of news would have sent the market to new highs.
Our point is that we have mapped out the markets movements for years and these events can do serious technical damage. However, this time is much different because it not only feels like we are headed lower but it also feels like we could explode to the upside. In other words, is there a fat kid sitting on the other end of the see-saw and we drop or is the market ready for another liftoff?
We had planned for the market to follow a continued bull run through January and then fade and here is what we said in our Members Area last Friday:
“As far as our current plays, look at them as a hand of 7 cards (7 trades). If we were playing stud poker then we are going to play our best 5 cards to try and win the pot. We knew when the market topped we might get “caught” holding cards but you can’t let it affect your trading plan that has been in place for months.
We may have to throw away a few cards (February calls) but our hand looks strong as we have call options that do not expire until March, April and May. In other words, we didn’t go heavy with the February options because we knew we might be topping out. We even have a “joker” with the RIMM puts which we have used as “protection” or “insurance” in case the market did plateau.
That said we like our hand as we go up against the current market environment so we aren’t afraid to hold most of the trades. We also realize that even though we may have “pocket Aces” we can still get beat and lose a little change in the process.
The hand is being dealt so let’s go play…” (END)
We are still holding those same “seven cards” and one of them happens to be a Berkshire Hathaway Class B (BRK/B, $68.00, down $0.84) option. Shares got a huge pop in after-hours and we sent out a News Flash last night after hearing the good words.
We also expect more downside today with the possibility of a rally on Thursday and Friday as we close out the end of the month. Our feeling is that the bulls want to end January with some kind of gain and right now the Dow is down a little over 200 points YTD. That means the bulls have to make up ground over the next three trading days.
As we head to press, futures are pointing towards a mixed open. Dow futures are down 4 while the S&P futures are higher by 2. The Nasdaq are up 4.
The current trades are listed in our Members Area and we have added some extra tidbits of information this morning for all of you who may have just signed on with us.
“Timmy” Takes The Stand
Wednesday, January 27th, 2010
1:30pm (EST)
The market is slightly lower today but has come off its worst levels of the session as Wall Street is carefully watching Treasury Secretary Timothy Geithner. He is testifying before the House Committee on Oversight and Government Reform today and has seemed calm for the most part answering questions.
Of course, he is there to answers questions on his involvement in the bailout of AIG (AIG, $24.10, down $0.30). For the record, he has denied knowing details of payments to any banks including Goldman Sachs (GS, $148.34, down $2.44) which continues to slide…
As a result, the Dow is currently down 39 points to 10,155 while the S&P 500 is off by 4 points to 1,088. The Nasdaq is lower by 2 points and is at 2,202.
As far as economic news, December new home sales came in at 342,000 units sold versus the expected 366,000. At 2:15pm (EST) today the Fed will release its latest policy statement.
There are plenty of earnings to report but one company we are watching after the bell is Netflix (NFLX, $50.05, up $0.10). Wall Street is expecting the company to earn 45 cents on revenue of $445 million.
We expect the company to surpass 12 million customers and report a great quarter. Netflix has been in a downtrend since topping out at $60 in November and the options market is pricing in a 10% move for the stock.
We will be back in the morning with our regular update and we are expecting a bounce over the next two days for the market. Tonight President Obama delivers his State of the Union message and you can bet the market will react accordingly on Thursday.
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