Those options closed at $11.20 today.

MER jumped almost +8% to close at $32.77. PRU also rebounded well, adding nearly $4 to close at $63.27, up +6.68%.

Techs were also very strong, especially the biotechs. BTK added +3.83%. CELG continued to ramp higher, up another +3.8%. SVNT, also mentioned yesterday about a possible breakout, gained +4.01% today, as we cashed out our trade for a +46.6% gain. SVNT could have more room to go, but, the intraday charts look a bit toppy. DNA tested resistance at $78 again today. We started a new position in this. I think DNA could break out before its earnings report next Monday. It’ll need to break above $78 first. BIIB hopped +6.91% and GENZ advanced +5.62%.

The Dow closed up +152.25 points; SPX gained +21.39 points; Nasdaq jumped +51.12 points:

VIX tumbled 10.20% and closed just above 23. XLF (financials) garnered +6.48% while HGX (housing) added almost +6%. INX2 (Internet) rose +2.7%. USO (oil) slumped 4.38% and UNG (natural gas) went down 4.7%. FXI (Chinese ADRs) was higher by +1.92%.

SPX

SPX gained +21.39 points to close at 1273.7. It closed below the 1280 level. Its MACD went higher.

Nasdaq

Nasdaq jumped +51.12 points to close at 2294.44. It closed just below the 1300 mark and its 10-day MA. The MACD was up.

The market has been trying to bounce for a few days now. It finally succeeded in sticking a rally to the close. I think we’ll need to see SPX bounce above 1300-1320 and Nasdaq above 2350 to feel more comfortable. However, it is very encouraging to see XLF rise above $20 to close at $20.53. It is also nice to see oil prices coming down. After the market, AA reported better-than-expected earnings. Its shares went up +3.46% in AH trading. This could give the metals and mining sector a boost tomorrow. So, I’ll be hawking on coal and steel plays. The important thing for the market tomorrow is to continue this rally. There’s likely to be some profit-taking during the day. We’ll have to see if the market can close strong again.

Good night and HappyTrading! ™

“Days Go by”- Dirty Vegas

From Briefing.com

Periodicals Wrap-Up for Tuesday, July 8th
WALL STREET JOURNAL: A loss of confidence in the government sponsored mortgage firms Fannie Mae (FNM) and Freddie Mac (FRE) resulted in both companies shares plunging about 15% to 14 year lows. Because the two are the largest providers of funding for mortgages in the U.S., their troubles are significant as both may have to issue billions of dollars in stock to save themselves, diluting current shareholders, according to the Wall Street Journal…For 75 years the NFL’s Pittsburgh Steelers have been owned by the Rooney family, but that may now change as the Wall Street Journal reported that the family is seeking to sell the football team which is valued at about $1.2B. One potential buyer is Stanley Druckenmiller, a billionaire, and chairman of Duquesne Capital Management in Pittsburgh…FINANCIAL TIMES: British Prime Minister Gordon Brown yesterday raised the issue of visa problems facing BP (BP) employees in Russia with Russian President Dmitry Medvedev, but Medvedev did not make any concessions on the issue, according to the Financial Times. Some people have suggested that BP’s billionaire partners in its Russian joint venture, TNK-BP, have orchestrated the visa problems in order to gain control of the venture…

Increasing mortgage defaults send Fannie and Freddie shares to 14 year lows-WSJ
A loss of confidence in the government sponsored mortgage firms Fannie Mae (FNM) and Freddie Mac (FRE) resulted in both companies shares plunging about 15% to 14 year lows. Because the two are the largest providers of funding for mortgages in the U.S., their troubles are significant as both may have to issue billions of dollars in stock to save themselves, diluting current shareholders, according to the Wall Street Journal. One immediate result is that home buyers will have to pay even more to borrow. Another firm, IndyMac Bancorp (IMB), has said it will now stop marking almost all types of home loans.

Oil production at large Mexican field has dropped sharply-FT
Daily production at Mexico’s Cantarell oil complex, one of the world’s largest oil fields, has dropped by a third in the past year. Average daily production at the complex sank to a little over 1M barrels a day in May, versus 1.6M a year earlier. Mexico’s total oil production dropped about 10% year-over-year in May.

Repsol is still looking to Russia for desperately needed energy-FT
Even as many energy companies shy away from Russia, Spanish energy company Repsol (REP) is looking to increase its presence there, because the Spanish company’s reserves are very low. The company’s 2.4B barrels of oil equivalent will last it about six and a half years at current rates. However, Repsol’s ventures in Russia have produced minimal gains so far. Repsol is hoping its venture off the Brazilian coast proves to be more fruitful.

Pickens looks to drive political, economic agenda of the U.S.-USA Today
In an effort to help shape the political and economic agenda of the U.S., Texas oilman T. Boone Pickens will today unrwap the Pickens Plan, his plan for cutting the country’s demand for foreign oil by more than a third in under a decade. Pickens will, to promote the plan, bankroll www.pickensplan.com, what his aides say is the biggest public policy ad campaign ever and goes live today.

Swift Energy continues to diversify as it grows-IBD
Swift Energy (SFY) witnessed the oil shock of 1979 and the oil crash in the mid-1980s. It survived both, expanded into other areas and has thrived, especially with current record oil prices, giving it double digit earnings and revenue growth, according to Investor’s Business Daily’s “the New America”. Its diversity is by product, geography and geological assets. “We tend not to get too excited when things are going great, which they are, and we tend not to get too down when things turn around and go the other way,” says Paul Vincent, Swift’s investor relations manager. At the end of 2007 Swift had the energy equivalent of 134M barrels of oil in proven reserves, up 14% from the previous year. The company expects production to grow 10% to 15% this year. First quarter earnings per share jumped 79% to $1.61, as sales climbed 53% to $199M. Swift will release its second quarter numbers on August 7. Analysts see EPS surging 71% to $2.20, with estimates of a 53% jump in revenue to $243.6M. The consensus estimate calls for Swift’s earnings this year to be up 64% to $8.68.

Earnings Season: Sentiment Review and Outlook
Investor sentiment coming into Earnings Season, which is traditionally seen as starting today with Alcoa’s report, is very bearish. The reasons appear obvious given the breaks in March lows, higher than average volatility, wide credit spreads, record input prices in materials, food and energy as well as very low earnings expectations outside of Tech stocks. We had noted last week that these are ideal conditions for some form of rally to take place. Many of the bearish factors noted other than credit issues have been with us throughout the entire up move since 2004. The one key that made that up move possible was positive forward guidance. Outside of Tech stocks, expectations for earnings, especially in Financial stocks, have been crushed. For rallies in those names, all that may be needed is less than horrific news. The focus will be less on the quarter reported and more about guidance. If guidance is poorer than lowered expectations, we won’t see a rally. If it is inline or better with less uncertainty, we will likely see something start that could be traded. That may not mean we have seen index lows however. It is possible that additional write-downs in the Financial names will fail to spark conditions for a rally. We could instead see a long drag along lows. For Tech stocks, expectations may simply have been set too high with this area being a very crowded long trade. In this scenario on an index basis we might still see price declines while select sectors rally. Index declines could be exacerbated by declines in Energy if the commodity outlook dims over the next several weeks. This is contrary to equity bull expectations, but we should recall that Financials, Tech and Energy have almost equal weights in the S&P 500. The sectors that may be most likely to rally are Consumer Discretionary (short-covering), Industrials, Consumer Staples and Health Care (short-covering). Financials could see an extended short-covering rally on much better than expected news. That may be a brief respite given the fundamental backdrop. We should note that a July rally is likely to be short-lived unless surprises are positive in the extreme. Our expectation is that conditions into the election will not be favorable for higher equity prices.

TEVA added to Conviction Buy List; maintain Buy@GSCO
Goldman added TEVA to its Conviction Buy List citing valuation following disappointing Copaxone results and views Azilect as a near-term driver.

Semiconductors: Estimates lowered on lower US GDP outlook@MSCO
Morgan Stanley lowered estimates for semiconductors citing reduced expectations for U.S. GDP growth but continues to positive on ALTR, BRCM, and PMCS.

