Feb 16, 2009 - Issue #150
Testing Nov Low?
Testing Nov low? Better question, will it hold? The Democrats, with the help of a few
Republican 'turn coats', got what they wanted. The responsibility for the economy now
rests entirely on the Democrats and President Obama. If their plan succeeds they get
100% of the credit. If it fails, they get 100% of the blame. The 2010 elections will
be very interesting.
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
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.
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???).
2/24 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%:
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.
Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!