Last night, AA reported earnings that missed the estimates. The market gapped down at the open and slid lower, although the Dow climbed back up, ending down only 0.34%! AA shares closed 11.06% lower for the day. Commodity sectors were weak across the board. Energy, metals, and miners were all down: HES -4.01%; WLT -2.9%, RTP -2.97%, BHP -3.46%, GOLD -3.77%.
Last Thursday, after cashing out big wins on our long positions, we stayed mostly in cash. We were able to take advantage of the weak market today by playing the short side. In our Trading Room (where we discuss in real-time what’s happening on the market and explore trading ideas), I said early in the morning:
January 12, 2010 7:30 AM
BIDU
very weak…
We traded Jan 390 puts on BIDU with a +48% gain in 1 hour:
January 12, 2010 9:48 AM
BIDU
sub-$390!! got $2.1 on 390 puts from $4.4 to $6.5 in 1 hour…
These 390 puts traded as high as $8.74 and closed at $7.3. Although we left some money on the table, we should feel good about being careful as BIDU jumped $27 to trade above $413 after market today, as GOOG pondered upon the possibility of pulling out of China!
We also did a quick published trade on FAS Jan 83 puts, which booked a +31% profit in 1 hour:
January 12, 2010
10:00 | HappyTrading FAS ($80.70) Sold to Close FPMME Jan 83 put, at $3.60 +31%
09:04 | HappyTrading FAS ($82.25) Bought to Open FPMME Jan 83 put, at $2.75
These FAS 83 puts traded as high as $3.9 and closed at $3.35. If the market continues to be weak tomorrow, we may look to re-entry this trade.
The Dow was down just 36.73 points; SPX lost 10.76 points; Nasdaq fell 30.10 points:
GDX (gold miners) sank 3.63%, while XME (metals and mining) lost 2.5%. OIH (oil services) was down 1.75% and USO (oil) fell 2.24%. Other the other hand, UNG (natural gas) added +1.69%. SOXX (semiconductors) led the techs down with a 3.59% loss. XLF (financials) was lower by 1.44%. FXI (Chinese ADRs) slumped 2.43%.
SPX
SPX fell 10.76 points to close at 1136.22. It closed above its daily MAs. The MACD slid slightly.
Nasdaq
Nasdaq lost 30.1 points to close at 2282.31. It closed below the 10-day MA, but, was supported by the 20-day MA. The MACD went down.
A lot of mining stocks have run very far in the recent weeks. X, for instance, has gone up +85% in the past 2 months! With AA’s earnings not meeting the estimates, these stocks may need to shift down a gear and consolidate. Financials led the market higher last week, but, saw a quick pullback in late morning today as the Obama administration considered to raise more than $100 billion from a fee on banks. With 2 major legs on the market faltering, the market may have a difficult time advancing, for now. Techs have also been stalling, dropping sharply today. INTC will report earnings on Thursday after the market and JPM delivers its report on Friday morning. So, until Friday, buyers may be hesistant to make any drastic moves. It is earnings season, so the market will be driven by earnings reports. In addition, this week is options expiration week. There’s normally a lot of "expiration manuevers" and volatility is to be expected. After dropping below 17 yesterday, VIX has climbed back above 18. So, be a little more careful in the next few days.
Good night and HappyTrading! ™
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