Tuesday Wrap-Up
Today reinded me of my daughter’s favorite game.
One of these indices was not like the others.
That’s right, our pals at the SOX made a real mess of a good day, mostly due to a report that that the utilization rate at microchip plants fell from 91.2 in Q2 to 88.6 in Q3.
That was enough to tumble AMD (-1%), BRCM (-2.6%), INTC (-3%), LLTC (-2%), MRVL (-2.5%), NSM (-2%), NVLS (-2.5%) and TXN (-1.7%). Since there’s only 19 total companiesin the SOX, it’s amazing it only went down 1%!
But say - weren’t we worried about excess inventory just about a month ago? Ah well, it’s always something…
Who do we blame for this disaster? Obviously Microsoft! With Vista still a Q107 event it’s hard to get excited about Q406 and a hint of trouble, like low output, can spook the markets.
As I said on Monday: “We must have our SOX, also weakening above 480, still miles below January highs of 559 so there is NO excuse for hanging out down here - we’ve been there, we’ve done that with a 120 point rally that began last October. MSFT must set us free and give us the green light to love tech again!”
MSFT was less than helpful today as it struggled with $30 earlyand couldn’t get back all day. The SOX have moved in lock-step with Microsoft all week.
Obviously with MSFT ($294B) and INTC ($124B) do poorly, it will be very hard going for the Dow, Nasdaq and S&P - all of whom list them as major components.
The Dow overcame a 5% drop by GM today to finish up at 12,321 while the S&P scratched out another 2 to close just under 1,403. The NYSE had a nice 33 point gain with a strong 8,919 and the Nasdaq held on at 2,454.
Even the transports turned it around and gained 18 points to 2,688 but the SOX gave up 5 and closed at 486.
We got our oil rally today with crude shooting up to $60.17, about to run into the descending 50 dma at $60.70 but making a dangerously strong move today.
Our call this morning to take protective covers over $59.17 was well rewarded with most of the oil patch posting big gains.
Gold ran right up and tested the $630 level so we will watch this one closely tomorrow. Oil and gold’s up move came against continued dollar weakness which is just not improving!
As we know, there’s nothing I hate more than a commodity based rally so, despite the great numbers being put up, I’ve still got my eye on the exit signs!
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For someone looking to lighten up I sure took a lot of new positions but there were just a few I couldn’t resist, just in case the SOX reverse this silly sell-off and take the Nasdaq back over 2,500!
ABX $27.50s were the right call but I just played it for the day as it ran up to $1.90 (up 15%).
AMAT wastaken in comments on the SOX drop and the Dec $18 puts finished up a nickel at .40.
BSX had a great day with a 2.4% gain but the Jan ‘08 $17.50s barely budged at $2.55.
Our DELL $25s are looking good again as DELL’s earnings surprised 27 analysts by 25% on very slightly lower revenues. I feel PRETTY good about this pick!
DOW looked OK to meafter a nasty MER downgrade and dangerously rising oil prices (a major cost) so we took the Mar $45s for .50, which should give them some time to work it out.
EBAY Jan $35s came in at $1.15 but did at least pick up a nickel on the day.
Mr. Burns called the exact bottom of FCX in comments and I followed him out just after 2 pm, which was a good thing as the stock drove up in the afternoon. We said goodbye to the Jan $50 puts for $1.70 (up 386% from the $1 reduced basis) and took a .15 hit on the $50 puts, which is fine for a roll!
GOOG June $490s were taken for $61.50 to take advantage of selling the $500s for $18, which doesn’t seem like too much after a day like today!
If you really feel like crying - why didn’t we just hold our original Google plays and retire? Dec $410s for $12.60! Dec $420s for $9.60! Not only that but we did 2 updates and picked them again and again… And we thought making a lousy 1,970% on the September calls was good!
The JWN Dec $45 puts were dumped at the open for .50 (down .40) and I rolled that cost into the open Jan ‘08 $50 calls (basis $5.20 after sale) as they have served their purpose.
MOT was just too darned cheap and we picked up the $22.50s, which promptly dropped a nickel to .35.
It wasn’t a bad day but I was disappointed that some of our other open positions didn’t do better. While few stopped us out, not to many were ready for take-off either.
As I’ve said all week, all it takes is one bad thruster to screw up the whole rocket so let’s hope the SOX can right themselves in time for us to hit the boosters!
Meanwhile the VIX has gone into suspended animation in preparation for a long voyage to the stars…
November 22, 2006 at 1:25 am
Phil theres a 16m change to the negative in shares short in MOT this month compared to last do you feel this will hold the stock down? http://www.247wallst.com/ great list showing short position gains and loss’s just thought id pass it on found it interesting that MOT was neg 16m shares short. I think this will hold MOT back seems TXN’s in the same boat.
