Net weekly Money chart 02/06/09 and thoughts looking ahead

Fellow Traders,

Again the market holds key support in front of the Obama bailout plan. Remember the old adage, "buy the rumor and sell the news?"  Given the news was to be released next week we were faced with a number of choices this past week. Would we dare buy OEX Weeklys in hope of some leaks or some other strategies?  The best choice was to buy the 400 strike W calls under a $1 at or near Thursdays opening. These  400 strike calls closed near $10.00 the next day. See this weeks 30 minute chart (attached) and for some of the other choices.  All our choices to trade worked rather well but some better.

Next week should prove interesting.  Do we sell the announcement or is the news so good we rally through 900?  If the rally holds and builds there is a good chance the right policies may be in place.  However, if the rally fails, we are likely down a slippery slope to 600 on the S&Ps or 6500-7000 on the DOW.  Remember the first 700 S&P points down were the hardest.  The next 200 shouldn't panic US investors.  It's those other countries, especially Europe and a few of the Asian Tigers (such as Singapore, Korea, Taiwan and Malaysia) I'm more worried about.

Given the $trillions of $'s being spent around the world we should see the markets significantly higher over the next few months.  I'm thinking 950-1000.  China was up 4% one day last week.  I still like energy and material stocks.  I wouldn't chase them but buy them on weakness or sell puts. Then we can sell hard later on.

If we get the right package the economy could start to recover during the 1st or 2nd quarter of '10.  This means we could start to have a serious rally beginning in the 3rd quarter. 

I saw the "D" (depression/deflation) word mentioned from a portfolio manager in a featured Barron's story this week but haven't read it yet.
 
Update on some of our stock ideas

LINE went ex-dividend at $.62 and managed to close higher. Those who wrote the $15.00 calls should look to buy them back on any weakness and sell further out dated calls, maybe even the Aug or Sept $17.50 strike in a 3-2 (calls/shares) ratio.

HTS's Oscillator had a nice sell divergence when the stock tested the highs a week ago and could have been sold and repurchased $3-$4 lower.  It has been a rather good trading stock. They will have a conference call sometime the week of the 23rd. HTS is a better defensive stock that may become a source of cash as traders move to more aggressive market Beta stocks.  There could be another reason for the short term weakness.  HTS owns 100% 3, 5 and 7 year ARMs. When the Fed aggressively bought long-dated treasuries they drove 30-year mortgage rates to 4.25%.  The low interest rate caused a tremendous rush to refinance.  These MBS (mortgage backed securities) are now back to 4.75%. However, the spread remains attractive and we should be adding to positions here.

HUN was a nice winner last week rallying from a low of $2.49 to close over $3.00.  There was a J.P. Morgan Global High Yield Conference with a rather upbeat presentation by the company.  Pay attention to the summary in the 20 page report.  At this moment, we just require patience and time.  No one is paying a plug nickel for the $2-$3Bil suit starting May 11th.  Reference:

JP Morgan Global High Yield and Leveraged Finance Conference Presentation
(Optionally) http://ir.huntsman.com/phoenix.zhtml?c=186725&p=irol-calendarPast

Keep all those cards and letters coming.