RIMM likely to hold market share, reiterate Top Pick@LEHM
Lehman said Blackberry’s vertical integration in enterprise provide a high barrier to entry. The firm said their is increased competition for the consumer but the company is likely to hold material market share. RIMM is the analyst’s top pick in the group.

Boone Pickens says oil low over next two years is $100/bbl-CNBC

Crude Oil-$CL: The Technical Picture: Death of Crude?
The “death” of Crude has been making the rounds again after yesterday’s price drop. In Tuesday’s pre-market the $140 level has been broken on the Light Sweet contract but not on the Brent. The roughly $1 spread between the two contracts continues. One notable factor is the G8 commitment to cut carbon emissions in half by 2050 that was headlined this morning. Despite the news we remain skeptical that the price drop in Crude is a death blow to the rally. First, all commodities except Coal dropped sharply yesterday. Many contracts are rolling this week and that is no doubt a factor. There is often both volatile action and large price drops as this takes place. If one looks back at weekly charts for Crude, that is apparent in the second or first week of each month. There is also little doubt that traders have been cautious around G8 given the prospect for coordinated action. Since the agenda targeted high food and energy prices, this was prudent. What would get us bearish? On a technical basis, the Light Sweet contract would need to break the 10-week moving average at $134.46. That is the proxy for the uptrend leg for this year. Next, the 50-day moving average at $130.15 would need to be broken as well. If both these levels were voided, not by a touch but a hard break over at least a week, then the current uptrend leg would be broken. The bad news for Crude bears is that it is touches or breaks of these uptrend proxies that usually bring in buyers and lead to even higher highs.

GOOG: Should meet or beat high end of expectations@SUSQ
Susquehanna said GOOG is seeing ongoing demand for search offerings despite the weakening macro environment. With the addition of a full quarter from DoubleClick, the firm believes GOOG should meet or beat high end of expectations. Shares are Positive rated. Target $635.

MA upgraded to Outperform from Market Perform@RAJA

ELN initiated with a Neutral@COWN
Cowen cites valuation and PML concerns for its Neutral rating.

MOS expects tight phosphate market for 2H ‘08-Slides
The company reports in an 8-K: The same factors that have driven prices to record levels during the first half of this year � namely strong demand prospects, a big expected drop in Chinese exports and higher raw material costs � are expected to tighten the phosphate market even further during the second half of the year. Recent increases in agricultural commodity prices continue to under-gird a strong phosphate demand outlook worldwide. For example, the 2009 new crop prices for corn, soybeans and wheat climbed to $6.55 per bushel, $14.79 per bushel and $9.40 per bushel, respectively, at the end of June. U.S. phosphate use is forecast to increase 2% to 3% in 2008/09 given the prospect of a rebound in corn acreage to at least the mid-90 million acre range next spring. The latest USDA estimates indicate that U.S. corn stocks will plummet to less than 675 million bushels by the end of the 2008/09 crop year due to a smaller 2008 crop and continued strong demand from both domestic and offshore buyers. USDA right now is evaluating whether to release CRP acres for the 2009 planting season. More exports are needed from U.S. producers because of a large expected drop in Chinese phosphate exports in 2008. China exported 4.0 million tonnes of DAP and MAP in 2007, up sharply from about 1.0 million tonnes in 2006. However, we estimate that Chinese producers shorted local customers by as much as 2.0 million tonnes last year. Chinese planners imposed a 35% export tax on all phosphate products on January 1 and then increased this rate to 135% on April 20 in order to shut off exports and insure adequate supplies for domestic farmers. Raw materials costs continue to escalate. Phosphate rock prices fob Morocco for Q3 shipment have increased to the $450 to $500 per tonne range, up another $100 per tonne from Q2 and up almost $300 per tonne from Q1. Based on these forecasts and assumptions, U.S. DAP/MAP producer stocks are forecast to stay at extremely low levels throughout the 2008/09 fertilizer year. In fact, month-end stocks are projected to drop below the low levels of last year during the next six months.

CRME July volatility Elevated at 195 into data release
CRME closed at $8.66. Phase 2b data is expected soon for a oral formulation of Kynapid (vernakalant), a drug to restore normal heart rhythm in patients with arterial fibrillation. CRME July option implied volatility of 195 is above its 26-week average of 131 according to Track Data, suggesting larger price movement.

BIDU: Checks indicate quarter tracking above estimates@PIPR
Piper’s checks suggest BIDU’s June quarter is tracking slightly above Street estimates and they expect the company to maintain its guidance for the September quarter. Shares remain Buy rated.

ENER selected by General Motors-GM
Energy Conversion Devices, Inc. announced that its UNI-SOLAR(R) thin-film flexible solar laminates will power the world’s largest rooftop solar power system. The 12-megawatt system is being installed on GM’s assembly plant in Figueruelas, Zaragoza, Spain and will become operational in the fall of 2008. ECD will supply the solar laminates through its wholly owned subsidiary, United Solar Ovonic, LLC. When fully operational, the photovoltaic system will have a peak capacity of 12 megawatts, producing as much as 15 million kilowatt hours of “green” energy annually, enough to power approximately 4,500 homes.

Boone Pickens says U.S. is the Saudi Arabia of wind power-CNBC

EGLE initiated with a Buy, target $28@MLCO
GNK initiated with a Buy, target $80@MLCO

For doctors, drug costs and patient care are in conflict-WSJ
James Waisman, an oncologist and a partner at the BreastLink cancer clinic near Los Angeles says, “Patients are at risk and we’re at risk.” These days the exploding cost of drugs to treat various types of cancer are so expense that doctors must wait months for reimbursements, often having to front the money themselves to be able to get the necessary drugs to treat their patients. Drug companies cite the billions it costs to bring drugs to market, and that they give back by helping the poor who need treatment. But for a typical oncologist, according to the Wall Street Journal, treatment is affected by cost. A survey of 167 cancer doctors published in 2007 in the Journal of Clinical Oncology showed that 42% regularly raised the issue of costs when discussing treatment options with patients. Over 20% said costs influence their treatment decisions, and 16% said they omit discussion of very expensive treatments when they know the cost will place great strain on patients’ resources. Doctors are often financially unable to front the costs for drugs, risking their own livelihood.

On The Fly: Asian Markets Wrap-Up for Tuesday, July 8
Stocks declined, as investors worried about the negative effects of inflation and banks’ losses. JAPAN: Shares dropped, led by financial and commodity companies. The Nikkei 225 sank 2.5%, to 13,033.10. Mizuho Financial (MFG), a bank, fell 3.7% and brokerage Nomura Holdings (NMR) slipped 4.6%. Orix (IX), a financial services company, lost 6.3%. Companies involved in energy production declined after the price of crude oil dropped substantially yesterday. Oil production company Inpex sank 5.2%, while Itochu (ITOCF), which invests in oil exploration, declined 4.5% and Mitsui (MITSY), another energy investor, lost 4.4%. Mazda (MZDAF) rose 3%, as the yen’s decline against the euro has improved the company’s prospects this year. AUSTRALIA: Stocks finished lower, after an index measuring the confidence of Australian companies reached its lowest level in seven years. The S&P/ASX 200 Index dropped 1.4% to 4,932.90. Several REITs declined significantly, after S&P downgraded the credit rating of GPT (GPTGF), a REIT. GPT tumbled 11%, while Valad Property Group plunged 14% and Mirvac Group lost 13%. A number of oil companies finished lower, with Santos (STOSY) declining 3.1% and Woodside Petroleum (WOPEY) dipping 2.4%. AROUND ASIA: China’s CSI 300 index rose 0.66%, but South Korea’s KEX 100 retreated 2.81% and Taiwan’s Taiex tumbled 3.94%…Citigroup predicted that Asian countries’ rising inflation and slowing exports would trigger downward revisions of earnings estimates for Asian companies.