November 22, 2006 at 2:03 am
This seems to be the trouble with MOT……………………RBC Capital notes the fourth-quarter mobile devices sell-thru indications remain favorable and they are increasing their unit assumptions for Motorola (NYSE:MOT) from 62M to 62.5M units. However, the mix of handsets may not be tracking towards firm’s original expectations and they are reducing their ASP assumptions from $138 to $134. Subsequently, they are adjusting revenues for 4Q06 from $12B to $11.9B vs. consensus of $12B. EPS remains unchanged at $0.38 vs. consensus of $0.39.
With price driven growth likely to remain a persistent theme going forward, they will be utilizing a lower forward-multiple for the wireless-handset vendors. Firm’s new price-target for Motorola decreases from $26 to $28 or 18x CY07 earnings. Growth from emerging-regions, a methodical-ramp in WCDMA, and a greater- acceptance of mid-tier and low-end phones may limit the expansion of mobile-device ASPs as we enter 2007.
Firm recently surveyed 200 retailers across the U.S. via telephone and the data points to strong-demand for wireless phones as we approach the holidays. The popular-phones for Motorola are the RAZR and SLVR with price often cited as the primary factor after brand. Thus far they believe order and shipment trends for Motorola remain strong; it’s the mix that concerns the firm. The venerable RAZR, now over two-years old, has moved from a high- end to a mid-range and now to an entry-level phone, priced at $49 with a service plan.
The slide in ASPs for Motorola is not that bad when compared to Nokia, which is suffering from a weak mid-tier product-line and a ramp in emerging-markets, two major-factors impacting ASPs.
November 22, 2006 at 4:09 am
Also with regards to MOT relating to agreement with AAPL and iphone: there is talk that the iphone is delayed as AAPL has said little about projected release lately. Some project as late as March 07. Others predict Jan 07 which will miss much of the buying frenzy that could have occurred if the product would have been available before Xmas. If this is true, any bottom line increase recognized by MOT’s relationship with AAPL will not be visible until 1Q07.
Vol in BRX jan 07 20 P exceeded open interest yesterday. Wonder if its too late to consider?
GM Jan 32.5 P seeing large increase in volume yesterday also. The announcement of union talks in June has apparently negatively affected the stock. Can GM go below 30?
Thinking about ORCL DEC 19 C at .80…..any thoughts?
November 22, 2006 at 4:21 am
MOT was third on list for largest “decrease” in short interest from OCT to NOV Would think this would be a positive?
November 22, 2006 at 5:13 am
MOT - I’m thrilled that there still 22M people who have to cover that trade, although it may make it tough on my new Dec calls with so much less short interest.
Here’s today’s latest:
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20061122:MTFH77765_2006-11-22_00-01-17_L21794961&type=comktNews&rpc=44
That’s an additional 240K handset shipments for MOT based on current market share and, even if they are all just $130 per phone (lowest estimate), that’s a 7% boost in sales there alone. Add that to 1M Apple phones at $250 and that’s an additional .5%.
I have to disagree with RBC on the quarter -
Sales don’t just suddenly jump 10% on Jan 1st so the Q4 estimates must be too low and guidance has been flat for 3 months at .39, a 13% improvement over last year, but sales are already tracking at close to $12B ($11.9, I wouldn’t quibble), a 15% improvement over last year so I guess people are betting that MOT has incompetant management - good luck with that!
Don’t forget that NOK has been relentlessly discounting this year - they are unlikely to keep that up two years in a row.
I’m gambling with the Decembers but I will DD the March if it pulls back.
Don’t forget those Dolce/Gabbana $500 Gold Razors, there are 2.7M millionaires in the US and 8.7M globally - what’s a better Christmas gift?
http://www.dexigner.com/forum/index.php?showtopic=3865
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Apple doesn’t need an IPhone to have a good Q4, they will release it in Q2 when sales need a boost. Right now they are pulling the classic Microsoft move of pre-announcing so they can let the 2M apple fanatics (who would buy it even if they just slapped their logo on a tin can with a string) know that they shouldn’t buy a new phone for Christmas.
Don’t forget that new phones are all about contract expirations so it is in Apple’s interest to have a prolonged ramp-up as people have to get out of their existing contracts to switch (yes I know they can switch early but who really does?).
They cannot possibly make enough phones to satisfy the demand with 1.1 Bn phones being sold next year, even a 1% market share would strain a new production facility and you know they are going to do their best to watch the QC.
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BRX?
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GM - I can’t believe after I went to all that trouble to badmouth them on the 16th!
“It took them 6 months but GM finally found someone to cook keep their books! Congrats and GOOD LUCK to former T controller Nicholas Cyprus! Just remember, in the event of a crash, your chair may be used as a floatation device…”
I even had a link to a picture of the Titanic!
It’s not safe to short them here as they usually get rescued just below the 200 dma but one day they will just keep on dropping - this might be it as this sell-off is very ugly, below $32.50 you might consider the $30 but it’s a very dangerous play.
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ORCL - I like that as if they break $19.50 you will be in good shape but don’t fight the Nasdaq.
