Goldman Says Market Oversold
Goldman Says Market Oversold
(Translation: Please buy something so we can get out!)
The futures are a shade higher at the moment. GDP was a slight
positive, coming in at a higher-than-expected 5.8% vs. the 5.0% consensus
expectations. The deflator came in at a lower-than-expected .8% vs.
expectations of 1.5%. Digging beneath the headline numbers, however, we find
that inventories contributed to more than half of the increase as final sales
growth came in at 2.6%, and business investment fell 5.7%. Inventory rebuilding
will only be a short-term pop if they can’t sell the stuff.
Since the American stock market is basically a confidence game, the more
important report this morning will be the University of Michigan Sentiment
numbers due at 8:45 CDT. Expectations are for a 94.6 reading. I would not be
surprised to see it come in lower, as the conflict in the Middle East is finally
showing up on the radar of the average American, and the situation is truly a
bummer.
Volatility
The VIX gained .37 to 23.05, the VXN was unchanged at 40.18, but had traded up
to 42.51 intraday before settling near the low. The QQV also traded much higher
intraday, up to 35.62 before rolling over to close at 34.21, up .21 on the day.
General Outlook
The market is slightly oversold here, and I would not be shocked by a
rally. Also, as Bill Fleckenstein notes in his column in realmoney.com, we are entering the "dead period" following
earnings when the pumpers and cheerleaders tend to operate. That being said, I
think the market over the last few weeks has revealed what it really is (a bear)
and we have to be prepared to be scale buyers of puts on every rally for the
near future.
I think it is interesting that the "second half" recovery stories are
starting to be floated now that the "second quarter" recovery has been
flushed down the toilet. Of course, these are the same people that were pushing
the "second half" recovery story last year. Will the economy recover?
I don’t know. But the stock market usually precedes the economy, and it sure
isn’t acting like it is expecting a big recovery.
Trade Updates (4/24/02)
Nothing yesterday.
Working Orders (Old Recommendations)
(
APC |
Quote |
Chart |
News |
PowerRating) — Buy the May 55/60 1:2 ratio call spread as a "roll" of our
APC May 60 call position. Pay $.65.
(Note: What you are doing is selling your
long May 60 calls to close, buying half as many May 55 calls to open, and paying
$.65 for the privilege). Cancel this trade if APC trades below $53.00.
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Sell all of the July 50 calls at $1.00 to close position.
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Sell all of the May 25 calls at $.50 to close position.
(
MSFT |
Quote |
Chart |
News |
PowerRating) — Buy the May/July 50 put calendar (buy the July puts, sell the May
puts) at $1.00 (25%).
(
WMT |
Quote |
Chart |
News |
PowerRating) — Sell half of the June 60 puts at $5.00 (when they get there).
New Actions (New Recommendations)
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Sell all of the July 50 calls at $1.00 to
close position.
(
DJX |
Quote |
Chart |
News |
PowerRating) — Sell half of the May 100 puts at $3.00.
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Sell all of the May 25 calls at $.50 to close position.
(
QQQ |
Quote |
Chart |
News |
PowerRating) — Buy the June 33 puts (25%) against the $33.30 area in the QQQ, buy 25%
more at the $33.80 level.
(
SMH |
Quote |
Chart |
News |
PowerRating) — Sell half of the May 40 puts at $1.80.
Rolls/Adjustments
None.
On The Horizon…
Broker/Dealer shorts on a bounce.
Recap of open trades:
Long-term
Reverse Collars
None.
Buy-writes
(
AMR |
Quote |
Chart |
News |
PowerRating) — Long the August 25 buy-write at $22.00 (50%).
(
AOL |
Quote |
Chart |
News |
PowerRating) — Long the July 22.5 buy-write at $19.40 (50%).
(
HAL |
Quote |
Chart |
News |
PowerRating) — Long the July 20 buy-write at $15.00 (50%).
HAL — Long the July 17.5 buy-write at $14.50 (50%).
(
SEBL |
Quote |
Chart |
News |
PowerRating) — Long the August 27.5 buy-write at $23.00
(50%).
Proxy buy-writes
None.
Complex Strategies
None.
Directional Positions
(
JNJ |
Quote |
Chart |
News |
PowerRating) — Long the January 60 puts at $3.30 (50%).
Short-term
Call Positions
(
APC |
Quote |
Chart |
News |
PowerRating) — Long the May 60 calls at
$1.50(100%).
(
CHIR |
Quote |
Chart |
News |
PowerRating) — Long the July 50 calls at $3.30 (50%).
(
CPN |
Quote |
Chart |
News |
PowerRating) — Long the May 15 calls at $.40 (50%).
(
MLNM |
Quote |
Chart |
News |
PowerRating) — Long the May 25 calls at $2.40 (50%).
Call Spread Positions
None.
Put Positions
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August 65 puts at $3.00 (25%) – part of a spread
"leg" to be completed later.
(
DJX |
Quote |
Chart |
News |
PowerRating) — Long the May 100 puts at $1.50 (50%).
(
SMH |
Quote |
Chart |
News |
PowerRating) – Long the May 40 puts at $.90 (100%). Holding.
(
WMT |
Quote |
Chart |
News |
PowerRating) — Long the June 60 puts at $2.50 (75%).
Spread Positions
(
BAC |
Quote |
Chart |
News |
PowerRating) — Long the August/May 65 put calendar at $1.50 (50%).
Stops
None.
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- Options trading involves substantial risk and
is not suitable for all Investors. - Also note that spread strategies involve
multiple commissions and are not risk-free. Most spreads must be done in a
margin account.
- Because of the importance of tax
considerations to all options transactions, the investor considering options
should consult with a tax advisor as to how taxes may affect the outcome of
contemplated options transactions.
- Supporting documentation for claims,
comparisons, recommendations, statistics or other technical data will be
furnished upon request. One or more of the contributors to these
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- It is important to note that the options
strategies discussed herein are not suitable to all investors. Options are
complex investment tools and involve substantial risk. Moreover spreading
strategies do not eliminate risk and involve multiple commissions.
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