MDVN upgraded to Outperform from Market Perform@RODM
Rodman & Renshaw upgraded MDVN citing valuation of the firm’s pipeline given recent catalyst of positive Ph II results in Huntington’s disease with lead candidate, Dimebon. Target $24

MER estimates lowered on expected Q2 writedowns@WCHV
Wachovia expects $5B of marks for the quarter, centering around CDO exposure and monoline hits in light of recent ratings downgrades, and lowered their Q2 estimate to ($2.16) from 63c and 2008 estimate to ($3.11) from 15c. Further, Wachovia believes potential sales in MER’s BlackRock or Bloomberg stakes would be a negative since these positions are “one of the few remaining positive elements of the MER story.” Shares remain Market Perform rated.

Jim Cramer’s “Mad Money”
Cramer said the market is headed towards an oil-induced recession. With earnings expectations down 11% from last year’s levels, Cramer told viewers it’s time for a shift in strategy. He advocated using any strength in the market to take profits and reposition into defensive stocks and cash. Cramer drew a comparison of today’s markets to that of 1990-91, when the S&P500 saw a drop of 16% due largely in part to weakness in the financials. During that same period, he observed, biotech stocks led the way. He said that traditional recession stocks would normally include the food and beverage names, but with raw costs rising, these stocks, with perhaps the exception of Heinz (HNZ) and General Mills (GIS), are the wrong move for this market. Cramer said he will spend the rest of the week talking about his favorite biotech names. Cramer claimed health care as “the safest sector around” and named Genentech (DNA) as his first biotech favorite. Cramer credits much of Genentech’s strength and future to its cancer-fighting drug Avastin. Cramer also likes Genentech for its myriad other drugs and its strong drug pipeline, which he feels will give the stock many catalysts over the next year. Cramer said it’s time to buy shares of Genentech off the company’s negative press from a recent New York Times story, which he views as a “non-event”, and a perfect entry-point. Next, Cramer welcomed Larry Lee, chair/CEO of RAM Energy (RAME) to discuss the future of natural gas, and natural gas stocks. Lee said that with oil over $100 a barrel, the price of natural gas still has room to run to the upside. Cramer said he felt the stocks in this sector got too hot, too quickly, but reiterated that he’s bullish long-term on the sector. While he urged viewers to exercise caution, he called the recent pullbacks in many of the top natural gas stocks an attractive entry point. MAD MAIL: Cramer told viewers that the fertilizer and mineral stocks are in a free-fall at the moment and that he’s cautious. He said that Sociedad Quimica (SQM) is still one of his favorite names once the bottom has been established. SUDDEN DEATH: (Bullish) MA and FRO. (Bearish) BA, V and GMR. LIGHTNING ROUND: (Bullish) PG. (Bearish) MOS; X; BK and HK.

Fast money position recap- First Moves: Jeff likes USO on a pullback, Karen likes PDE, Pete likes XTO, Guy likes CELG. Macke Owns (ATVI), (WMT), (DIS), (MSFT); Najarian Owns (AAPL), (NOK), (TSO), (XLF), (XTO), (FNM), (ANR); Najarian Owns (FNM) Puts, (MER) Puts; Najarian Owns (RIMM) Calls, (SLB) Calls; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman’s Firm Owns (GE), (MPG), (MSFT), (SUN), (TSO), (VLO); Finerman’s Firm And Finerman Own (PDE); Finerman’s Firm Owns SPX Index Puts; Finerman’s Firm And Finerman Own (C) And (C) Leaps; Finerman’s Firm And Finerman Own (FLS); Finerman’s Firm Is Short (SPG), (IYR), (IJR), (MDY), (SPY), (IWM); Finerman’s Firm Is Short (XME) And Owns (XME) Puts.

I am going to be reactionary today and watch how the market trades before analyzing the best trades to make. Going to act like a defensive back today by reading and then reacting. Watch the opening range and let it develop first. Looks like the downside momentum is starting to lose strength and we may be forming a temporary bottom. I still want to see 2 rally waves on strong volume with good breadth confirmed by the TRIN indicators.
Pick plays with a high probability of success, have focus and patience, plan the trade and trade the plan. Great luck and great trading.

But, the financials stayed weak, and, soon dragged the whole market lower. GS sank more than 5%. STI and PRU (both mentioned in the Sector Watch this weekend) broke down further, losing 9.11% and 2.71%, respectively. MA went as low as $243.34, but, bounced back to close at $246.1, down 3%. It still looks like it could hit $240 soon to fill the gap.

In the biotech sector, CELG continued to sail higher, adding +2.7%. It looks like it could go higher from here. Its all-time high is at $75.44 set in October 2007. SVNT went up almost +6% today and could be setting up for a breakout (we have a position in this).

The market saw some violent tugs between the bulls and the bears, swinging from one side to another. The Dow ended down 56.58 points; SPX lost 10.59 points; Nasdaq slid 2.06 points:

VIX added almost +4% to close at 25.78. HGX (housing) was down 2.7% and XLF (financials) tumbled 3.31%. XLE (energy) slipped 2.51% and OIH (oil services) lost 2.33%. FXI (Chinese ADRs) managed pick up +2.21%.

SPX

SPX lost 10.59 points to close at 1252.31. Its daily MAs and MACD continued lower.

Nasdaq

Nasdaq slid 2.06 points to close at 2243.32. Its daily MAs and MACD also went lower.

This market is still weak. It gapped up at the open, but, ended with a loss. Like I’ve saying for a while now, until the financials establish a bottom, it is very difficult for the overall market to find sustainable strength. XLF pushed lower on a new leg down. However, we are also seeing violent swings. So, trades seem to go pretty quickly. I’m still almost 75% in cash; perhaps, it is the safer place to be. Earnings season is going to start to heat up though. There could be some very good opportunities coming. AA, which has been driven down quite a bit in June, reports tomorrow. This could be a mover for the metals and mining sector, as in just 3 days, XME gave up the gains that it had accumulated in the past 2 months! Standing by with cash.

Good night and HappyTrading! ™

The Shins “Sleeping Lessons”

From Briefing.com

Periodicals Wrap-Up for Monday, July 7th
FINANCIAL TIMES: The Financial Times reported that Bain Capital, Blackstone (BX) and General Electric’s (GE) NBC universal will acquire The Weather Channel properties from Landmark Communications for approximately $3.2B in a leveraged buy-out. The Weather Channel will be run separately…A top Goldman Sachs (GS) trader is defecting to GLG Partners (GLG), the UK’s second-largest hedge fund. Goldman’s Driss Ben-Brahim, a partner in the firm and the head of its emerging market trading business, will take over GLG’s $1.2B emerging markets special situations fund, the Financial Times reported…NEW YORK POST: Take Two Interactive (TTWO), which makes video games, will probably sign video game creator Ken Levine to a new contract. The deal would bolster Take Two’s argument that its value exceeds the $25.74 per share that Electronic Arts (ERTS) has offered as a takeover price for the company, The New York Post believes…REUTERS: Reuters reported that Deutsche Bank (DB) is the only bidder remaining for Citigroup’s (C) German retail operations. Sources said Commerzbank (CRZBY) dropped out of the running on Friday…

Weekly subtractions from the Investor’s Business Daily-100
The following are subtractions from the Investors Business Daily-100 list for the week of July 3: Sociedad Quimica Y Minra (SQM), Companhia Siderurgic (SID), Metalico (MEA), Hill International (HIL), Pericom Semiconductor (PSEM), Darwin Proffessional Underwriters (DR), Priceline.com Inc. (PCLN), China Medical Tech (CMED),Gulfmark Offshore (GLF), Intrepid Potash Inc (IPI), Concur Technologies (CNQR), Rowan Companies (RDC), Kansas City Southern (KSU), Newmarket Corporation(NEU), Morningstar Inc (MORN), Celanese Corp (CE), Wabtec (WAB), Airgas (ARG).

Weekly additions to the Investors Business Daily-100
The following are additions to the Investors Business Daily- 100 list for the week of July 3: Celgene Corp. (CELG), Plexus Corp (PLXS), Monolithic Power Systems (MPWR), Flir Systems (FLIR), Atheros Communications (ATHR), Netlogic Microsystems (NETL), Nordson Corporation (NDSN), Stanley Inc. (SXE), Devon Energy Corp (DVN), Gulf Island Fabrication (GIFI), Halliburton (HAL), Axsys Technologies (AXYS), Forest Oil Corp. (FST), Plains Exploration & Production (PXP), True Religion Appare l(TRLG), Helmerich & Payne (HP), Schnitzer Steel (SCHN), Credicorp Ltd.(BAP).