November 22, 2006 at 6:55 am
Thanks to a wiring issue to a new broker, I couldn’t play with the FCX puts. But today may be the day: Reuters.com reports shares of copper producer Freeport-McMoRan jumped 5% in U.S. trading on rumors of a takeover bid by BHP Billiton (BHP), but analysts gave an offer low odds.
Looking at DEC puts, and pullin trigger even if a tad “late”!
November 22, 2006 at 7:02 am
What a morning. Homepage was earnings.com and they’re losing their domain? Jeeze, I’d have donated a couple bucks a month to keep that one open.
November 22, 2006 at 7:04 am
good morning phil
I see you’re still up and around… good
NTES has taken off… your thoughts on target price… my March $15 are doing just about 100% but am thinking to let it cook longer??
Just put an order to DD on my COF Jan 85, it’s a long way to reach but COF can do it and they were too cheap to resist -I think?? Also own the March 85
Also CAG Dec 25 put… the’re hovering and am running out of patience… not the patient kind I guess… should I wait longer? may be just asking will make them collapse today LOL - do you know when they release earnings? only thing I found was this http://biz.yahoo.com/e/061120/cag8-k.html … non event
Finally Cramerboy advise buying BEAS (sore subject I know but $ is $) -your thoughts?
Thks in advance
November 22, 2006 at 7:08 am
Oops almost forgot DELL
Should I let my Jan 27.5 call cook for few more days/weeks -which I would prefer- or take profit whenever it reaches peak in the first few hours or less?
November 22, 2006 at 7:16 am
OK final one or I’ll get red flagged
With Deere taking off, don’t you think your CAT will follow? But I see a note on your spreadsheet to sell the Jan 09 calls which now I think of buying??? Unless you now recomend somthing sooner / cheaper??
November 22, 2006 at 8:16 am
Slackin
I think earnings.com just sold the name. Here is the new site.
http://www.fulldisclosure.com/splash.asp?client=cb
November 22, 2006 at 8:16 am
Slackin
I think earnings.com just sold the name. Here is the new site.
http://www.fulldisclosure.com/splash.asp?client=cb
November 22, 2006 at 8:22 am
FCX/BHP - that’s the kind of nonsense they tried to pull with N - I can’t believe they even allow this. The whole concept of anti-trust has just completely gone out the window….
Don’t put FCX if copper goes up - it’s like COP, if the prices go up, they’ll look smart as opposed to suicidal.
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Earnings.com? That’s got to be worth a few bucks to someone!
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I’d be taking half a double off the table into the weekend, they took a big pullback from $18.50 yesterday and you really don’t want to ride out a correction but you should get good support at $16.50 if you intend to be patient.
Oh wait, forget that - get out of the March $15s for sure, what good are they doing you. Roll share for share into the Mar $17.50s for $1.85 and bank the $1.65 so you can’t possibly lose more than your profits - that’s a nice relaxing trade.
Set a stop at $1 to guarantee a 50% profit - worst case, better than you’d be if you held the $15s through that kind of drop!
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COF - very good possible shopping upside but I’m waiting for AXP and MC to break up and then I’ll pick up the laggard.
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CAG is a plunge protector for me - if the market goes, they go, if everything goes up, I can stand to lose the quarter.
Earnings were good on 9/21: http://biz.yahoo.com/ap/060921/earns_conagra.html?.v=8
But corn is (to me) a big danger sign:
http://futures.tradingcharts.com/chart/CN/C6
This is, by the way, the real driving reason for these “benevolent” companies suddenly caring about trans-fats - corn oil got expensive so they put a pr spin on the swtich!
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I thanked Cramer last night for getting me out of BEAS and I will have my finger on the sell trigger as soon as his minions are done buying it up.
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I think DELL should have legs but there is a parade of assasin/analysts on CNBC trying to stop it from getting away from them. I don’t know what the weekend will bring on that one so it’s another one I would rather roll or half out if it starts pulling back.
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Oh that CAT note was pre-explosive China story. I’m not selling anything against them unless they get some kind of ridiculous run-up. I just picked the Dec $60s as a momentum play today.
November 22, 2006 at 8:41 am
Phil/ What is your take on the yen/dollar/
Is the yen getting stronger or is the dollar getting weaker?
T
November 22, 2006 at 8:47 am
Helium shortage about to shut the plant down where I work. Anyone read up on a angle for this? I don’t think there’s been any new discoveries of the stuff, and our vendors are running out…like right now.
November 22, 2006 at 9:17 am
One of the leaders in option volume and % increase in price was FCX but it was FCX Dec 65 CALLS….personally I wouldnt take the Puts except maybe if looking at PD
November 22, 2006 at 9:25 am
Yen and dollar weak - see morning post.
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I think you make helium, not “discover” it. APD makes those sort of things, just got raised to overweight at JPM and I like the Mar $75s for $1.10 but I won’t have much patience if they don’t break $70 soon.