Subscribe



Feb 16, 2009 - Issue #150

Testing Nov Low?

CNBC's Kudlow Report is not on board with the 'Spending Stimulus' plan. At least one guest analyst is buying copper and FCX stock (an interesting chart).

How are we suppose to play this? As always, let the market tell its own story and act accordingly. Volatility is through the roof. Finding cheap Options is almost impossible. A primary reason for this is government interference in free markets. Government is changing the rules. The market is confused.

An interesting play, in my opinion, is developing in MRK. If the stock goes above 30.93 or, at least, stays above 26.87 this week, it will constitute a new 'significant' line of support dating from the 11/21/08 low of 22.82 thru the 1/22/09 low of 26.87 on the weekly chart.

Should the above conditions take place, a case could be made for buying the MRK Jul 30 or 27.50 or 25 Calls and financing the purchase by selling credit spreads using Puts (either the MRK Mar 30/27.50 or 27.50/25 or 25/22.50 Put spreads, depending on price action of the stock). This would present a limited risk (long further out in-the-money Jul Calls for lower time value, while short the nearby Mar at-the-money Put credit spreads for maximum time value). The Put spreads expiring in Mar leaving the long Calls good till the Jul expiration. Such a position would allow the trader to 'morph' into a synthetic long Put position, if desired, by shorting stock at any time. Food for thought.

Heads Up

W. D. Gann, a keen market observer, although not an astronomer, nevertheless, was fascinated by the apparent coincidence of important market 'pivot points' and astronomical dates. Theories exist for estimating time and price of important market turning points but astronomical occurrences are computed with mathematical certainty.

There is no logical reason why these occurrences should coincide yet, empirically, they have. The 'Full Moon' and 'New Moon', among others, have been cited. Therefore, one might be well advised to be aware of their occurrence. Note: The first 5 business days of 2008 concluded on a 'New Moon' and we all know how that worked out. Coincidence?

2/24 Tuesday - New Moon.

During the next two weeks, the following Dow components report earnings. Keep a sharp eye out for possible price swings leading up to 'earnings day' (Subject to revision):

2/16 GM (Market Closed???).

2/17 WMT.

2/18 HPQ.

2/24 HD, (Transportations) OSG.

Dow score card for the week ending 2/13/09.

DJ-30: 7850.41 -430.18 -5.20%. The Real World (arithmetical) DJ-30: 32.85 -1.80 -5.19%.

UP: 2, Down: 28.

Trends (weekly charts): This is the subjective part.

Rising (Generally Higher Highs/Higher Lows) 0 (-6) 0%:

None.

Consolidating (Generally Lower Highs/Higher Lows) 16 (-1) 53%:

AXP, +*BAC, C, CAT, +*GE, HD, HPQ, -*IBM, -*INTC, JNJ, -*JPM, KO, -*MRK, MSFT, VZ, WMT.

Declining (Generally Lower Highs/Lower Lows) 14 (+7) 47%:

-*AA, -*BA, -*CVX, -*DD, DIS, GM, KFT, -*MCD, MMM, -*PFE, PG, -*T, -*UTX, -*XOM.

+/- denotes change of direction.

* denotes change of category.