RIG: Believe company will benefit from strong deepwater market@GABE
Gabelli contends that Transocean will reap the benefits of higher day rate and term contracts in the deepwater market. The firm believes investors’ concerns about possible competition to Transocean from Petrobras (PZE) is overdone, as they note that the two companies recently signed a 10 year drilling contract. The firm maintained their Buy rating on Transocean.

ZION target lowered to $33 from $38, maintain Outperform@RBCM
RBC believes management chose to hold off on a larger stock offering since it could not get the pricing it wanted, and did not see an urgency to raise new capital. They adjusted their estimates to reflect the company’s Q2 update and keep an Outperform rating.

U.S. equity futures point to a slightly higher open
U.S. equity futures are pointing to a slightly higher open as gold, oil and natural gas prices have weakened. This week kicks off the second quarter earnings season, and Alcoa (AA) will be the first of the Dow components to report tomorrow after the close. Although investors are anxious to see how profits are holding up amid rising fuel prices and overall inflation, the Wall Street Journal prefaced Alcoa’s earnings report by saying that the company will be pressured by higher costs and lower aluminum prices. The Journal did say that the outlook for aluminum is strong, based on ongoing building in emerging countries and China, but that investors will be anxious to hear the company’s comments.

MI target lowered to $15 from $22@RBCM
RBC lowered their target following the company’s Q2 preannouncement and believes downside risks to credit remains. Shares remain Sector Perform rated.

Solar Industry: Adjusting ASP assumptions due to potential cap in Spain@CSTI
Collins Stewart cut their ASP assumptions for YGE, STP and JASO to reflect the likelihood of Spain establishing a cap on solar installations that will receive a feed-in tarif. The broker says this move will reduce industry demand in 2008 and impact industry pricing. YGE, STP and JASO remain Buy rated.

Broadcom-BRCM upgraded to Buy from Neutral@PIPR
Piper upgraded shares as they believe the Street is underestimating some of the company’s product cycles.

Auto makers hit the brakes against escalating steel prices-WSJ
Some auto makers are fighting back against steel price increases, refusing to pay surcharges and threatening legal action. Negotiations between the two sides are ongoing, reports the Wall Street Journal. “There are some customers who have accepted the surcharges and some who have not. For those who have not, we are still in negotiations,” says Aditya Mittal, ArcelorMittal’s CFO.

GMX Resources-GMXR volatility Elevated on wide share price movement
GMXR, a gas exploration and production company, closed at $76.37. Morgan Keegan say’s “Based on our well model, we can justify a risked, present value analysis of GMXR shares between $120 and $125 per share.” GMXR July option implied volatility of 94 is above its 26-week average of 54 according to Track Data, suggesting larger price movement.

AMGN: See additional upside following recent rally@DBAB
Deutsche Bank believes the valuation is still attractive at current levels and raised their target price to $54 from $52.

Brokers: Recommend buying BLK into earnings following recent weakness@SBSH
Citigroup expects the best core trends in Q2 from retail brokers like AMTD and SCHW and from asset managers delivering core organic growth like BLK and TROW. The firm expects the worst core trends at ETFC, LM, FIG and MER. Citigroup recommends buying BLK into the quarter as they view the recent weakness as an “excellent” buying opportunity.

Goldman Sachs-GS says Q2 Level 3 assets at $78.09B vs. $96.39B in Q1

CF upgraded to Outperform from Neutral@FBCO
Credit Suisse upgraded CF citing valuation. Target $180.

PBR initiated with a Buy, target $92@GSCO

SU upgraded to Outperform from Market Perform@FBRC
Friedman Billings upgraded SU citing valuation. Target to $85 from $53.

SU upgraded to Overweight from Neutral@JPMS
JP Morgan upgraded SU citing valuation.

European Banks sector upgraded to Neutral from Underweight@KBWI
Keefe Bruyette upgraded the sector on valuation as they see limited downside from current levels. Included in the firm’s top picks are HSBC Holdings (HBC) and Banco Santander (STD).

MON: Corn demand concerns could create buying opportunity@JEFF
Jefferies believes perceived risks to corn demand could create a buying opportunity in the second half of 2008 as they feel a secular downshift in corn acreage is highly unlikely. The firm reiterates a Buy rating on MON shares.

Solar: Proposed Spanish 300MW cap unlikely to become law@COWN
Cowen said the proposed 300MW cap in Spanish solar subsidies is unlikely to become law as it would cause significant job losses and business closures. The firm said Outperform rated ENER and FSLR are best positioned and that ESLR, SPWR, and STP are oversold.

Plains Ex & Prod-PXP target raised to $105 from $85@Coker & Palmer
Coker & Palmer raised their target as they believe the company’s joint venture in the Haynesville Shale should generate significant growth. Shares remain Buy rated.

Biotechnology: DNA, AMGN, & CELG poised to beat@FBCO
Credit Suisse believes biotech looks particular attractive given its independence from the broader economy. The firm expects Neutral rated DNA to be a big winner but said Rituxan IMS strength seems odd, while Avastin growth is least surprising given approval in breast. The firm said Outperform rated AMGN was helped by no label change for Aranesp and that CELG’s momentum will continue. The firm continues to see PML risk for BIIB in 2H08.

Jim Cramer’s “Mad Money”
Thursday’s show, Cramer told viewers that although stocks are the most important element in a balanced portfolio, he cautioned viewers that “there are a lot of other things you have to do if you want those investments to pay off.” Cramer identified “three necessities” that he said all investors “need to have taken care of” before they invest in the stock market. (1) credit card debt — given the high interest rates, even a great investor can have his gain canceled out by credit card debt. (2) health insurance — he told viewers not to invest a penny in the markets until they have health insurance. Cramer says, “Medical emergencies are the biggest cause of bankruptcy.” (3) disability insurance — Cramer stressed how easily investors can get “wiped out” by unexpected hospital bills. Next, After taking care of the “necessities,” Cramer told viewers they need to prepare for retirement. He said it isn’t enough to just mindlessly save money into a 401k plan. Cramer told viewers they need to stay diversified and play an active role in the management of their savings plans. He recommended S&P 500 index funds as a better proxy for the market’s high-quality names. Cramer still advocated investing in bonds, but contrary to conventional wisdom, recommended only two-thirds of a portfolio be in bonds at retirement age. Also, Cramer suggested making 401K contributions as the market dictates, rather than evenly throughout the year. “Pay attention to the market,” said Cramer, “contribute twice your normal contribution any month the market is down.” Cramer’s final piece of retirement advice was that there is more to investing than just 401k plans. He said individual IRAs are the perfect way to supplement a 401k, giving investors a superior vehicle for managing retirement investments. During the show, Cramer took a question from a caller who asked him what it meant to do homework on a stock. Using Caterpillar (CAT) as an example, Cramer said investors need to put in time, reading a company’s earnings reports, news stories and annual reports in order to make an intelligent decision on a stock.

