Further Prognostications on the Market and Updates on HUN

Fellow Friends and Traders,

It’s been another week with more of that schizoid trading pattern where one day has nothing to do with the next.  The markets are searching for that special piece of news that will break us out of the trading range we've been locked into. However, be aware if it comes the market will blow out through 1,000 rather quickly. I'm looking myself but can't seem to find even a hint.  I was surprised the market did not react more negatively to the Chicago Purchasing Managers Index.  The index came in at 34 instead of the expected 42.  In reaction, the market still shrugs off bad news - the economy continues to remain weak.
 
There are huge $$$s out there looking to become more engaged and out of bonds. Many hedge funds are only 45% long and are trailing the market performance going into their second year. There will be no third.  Their monies will be pulled.
 
I believe the government has a covert plan to weaken the dollar and to reflate us out of this recession. U.S. Bonds and the USD continue to soften.  This isn't good news down the road. Markets sense this too. Therefore, traders continue to favor Materials & Energy (a reflation trade) and selected high-beta special situation techs.  Even Foreign ETF's are getting significant $$$ flows lately.
 
Speculators are aggressively buying crude and as price moves through $70-$75.  Consumers will have even more problems and the hope for any reasonable future economic growth will fall off.  Housing shows no signs of recovery. Recently, I heard on CNBC that there is a 40-month supply of homes over $750,000. Few institutions are making jumbo loans. In Las Vegas, our median home price is now back to 1998 prices @ $115,000 down from over $330,000 in 2005. We'll get a glimpse of consumer spending with numbers out this week. The numbers may be good because $$$s flowed from the Government last month. Both Sandi and I received our special $250 stimulus Social Security checks. We rushed out to spend the $$$s before it's taxed away.
 
So, it seems that Obama's multi-trillion dollar deficit spending programs have bought us this 35% rally and nothing much else.
 
Trading the E-minis in the Chat Room has been quite profitable these last 4-6 weeks. It took awhile to get the right combination of teaching and utilization of trading talent pulling in the same direction. The "Bible" trades jump right off the page and put mucho $$$s in our pockets.  Try it.  Jared and I won't bite you.
 
The expiration week trades came back with a vengeance this month especially Thursdays and Fridays with cheap trade able options. See attached chart and Friday’s intraday if you’re a subscriber. Looking ahead, I will recommend scaling back or selling calls against our reflation names. I will look to buy BAC calls into any weakness at under $9-$10 using Jan '11 12 and 15 strikes.  We can use any put-generated dollars from the sale of Jan 10 strike as recommended earlier to buy these calls.

HUN finally had a soft week hitting $5.95 and closing $6.50 Friday night. We should be using any weakness to add to our $7.50 call positions. The trial should begin Monday, June 8th, after the jury is selected. Bloomberg will cover the trial which will be a big help. HUN backed off as JPM lowered the EPS numbers for '09 and '10. Remember analysts had a $3.50 price target looking at lower #s this year. Learn to embrace weakness we're here for a deal or settlement using cheap call options and nothing else.
 
More on HUN.  The banks have been trying to get Apollo's Black back into the case as a defendant. The judge threw their motion out on Friday. Not sure what that means but it can't be bad.
 
Final thought, if the June 7.50s get down to $0.20 not later than June 9-11 I'd buy more as a throw-away trade.  If trial goes well early you could get a settlement or the stock could rally for any number of good news expectations.  We could make 5-10X rather quickly.  Anyway, I love the risk/reward.