EOT Position Update – December 31, 2008

| December 31, 2008

December 31, 2008

Market Snapshot

Today is New Year’s Eve.  It’s a historic moment as we wave goodbye to one of the worst markets since the great depression.  We stand today down almost 40% on the year.  I don’t know about you, but I’m ready to forget about 2008 and focus on 2009.

Because of the Christmas holiday and the New Year’s break, news on the market has been relatively light.

The big news this week . . .

GMAC was approved for a bailout by the US Government.  The car companies both rallied on the news.  I don’t see this industry getting any better any time soon.

Kuwait backed out of a proposed joint venture with Dow Chemicals, taking their $9 billion in funding with them.  This puts the acquisition of Rohm & Hass at risk.

The list of Madoff victims continues to expand.  The who’s who of Wall Street appears to be investing with this crook.  New victims include Kevin Bacon and Former Salomon Brothers Chief Economist Henry Kaufman.  It’s amazing that no one was able to uncover the scam earlier.

Now for the trade updates.

Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  I try to focus on the positions that have some significant news or price movement.

 WPI February 2009 $25 CALLS (WPIBE)
The stock had a nice run over the last few days.  We moved into the money on our option and now have a really nice profit.  We hit the first resistance level today… conservative investors should take profits.  Aggressive investors might want to give the trade more time to move.  Resistance levels will be at $25.50 and again at $27. Support levels are $22 and $21.

  GVA January 2009 $55 CALLS (GVAAK)
Last week we were under $38, now we’re trading at just over $43.  We should see this option trend up in value as we approach the Obama Inauguration.  Resistance is $50 and $55.  Support will be at $41 and again at $37.50

  SU January 2009 $17.50 PUTS (SXHMW)
We’re below $20 on this stock.  Unfortunately it looks like it flat-lined.  If we don’t get a solid move early in the New Year, consider exiting the trade.  Resistance is $23 and $25.50.  Support will be at $17 and again at $15.

  JCP January 2009 $30 PUTS (JCPMF)
If you hold this option take your profits soon.  The option reached a peak value of 676%.

Parting Shots…

What to Expect for 2009

2009 is a year just ripe with opportunity.  The rotten market environment from 2008 needs to be wiped away.  Unfortunately I think any near term positive momentum in the markets will be replaced with further concerns over recession.

Fourth quarter earnings will be huge.

I’m going to watch closely the fourth quarter/year end announcements.  This should give us some clue as to how the market perceives early momentum.  Everyone expects the news to be bad.

If we rally off the bad news, it might be a sign the market has bottomed.  If the market falls with the bad news, that means it’s worse than expected… watch out below.

I’m not expecting the economy to recover until the second half of 2009.  I think gold might have a strong year (as inflation becomes a concern).  And the Dow is likely to be locked in a trading range for a significant part of the year.

I’m always looking for trading ideas.  When the next one hits my desk I’ll let you know.

Have a safe and happy New Year!

Category: EOT Update

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