Fast Money position recap- Adami Owns (AGU), (C), (GS), (INTC), (BTU), (MSFT), (NUE); Najarian Owns (AAPL), (AMLN), (ANR), (NOK), (NUE), (TSO), (XLF), (YHOO), (HD); Najarian Owns (WFMI) Puts, (MER) Puts, (WFMI) Puts, (HBC) Puts; Najarian Owns (MYGN) Calls, (SLB) Calls, (WM) Calls, (WLT) Calls; Finerman Owns (GS); Finerman’s Firm And Finerman Own (TIP), (FLS), (GLNG); Finerman’s Firm And Finerman Own (C) And (C) Leaps; Finerman’s Firm And Finerman Own (GE) And (GE) Puts; Finerman’s Firm Owns (MSFT), (SUN), (TSO), (TWX), (VLO); Finerman’s Firm Owns SPX Index Puts; Finerman’s Firm Owns (HUN) Calls; Finerman’s Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Terranova Owns (BNI), (YHOO), (LUV), (CME), (GOOG), (SU), (INTC), (FXC), (IYT),  (XLF), (FCX); Terranova Owns Dollar Index Futures

Terranova is chief alternatives strategist at Phoenix Investment Partners;; Phoenix Investment Partners Ltd. Owns (RWX), (DBC), (DBV), (IGE), (AAI), (ALK), (AMR,) (APA), BP plc, British Airways plc, (CHK), (CVX), (COP), (CAL), (DAL), ENI SPA, (FCX), (XOM), Gazprom, (HA), (HES), (HOC), (HSE), (JBLU), Lukoil, (MRO), (MUR), (OXY), Petrobras Intl Fin, Petro-Canada, (POT), (PBR), Petroleos De Venezuela, (QAN), (RJET), Royal Dutch Shell plc A Shares, (SKYW), (LUV,) (SU), (TSO), Texaco Capital, Total SA, (UAUA), (LCC), (VLO).

Market looks to bounce on a pullback on oil. Tech shares and fertilizer plays look to bounce the most so far in premarket. Let’s see if this early bounce can manifest into something bigger but I’m not holding my breath. I have my list of shorts and longs and will let the market range for the first part of the day and week to gauge the supply/demand levels of the market in this oversold condition. Earnings are now up to bat and reactions to the earnings will be more important than the results themselves. Pick plays with a high probability of success, have focus and patience. Plan the trade and trade the plan. Good luck and great trading.
UPDATE: My short list today was posted in the trading room with:
optiondragon
Posted July 7, 2008 at 6:18 am
Short list hawks
Financials: MI, LFG, STI, ZION, HBC, PRU, STT, PNC, CMA, MTB

Let’s take a look at the major market indices:
SPX

SPX added +1.38 points, on Thursday, to close at 1262.9. Its daily MAs and MACD went lower.

Nasdaq

Nasdaq slid 6.08 points to close at 2245.38. It closed below the support at 2250. Its daily MAs sloped lower and the MACD dropped.

Both SPX and Nasdaq look unhealthy. They are just riding the lower daily BB down; their daily MAs are curving down with sharper slopes. For the new week, the market looks still to be on the defensive side. SPX has already penetrated below the March support (1280). Nasdaq just closed below an important support and could be testing the March lows, around 2200, soon. The financials still look weak. Coals and steels got hammered last Wednesday, which forced a sharp turn on XME (metals and mining). The energy-related sectors such as XLE (energy) and OIH (oil services) also saw similar reverals. However, pure commdities are still going higher! Let’s take a look at some of these sectors:

Sector Watch
XLF (financials)

XLF closed below $20, an important support, last week. PRU and STI look like they may break down further. MA closed below $260 and could easily head down to fill the gap at $240.

XME (metals and mining)

XME went from threatening to break out again (above $95) to now breaking down with that sharp drop last Wednesday. It took out the support at $82.5 and could slid to $77.5 before finding the next support. Coals and steels have risen up so much, and now they look very vulnerable. It’ll be interesting to see what this sector does next week, as they tend to move fast in whichever direction.

XLE (energy)

XLE also saw some big reversals last week, preventing its breakout above $90. It is now on its daily lower BB, threatening to break down. We could find some good opportunities here as well. If it breaks down further, recent high-flyers such as UPL and HES could see more pressure. If this sector bounces back, stocks like DVN, APA, and PBR could have a lot more room to go.

USO (oil)

USO broke out last week and has once again caught up with its daily upper BB. This could lead to further breakouts. The daily chart is still very bullish with the daily MAs curving higher. I think we could see USO at $120 soon.

UNG (natural gas)

UNG has been creeping higher. Above $64, it could get a new leg up.

DBA (agricultural commodities)

DBA saw a top around $43 back in March. Now, it is near that target again. Above $43, it’ll likely create a new new leg up.

If the overall market environment stays weak, I’ll be looking at the short side for financials and the market indices, while keeping an interest on the long side for the pure commodities.

Hope you’ve had a fun 4th of July weekend!
HappyTrading! ™

Since its a long weekend, and a big holiday for America, I’ll just do a quick wrap-up this week (and, also, not too many published trades this week).
Here are the closed trades:
NOV ($91.97)
NOVGQ, July 85 calls, at $8.3, +22%

DVN ($126.61)
DVNGZ, July 120 calls, at $8.6, +43.3%

PRU ($62.76)
PRUTM, Aug 65 puts, at $5.1, +8.5%

The trades left open this week are:
AEM ($76.24)
AEMGO, July 75 calls, at $3.9 (open)
Friday close: $1.99; unrealized gain/loss: -49%

GS ($182.2)
GPYHQ, Aug 185 calls, at $7.6 (open, nibbling)
Friday close: $7.2; unrealized gain/loss: -18.5%

I’ll be back on Sunday with my Market Forecast. Have fun and Happy 4th!
HappyTrading! ™

Moby-Rushing

From Briefing.com

Periodicals Wrap-Up for Thursday, July 3rd
WALL STREET JOURNAL: According to people familiar with the situation, the Wall Street Journal reported that Yahoo! (YHOO) is again talking to Time Warner (TWX), this time about taking over AOL, with Time Warner taking a stake in the combined entity. News Corp. (NWS) has its eye on any Yahoo moves. Meanwhile, Microsoft (MSFT) is considering what its next move against Yahoo might be and is talking to News Corp…The Wall Street Journal also reported that, as part of the company’s plan to cut costs, Tribune Co’s Los Angeles Times newspaper may look to cut about 250 jobs, including about 17% of its news staff…FINANCIAL TIMES: The Financial Times reported that Chrysler, which has been searching for foreign partnerships, signed with China’s Great Wall Motor a memorandum of understanding to explore long-term business ties in areas that include technology, distribution and components…DALLAS NEWS: According to the Dallas News, AMR Corp’s (AMR) American Airlines informed its flight attendants’ union that is may lay off 900 flight attendants on August 31…YONHAP: Yonhap reported that LG Electronics will release “Dare,” a new touch-screen mobile phone in the U.S. that will compete with Apple’s (AAPL) latest iPhone models…

Judge says Google can’t be forced to turn over computer code-WSJ
A federal judge said Google (GOOG) cannot be forced to turn over the computer code central to their search functions, reports the Wall Street Journal. In a $1B copyright-infringement suit brought by Viacom (VIA), U.S. District Judge Louis L. Stanton, in a Manhattan court, allowed Google’s request for a protective order. The source code controls YouTube.com and Google.com’s Internet search tool, and Google says it’s a trade secret critical to its business success.

BHP, Chinese companies expected to agree on iron ore price increase today-FT
Mining company BHP Billiton (BHP) is expected to reach an agreement with its Chinese customers today on a record increase in iron ore prices. The agreement is expected to be in-line with a similar settlement negotiated last week by BHP’s rival, Rio Tinto (RTP), in which Rio hiked prices by 79%-96%.

NVDA: Believe company can recover within three quarters@AMTR
After Nvidia significantly lowered its guidance for its July quarter, Am Tech believes that the company can return to its previous rate of earnings and revenue growth within three quarters. The firm still remains buyers of the stock.
NVDA down hard after disappointing guidance and earnings.

FSLR: Deal highlights important trends, reit Buy@AMTR
After a subsidiary of EDF Energies announced a 1.8MW PPA agreement in New Jersey using First Solar modules, Am Tech believes the deal will only provide First Solar with $4M in revenue. However, the firm thinks the deal illustrates the importance of state initiatives to increasing solar use, as well as the high value of PPA agreements in the event that the U.S. adopts a carbon cap and trade system.

