The Bears’ Revenge?

Folks, I’m sorry I
couldn’t get a report yesterday, but market activity was absolutely
unbelievable. To quote one of our traders, “We drained five phasers, and they
still came at us.” The combination of dead-cat bounce, short covering and the reaction to Greenspan combined to create one of the most fascinating trading
sessions I can remember. But on to
today’s action.

While a Canadian cold front pounds the country, natural gas futures exploded to
record levels. As you can imagine, that bad news was good news for energy
stocks, although option action in this sector is about as anemic as Calista
Flockhart! We call attention to the weather, as it will put further demands on
other fuel groups, ultimately keeping gasoline prices unusually high.

The unprecedented surge in natural gas prices follows overnight lows of —10
from North Dakota to Chicago. As some of you know, I do a daily television show
on Fox Television. The head meteorologist over there has been pounding the
table, saying we should expect unusually cold weather through January. That does
not bode well for a demand-driven market that is already short of supply.

On the brighter side, Wall Street seems to have fallen in love with former General

GE |
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executives and that’s been good for both Minnesota
& Mfg Co.

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and Home Depot
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. Both have stolen
GE’s best and brightest that were passed over for the top job at GE, and
shares of both companies are benefiting from the move.

MMM had a 19-point run on its appointment and today Home Depot’s shareholders
are likewise welcoming the vote of confidence from Wall Street as shares of HD
are up 1 1/2 to 45 1/8 (as of 12:35pm CST).

Many traders liked playing for a continuation of the bullish sentiment in HD by purchasing
the February 45 —55 bull call spread for 3 3/8. Since it’s a 10-point
spread, the risk versus reward is quite compelling and allows them to take a
defined risk bullish position in one of Wall Street’s darlings.