EOT Position Update – January 14, 2009

| January 14, 2009

January 14, 2009

Market Snapshot

Looks like the cold slap of reality I mentioned last week turned into a right hook to the jaw.  The market had a number of steady down days.  Not a good sign for the remainder of 2009.

If you get the Wall Street Journal, I suggest you look closely at the article on global trade (page A1).  It’s a very sobering read for the global economy.

The big news this week . . .

December retail sales were down 2.7%… like we didn’t see that coming.  Still the market dives on the news.  Even Wal-Mart (gasp!) was impacted by the slowdown in spending.

Citigroup (C) announces a restructuring.  It may be too late, the stock is already below $5.  And that’s after the government pumped in billions and billions of support.

Speaking of Citigroup, they recently entered into an agreement with Morgan Stanley. Morgan’s going to buy a big chunk of the Smith Barney brokerage business.  The new entity “Morgan Stanley Smith Barney” (what genius thought up that name) will control $1.7 trillion in client assets.

Alcoa (AA) kicked off earnings season with a horrible announcement.  This was after pre-announcing cutbacks in production, employee numbers, and capital spending.  The stock plummeted, and the rest of the market followed suit.

Monsanto bucked the earnings trend and reported better than expected earnings.  The stocks up some 15% from its December lows.

Apple (AAPL) is getting crushed in afterhours trading.  CEO Steve Jobs announced he was taking a medical leave from the company.  We wish him all the best in a quick recovery.

Arizona Cardinals watch is in full swing here at Hyperion.  The excitement in the city is palpable as the Red Birds suit up this week against the Eagles.  I say Go Cards! (my Bears were knocked out weeks ago).

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.

 APEI March 2009 $45 CALLS (QAZCI)
We’re seeing a small gain in the option.  The stock has been whipsawed by the market. Give this trade a few more weeks to develop.  Resistance is $44 and $46.50.  Support is $36 and again at $32.50.

  WPI February 2009 $25 CALLS (WPIBE)
The stock trended steadily lower along with the markets.  Surprising the stock didn’t bounce after the company settled a patent litigation dispute.  Resistance levels will be at $25.50 and again at $27.  Support levels are $22 and $21.

Parting Shots…

Are we set for a repeat?

Many people were happy to turn the page on 2008.  It was a year of substantial financial loss and struggle.  The anticipation of the New Year brought a lot of excitement.  So did the prospect of a new President and administration in the White House.

That excitement seems to be wearing thin as the reality of an economic recession continues to stifle growth (not only in the economy but in the market).

The question I have is a simple one… with a complex answer.

If 2008 was the worst year for the market since 1929… will 2009 look like 1930 or 1931?  It’s a scary thought, but after the market started its historic tumble (in 1929), it fell for 3 years straight.

The implications can be dire.  And trading our accounts require attention to this possibility.  The answer… unfortunately only time will tell.  I can tell you I certainly hope nothing like this will be forthcoming.  If the markets head that way we need to stand ready to profit from the move.

Just wanted to flag some of the issues I’m wrestling with.

Category: EOT Update

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