Pre-Market Movers: Ahead of the Bell
Today’s session is a short one. We can expect a flurry of activity at the open that quickly dribbles until the 1PM close. Despite news (Crude, Jobs, Euro) there is surprisingly little movement. The knee-jerk on Jobs looks to be to open them higher. That looks futures-led and could well disappear as we move to the open. There is very little volume other than in the ETFs which are seeing triple-normal volume for this time of day. It is not a good environment to get anchored on prices in either direction. Of the volume movers, Nvidia (NVDA) is the leader, trading down (-26.2%) after warning of a much-weaker than expected quarter last night after the bell. There is a sharp-drop in volume to the next most active, Chesapeake (CHK), trading down (-1.58%) on no specific news. The shares hit fresh lifetime highs yesterday so this is likely profit taking. Yahoo (YHOO) is trading up +2.7% not on a Microsoft takeover rumor as was the case yesterday, but on a possible hookup with AOL. Traders seem reluctant to let go of a positive outcome for Yahoo after the spurning of Microsoft’s $33 offer. Apple (AAPL) is trading up +0.2% which is likely related to futures action. Rest up folks, Earnings Season begins next week.

U.S. equity futures are quiet; Monthly jobs reports released
U.S. equity futures are relatively quiet after the release of the monthly jobs reports. The change in non-farm payrolls showed a decline of -62,000 versus an expected decline of -60,000. The change in manufacturing payrolls showed a decline of -33,000 versus an expected decline of -30,000. The unemployment rate is 5.5% The initial jobless claims showed 404,000 versus an expected 385,000. The numbers didn’t cause a knee-jerk reaction in the market, so it will be interesting to see how the data is interpreted after it’s fully digested.

RIG: Estimates raised on Marianas contract@RBCM
RBC Capital raised RIG EPS estimates to reflect the new Transocean Marianas contract with Eni. The firm continues to view shares as undervalued. Shares are Outperform rated. Target $200.

MER estimates lowered on expectation of more writedowns@JPMS
JP Morgan expects MER to report additional write-downs in Q2 due to ABS/CDO and monoline exposure and believes the company will need to raise its credit reserves for its $7.8B gross exposure to monolines. JP Morgan maintains a Neutral rating on MER shares.

Arch Coal-ACI upgraded to Buy from Hold@SBSH
Citigroup upgraded shares on valuation following the recent weakness. Target raised to $86 from $63.

Peabody Energy-BTU upgraded to Buy from Hold@SBSH
Citigroup upgraded shares on valuation following the recent weakness. Target raised to $105 from $69.

YGE announces 10MW sales contract
Yingli Green Energy Holding Company Limited announced that it has entered into a sales contract with Enfinity Management, bvba, a global renewable energy project developer located in Ghent, Belgium. Under the terms of the agreement, Yingli Green Energy is expected to supply 10 MW of PV modules to Enfinity from July 2008 to December 2008.

UBS: Believe writedowns could reach $6.9B in Q2@SBSH
Citigroup believes UBS could writedown an additional $6.9B in Q2 due to the weak financial markets and notes the company still carries $83B of risk exposures that are likely to require further markdowns. Citigroup believes UBS may have to raise more capital. Shares remain Hold rated.

Nasdaq 100 Index-NDX: Pivot Points
The following are the pivot points for the Nasdaq 100 Index (NDX). Pivot High: 1845.490, Pivot Low: 1786.500. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.

S&P 500-SPX: Pivot Points
The following are the pivot points for the S&P 500 (SPX). Pivot High: 1276.755, Pivot Low: 1246.285. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.

Dow Jones Industrials Index-DJX: Pivot Points
The following are the pivot points for the Dow Jones Industrials Index (DJX). Pivot High: 11324.815, Pivot Low: 11105.065. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.

Jim Cramer’s “Mad Money” from flyonthewall.com
In these tough times, Cramer said its time to start taking profits in the stocks that have gains and start hoarding cash to buy them back later at lower levels. He then returned to his theme for the week: non-economically sensitive stocks that will benefit from this year’s Medicare spending bill. Cramer recommended Pediatrix Medical (PDX) as the next in his series. Pediatrix manages the largest network of neonatal specialists and Neonatal Intensive Care Units (NICU) in the country. The stock is currently just 3 points of its 52-week low, but Cramer said that’s because Wall Street just doesn’t’ understand Pediatrix’s business. While Pediatrix itself will not receive any money from Medicare, Cramer noted it does rely on the Medicare pay rate set for physicians to determine the benchmark it will use to charge for theirs. Cramer also noted the company’s long-term growth prospects as the number of births in the U.S. that will require NICU services is expected to increase. Pediatrix has already had its sell-off, with shares falling from a high of $70 a share to just $48 a share today. Cramer gave Pediatrix a target of $62 a share, or a 28% gain of today’s levels. Next, Cramer warned that there will be more pain coming for his favorite sector, natural gas. He told investors that if they can’t handle a 5% to 10% sell-off in the group, they may want to scale back now and buy some back at lower levels. Cramer warned that there will be more pain coming for his favorite sector, natural gas. He told investors that if they can’t handle a 5% to 10% sell-off in the group, they may want to scale back now and buy some back at lower levels. Cramer recommended Spectra Energy (SE) as a smaller natural gas play they may not be as volatile as some of the bigger stocks he’s recommended previously. Spectra is a natural gas transmission company that helps get natural gas where it needs to go. With over $3B worth of projects in the works, Spectra is in a strong position. “Coal is so out of favor due to its emissions,” he said, “and natural gas is the logical alternative.” Spectra sports a $600M stock buyback program and a 3.5% dividend yield. He pegged the stock at $32.84 a share for a 17% gain, if its P/E multiple comes up to the industry average. “Wall of Shame” list of the worst CEOs: (Removed) James Keyes, CEO of Blockbuster (BBI) as he is “doing the right thing for his shareholders” by walking away from the bid to acquire Circuit City (CC), says Cramer. (Added) Founder and CEO of Yahoo! (YHOO), Jerry Yang. “This man has treated this company as his own,” he said, calling Yang “truly shameful.” SUDDEN DEATH: (Bullish) SCHW; FRO. (Bearish) SFL. LIGHTNING ROUND: (Bullish) HSC; VVC; SFG; ENI; CPL. (Bearish) RIO; GR; SWKS; VLO; HS.

Fast Money position recap- First Moves: Guy recommends long CELG, Tim likes TTM, Pete likes ZRAN, Karen likes PM. Adami Owns (AGU), (BTU), (C), (GS), (ITNC), (MSFT), (NUE); Finerman Owns (GS); Finerman’s Firm Owns (SUN), (TSO), (VLO), (MSFT), (PM); Finerman’s Firm Owns SPX Index Puts; Finerman’s Firm And Finerman Own (C) And (C) Leaps; Finerman’s Firm Owns (GE) And (GE) Puts; Finerman’s Firm Is Short (XME) And Owns (XME) Puts; Finerman’s Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Najarian Owns (AAPL), (CHK), (HPQ), (TSO), (XLF); Najarian Owns (MER) Puts; Najarian Owns (SLB) Calls, (WM) Calls, (YHOO) Calls, (ZRAN) Calls ;Seymour Owns (AAPL), (F), (MER), (MSFT), (TSO); Seygem Asset Management Owns (EEM), (TTM).

Yesterday there was a massive rotation out of the strongest sectors in the market namely coal, steel, miners. There was a mass exodus for the exits as bearish news of lower coal prices and possible lower demand metrics coming out of the shippers, China, and US Utilities caused an across the board drop in these names. The technical damage was severe and could mark a temp top for these names as they consolidate and possibly trail lower and technically follow the same path as the fertilizer plays. Just like the fertilizer plays the fundamentals are still sound but the appetite for risk has been dampened and all equity exposure is being lowered. These types of events happen where any strength in the market is a reason to take profits and lower exposure. These names are also widely owned by momentum funds and traders and volatility should be expected. We were in a bear market that had strong sectors overly outperforming the market, now we are getting a convergence of that trade and we could be in a bear market without or with even a smaller pool of strong sectors outperforming going forward. Time will tell. Until we see some market stabilization and a second rally wave with strong volume, the momentum is still to the downside and the higher probability plays will be to short rallies until a true bottom is formed. What is going on with the market right now is the story of thin illiquid trading that accentuates market moves, it just happens to be in a negative environment. The problem lies in not having any buyers to counterbalance the waves of selling. The waves of selling is mostly from the rebalancing of portfolios from all investors, hedge fund redemptions and risk aversion to equities due to the weak macro environment. The market is looking 6 months out and it does not like what it foresees. The Paulson comments made it very nervous and darkened its outlook as the dark cloud above it keeps following it like Charlie Brown. Have focus, have patience, pick plays with a high probability of success. Plan the trade and trade the plan. Great Luck and Great trading. Enjoy your 4th of July celebrations!

