No trades taken yesterday due to other commitments. I was around in the morning and could have traded a perfect short on Visa but was unable to pull the trigger. I’ve noticed that happening more and more as of late which reminds me of my trading fears about 3 months ago after the markets crashed about 20%. But today’s another day and my account continues to grow from deposits. Need to work on fear… must reread Trading in the Zone…
Crude is now over $125 this morning. Be very careful. As oil goes higher, there’s very little chance the markets can follow. AIG also missed earnings last night which has helped put a damper on the markets this morning. Futures are down about 90 points with fair value around positive 40, for a net difference at the open of about -130. I don’t forsee this being a pretty day.
Earlier this morning, crude oil finally rose above $115 a barrel (CLK8). With oil rising at a rapid pace once again, commodities are soon to follow. Some analysts such as the Option Addict feel commodities will push
higher as it did about two months ago. In anticipation of a potential breakout, I’ve jumped into the bandwagon with a small position in DBA, the PowerShares DB Agriculture Fund. Note the level of support around $39. Here’s how I’m playing the ag game. I’m currently in DBA May 40 Calls with a stop right under $39 and a price target of $42. The two bottoming tail hammers also bode well for a bullish position.
With oil, gold, gasoline, commodities, and everything else rising at a rapid pace, perhaps it’s the best time to jump into the oils such as Exxon (XOM) and others? Actually, I may have found a stock to short. Take a look at Petroleo Brasileiro, also known as PetroBras (PBR). For those keeping up with recent news, PBR may have found new patches of
drillable crude in Brazil and as a result spiked about $12 Monday. But take a look at the chart. Note the action from the past couple of months. It appears that a double top may be in the works on PBR. A double top is normally a major reversal pattern that’s found after a extended run up. In order to confirm, PBR would need to bounce off the $125 resistance and break $97.50. However, working in that channel alone can net about 25 points. It’s an interesting play and something I’ll be keeping an eye on over the next few days.
This morning, PPI and PPI Core numbers were released for the month of March. PPI came in at 1.1%, about 0.5% higher than estimates. PPI Core came in line with estimates at 0.2%. For a quick recap of PPI and PPI Core, here’s a link to the PPI homepage at the Department of Labor. Remember that PPI is a measure of inflation and PPI Core is a measure of inflation sans food and energy. What does this mean? From my point of view, food and energy costs are rising somewhat rapidly since core rates remained the same from February to March.
Crude futures earlier in the day rose to $113.90 and settled near that level today.
Perhaps it’s a lack of experience, but if two of the most basic needs for the US population, food and energy, are increasing as a pretty good rate, as well as crude and gasoline (closed near $3.35 per gallon today) are rising as well, why is the market taking it as good news? If people are forced to spend more on food and energy, shouldn’t that result in less money available for spending, resulting in a further slowing of the economy?
Earnings Report
Washington Mutual (WM) reported a loss of $1.40 per share while Intel (INTC) came in at $0.25 per share. WM’s earnings report was in line with estimates from last week and as a result are up about $0.20 in after hours trading. INTC, while reporting earnings in line with estimates, reported margins higher than expected. It also appears that INTC is reporting earnings for the rest of the year to remain unchanged which is helping to offset any ideas of a slowdown with the chip maker. INTC’s currently up about $1.75 in after hours trading as a result.
