Tape Painters Muddy The Waters
Kevin Haggerty is on vacation for two weeks. During this time, we’ve asked
Joe Corona, Senior Trader for Tony Saliba, to write the lead morning piece.
Kevin will return on August 12.
Futures are
lower this morning, giving up some of yesterday’s
last hour-and-a-half of “mystery rally.†Initial claims will be vs.
expectations of 375k. The bigger number on the day will be June construction
spending, due out at 09:00 CDT. Expectations are for a rise of .2%. This will
impact the homebuilding shares, which were pretty much left out of yesterday’s
rally.
Back
to yesterday’s rally, and I don’t want to rant too much about this, but this
month-end tape painting just helps to build the perception that the stock
market is a rigged and crooked game, and I would like to see some of the
players of this month-end charade paraded around in cuffs someday, like the
Rigases.
That being said, the fact that they were able to get away with jamming the Dow
up 200 points in the last hour and a half (see chart below) tells me that the
sellers are backing off, at least for the moment, and this thing might still
crawl higher.
Back From The Grave?
Interestingly, one of the sectors that caught my eye yesterday was the
Telecom sector. Yes, that’s right, the Telecoms! As a proxy for the sector
check out the chart of the TTH (Telecom HOLDRs) below. After making a spike low
(with everything else) on July 24, they have moved up smartly. Could the WCOM
and Q barfups have put a bottom in this sector? I find it to be worth a go.
Keep your eyes on
(
VZ |
Quote |
Chart |
News |
PowerRating),
(
SBC |
Quote |
Chart |
News |
PowerRating),
(
BLS |
Quote |
Chart |
News |
PowerRating), and of course the
(
TTH |
Quote |
Chart |
News |
PowerRating).
 
Punters Special
A possible throw
away: If the Telecoms do decide to rally, a tag along could be the fiberoptic
sector. I like the idea of a reverse collar in Ciena
(
CIEN |
Quote |
Chart |
News |
PowerRating). A reverse collar is a purchase of a call offset by the sale of a
put. In this case, I like buying the Ciena January 5 calls, and selling the
January 2.5 put. This should cost you about $.50, maybe a bit less.
Worst-case scenario
is you get put the stock at $2.5 (plus the $.50 for the collar) for a total
cost of $3.00 and it goes to zero. If it rallies before January, who knows? On
the other hand, you could just buy the stock.
Let’s be careful
out there — It’s August!
Joe