HappyTrading
Posted July 2, 2008 at 6:49 am | Permalink (Edit)
NOV ($91.97)
NOVGQ, out at $8.3 (this one has room to go; out for now)

CHK, also mentioned here last night, flew to a new all-time high of $74; but, closed at $69.4, up just $2.04. CHK announced a new joint venture to develop a promising natural gas deposit.

Metals and mining sector (XME) was weak right from the beginning, especially coal mining companies. Coal prices fell today as some traders felt like the long-awaited correction had finally arrived. Many coal and steel stocks recorded double-digit declines: ANR -16%; PCX -14.9%; MEE -18.92%; ACI -17.19%. Steel companies also stumbled: X -12.52%; RTP -8.17; CLF -17.24%.

In late afternoon, VIX started to glide higher, and I said on the member board:
HappyTrading
Posted July 2, 2008 at 11:46 am | Permalink (Edit)
market
VIX seems to be creeping higher. coals will probably slide into the close.

OptionDragon also got us into plays on the short side, buying calls on SDS, ultrashort S&P:
optiondragon
Posted July 2, 2008 at 11:57 am | Permalink (Edit)
Bought SDS july 68 calls at 2.45 , stock at 67.50

These options closed at $3.3 today.

The coals led the way and the market picked up downward momentum going into the close. The Dow ended down 166.75 points; SPX dropped 23.39 points; Nasdaq fell 53.51 points:

VIX jumped +9.6% and closed at almost 26! Stocks were weak across the board. XME (metals and mining) tumbled a whopping 11.5%! OIH (oil services), which was up in the morning, ended down 3.96% (We did the right thing by cashing out early on NOV). XLE (energy) also reversed course and lost 3.02% (likewise, a good exit for us on DVN). PBW (clean energy) fell 5.4%. MOO (agriculture) was down 5.66%. USO (oil) reached a new all-time high, at $116.84, to close up +1.96%. SLV (silver) added +1.76%, and GLD (gold) gained +0.55%. DBA (agricultural commodities) advanced +1.91%. FXI (Chinese ADRs) slumped 3.61%.

SPX

SPX lost 23.39 points to close at 1261.52. It caught up with its daily lower BB. Its daily MAs and MACD curved lower.

Nasdaq

Nasdaq fell 53.51 points to close at 2351.46. It closed just above the 2350 support, but, also caught its daily lower BB. Its daily MAs and MACD continued lower.

Well, SPX made a new leg down and closed below the March support at 1280. Nasdaq is also every weak. VIX closed above 25 and could easily charge up to 30 from here. Oil is at a new all-time high, with crude trading above $144/barrel. We might see some bounces tomorrow. But, this market is still weak. XLF (financials) barely closed above $20 and could easily fall back under. So, be careful bottom-fishing. USO (oil) could break out again tomorrow. SLV (silver) and GLD (gold) (we have a position in this) are also in positions to go up more. Coals and steels could continue lower, if this is indeed a correction for the sector. Ultrashorts may be interesting vehicles to keep in mind for the market indices (for example, SPX: SDS; Nasdaq: QID; Chinese ADRs: FXP).

Good night and HappyTrading! ™

Imagine- John Lennon

From Briefing.com

Periodicals Wrap-Up for Wednesday, July 2nd
WALL STREET JOURNAL: According to people familiar with the discussions, the Wall Street Journal reported that Microsoft (MSFT) has held discussions with Time Warner (TWX) and News Corp (NWS), among others, about joining it in a deal that could lead to the breakup of Yahoo! (YHOO). Some of the sources said the preliminary talks are unlikely to result in a deal with Yahoo!…Johnson & Johnson (JNJ) is reportedly in exclusive talks to sell its wound-care business Ethicon to the private-equity arm of JP Morgan (JPM), according to the Wall Street Journal. Terms of the potential deal were not disclosed…WASHINGTON POST: Sources familiar with the inquiry said that the Justice Department has opened a formal antitrust investigation into a deal that would allow Google (GOOG) to provide some search advertising for Yahoo!. The Washington Post reported that investigators will demand documents from Google and Yahoo!, as well as other large companies in the media and Internet industries…REUTERS: Reuters reported that regulators in the European Union are looking at the long-term effects of BHP Billiton’s (BHP) $170B bid for Rio Tinto (RTP). Sources familiar with the EU questionnaire said regulators have asked competitors and customers about effects of the deal on their businesses through 2015…

Feds reportedly open investigation into Google, Yahoo ad deal-Washington Post
The Justice Department has launched a formal antitrust investigation into the deal reached between Google (GOOG) and Yahoo (YHOO) last month, inside sources say. Under the deal, Google agreed to provide some search advertising services for Yahoo.

Is Iran ready to negotiate about its nuclear program?-WSJ
Manouchehr Mottaki, a top Iranian diplomat, says negotiations about it nuclear program could begin and that it’s reviewing a series of economic incentives presented to it in June by the U.S. and others, according to the Wall Street Journal. “We see the potential for a new round of talks,” he said. “The two sides are trying to see if they can arrive at a new modality.” The U.S. reaction was one of caution as Iran has not addressed suspension of its uranium enrichment program.

Houston turns to wind power to cut energy costs-WSJ
Even in Houston, Texas, the heart of America’s oil and gas business, wind power is front and center, reports the Wall Street Journal. The city is using wind generated electricity for about 25% of its municipal power needs because it’s cheaper than coal or natural gas. About half of the wind power is provided through Goldman Sachs (GS) and the rest is from Reliant Energy (RRI). Home residents and businesses are not users. Houston is one of the top purchasers of renewable energy in the U.S.

Pre-Market Movers: Ahead of the Bell
The session is once again broadly busy, much more so than we saw through the entire month of June. There are a few issues moving aggressively on earnings news today as well as renewed take-over speculation. The volume leader this morning is Yahoo (YHOO) trading up +8.21% after the WSJ reported that Microsoft (MSFT) was attempting to go after the company again with a group of partners. The Washington Post wrote that the DOJ was beginning a formal investigation into the Yahoo/Google ad sale deal. UnitedHealth (UNH) is trading up +7.41% after it lowered its FY08 EPS (see notes here for details). Volume is heavy. Circuit City (CC) is trading down (-14.5%) after Blockbuster announced it was withdrawing its takeover offer. Chesapeake (CHK) is trading up +4.88% after Deutsche Bank upped its price target to $91. Starbucks (SBUX) is trading up +4.99% after it announced a more aggressive round of under-performing store closings last night after market close. Apollo Group (APOL) is trading up +16.73% after a much better than expected earnings report after market close last night. In a rare bit of good news for the battered financials, Fifth Third Bancorp (FITB) is trading up +4.14% after being upgraded to Outperform from Neutral at Robert W Baird.

U.S equity futures weaken after release of the ADP employment report
U.S. equity futures have weakened after the release of the ADP employment change report. It was expected to show a decline of -20,000 service jobs but instead showed a decline of -79,000. The larger than expected drop in jobs came after last month’s surprising increase in service jobs. Investors will now turn their attention to the factory orders report for the month of May due out at 10:00 am, and the Department of Energy Inventory report due out at 10:30 am.

Yahoo-YHOO: MicroHoo Redux? Factors to Consider
There was an article in the WSJ suggesting that Microsoft (MSFT) may employ partners to go after and split up Yahoo (YHOO). This would seem odd given that Microsoft purchased Powerset, a “semantic web” technology company that would allow it to compete against Yahoo’s SearchMonkey. Digging around Microsoft Research, it does seem SearchMonkey was something the company had been concerned about. The acquisition of Powerset suggests the company is prepared to roll their own solution. For those bullish on Yahoo (YHOO) one might think the focus would be on the DOJ’s inquiry into the ad sale partnership with Google (GOOG).

Chesapeake-CHK & Plains Ex & Prod-PXP host a conference call at 9am on 7/2
Chesapeake and Plains EX & Prod will host a conference call to discuss the Haynesville Shale joint venture at 9am on 7/2.

Great article on this CHK deal and Haynesville Shale plays here at Zman’s Blog!

Solar: Recommend stocks with little exposure to Spain@DBAB
Deutsche Bank believes potential changes to Spain’s solar PV incentive structure remain a wildcard and prefers stocks with minimal exposure to the country. The firm recommends First Solar (FSLR) and MEMC Electronics (WFR). Deutsche is positive on the long term prospects for companies like SunPower (SPWR), but thinks exposure to Spain and the U.S. will drive significant near term volatility.

Petrohawk Energy-HK: Valued improved due to CHK/PXP acreage deal@FBRC
FBRC believes the company’s low-risk shale assets, as well as 2008 production growth of 27% and 37% growth projected for 2009, warrants in FBRC’s E&P covered universe continued upside potential with HK being their favorite growth name. Target price increased to $60 from $45 and Outperform rating reiterated.

Energy/Natural Resources: Weak earnings season is expected; Market Perform@FBRC
A main drag on results for 2Q08 earnings is the fact that raw material and energy costs increased at a rate quicker than produced commodities,despite most commodity prices being up this past quarter. AA, CENX and ZINC are expected to deliver results lower-than-consensus, while FCX is projected to exceed estimates due to its sales pricing.

Pioneer Natural-PXD coverage resumed with a Buy, target $110@UBSW
Target to $110 from $72.

Pioneer Natural-PXD upgraded to Equal Weight from Underweight@MSCO
Target $90.

Google-GOOG: Expect strong Q2 despite challenging economy@JEFF
Jefferies expects 16% year over year growth in U.S. paid clicks for April/May as they believe GOOG’s search business remains robust. The firm reiterates a Buy rating and $600 target on GOOG shares.

SunPower-SPWR: Potential changes to Spain’s solar PV incentive structure@PACS
PacCrest says SPWR has 70% exposure to US & Spain, which both now have no subsidies. The firm believes Street estimates for FY09 growth need to come down to the 17% range from the 40% range. PacCrest would rather own First Solar (FSLR) than SPWR.

Jim Cramer’s “Mad Money”
Cramer said Healthcare stocks, a group hated all year, stand to benefit from the upcoming Medicare spending bill. According to Cramer, the new Medicare spending bill now provides incentives for using electronic prescriptions, as opposed to paper, through 2010, and mandates electronic prescriptions thereafter. The provisions, now in both the House and Senate versions of the bill, will be a windfall for Allscripts (MDRX), a company with a lock in the e-prescription business, he said. Management has proclaimed their electronic healthcare platform is ready for prime time, after recent bugs in the platform. Cramer said now is the time to invest in the company, especially with electronic prescriptions expected to grow 400% in 2008. Allscripts trades at just 18x its earnings, despite a 23.5% long-term growth rate. Cramer expects the company will soon return to a 25 multiple on its 2009 earnings, which translates into a 44% gain in the stock. “Allscripts is the one I want you to own,” he asserted. Another Medicare spending play Cramer recommended was ResMed (RMD), one of the two biggest companies making equipment to treat sleep apnea. With a 40% share of the market, ResMed enjoys a happy duopoly with Respironics, a company recently acquired by Philips Electronics (PHG). Cramer noted that beginning this fall, Medicare will make it easier for patients to obtain sleep apnea equipment. With the sleep apnea market only 10% penetrated, Cramer said the growth potential for ResMed is significant, with or without competitive bidding. Cramer expects ResMed could see $50 to $53 a share, translating into a 30% gain from current levels. He called the shares “way underpriced.” Next, Cramer recommended Bristow Group (BRS) as another play on increased drilling, both on and off-shore, in the U.S. Bristow provides helicopter services to transport manpower to off-shore oil platforms. With more off-shore rigs heading to deeper waters, Cramer says demand for Bristow’s services should increase over time. Cramer said Bristow’s private placement of additional shares on June 19 hurt the common stock, but with money now in hand to purchase 19 additional choppers, the upside of the deal will be realized quickly. MAD MAIL: Watts Water (WTS) Cramer said his recommendation on November 2, 2006 was wrong, adding he needs to see a bottom in residential housing before he can recommend the stock again. Cramer is still bullish on Hornbeck Offshore (HOS), Anadarko (APC), Nabors (NBR) and Transocean (RIG). SUDDEN DEATH: (Bullish) NFX and INTC. (Bearish) SAP. LIGHTNING ROUND: (Bullish) UTX, HON, EXC, DUK, ED, VZ, T, HEV, SQM. (Bearish) PBY, BW, STI, OI, WB, EMKR.

Fast Money position recap- First Moves: Tim likes TSL, Guy likes GM, Karen likes MRK, Pete likes shorting PRU.
Adami Owns (C), (AGU), (BTU), (GS), (INTC), (MSFT), (NUE); Finerman Owns (GS); Finerman’s Firm Owns SPX Index Puts; Finerman’s Firm And Finerman Own (C) And (C) Leaps; Finerman’s Firm Owns (MSFT), (SUN), (TSO), (VLO), (SBUX); Finerman’s Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Pete Najarian Owns (AAPL), (NOK), (TSO), (XLF); Pete Najarian Owns (HBC) Puts, (MER) Puts, (RIMM) Calls, (SLB) Calls, (UBS) Calls, (WM) Calls, (YHOO) Calls; Seymour Owns (AAPL), (CFC), (F), (MER), (MSFT), (TSO), (TSL); Seygem Asset Management Owns (TTM), (PKX), (FMX); Seygem Asset Management Owns Shares Of Grupo Modelo.

Market starting out with a bounce. Let’s see the lasting power of this move before declaring it a rally. We are still in a bear market but I will try to take advantage of the bounce by looking for good longs and shorts. Shale plays getting a big boost this morning on the CHK news. Shale play list is: CLR, XCO, HK, CRK, XTO, GMXR, SD, GDP, WLL, EAC, FST, PQ, PVA, SM, NFX. Shale Drillers: NBR, UNT. These moves should continue higher over time. Looking at tech as well. Great Luck and great trading.

In energy-related sectors, DVN continued to rise, gaining $2.84, or +2.36%. APA went up more than $3 and could be setting up for a breakout. SLB broke out today to close just under $110, up $2.43. It could be looking to challenge its all-time high of $114.84 set back in October 2007. NOV (we started a new position in this) added $1.71 and could be heading for a new leg up. FLR bounced back also, advancing $5.33, or +2.86%. GMXR continued to set new all-time highs, jumping more than +7% and trading almost to $80! CHK went up +2.12% and could have more room to go.

The Dow closed up +32.25 points; SPX added +4.91 points; Nasdaq gained +11.99 points:

VIX went above 25 today, but, came down to close at 23.65, down 1.25%. XLF managed to bounce back from under $20 to close up +0.3% at $20.32. BTK (biotechs) advanced +1.45%. OIH (oil services) garnered +0.96%. SLV (silver) went up +3.69% and GLD (gold) added +1.38%. FXI (Chinese ADRs) ended down just 0.51%.

SPX

SPX added +4.91 points to close at 1284.91, above the 1280 level. Its daily MAs and MACD slid, but, the MACD difference (blue bars) continued higher.

Nasdaq

Nasdaq gained +11.99 points to close at 2304.97. It closed above 2300. Its MACD difference also rose.

The market was very weak in the morning. But, when XLF went below $20, things started to bounce. This is very interesting, as I pointed out this weekend, in my Sector Watch, that this $20 level could finally provide support for XLF. Both SPX and Nasdaq bounced to close above their respective support levels (SPX: 1280; Nasdaq: 2300). We’ll have to see if the market can continue this rally tomorrow. The recently broken supports could become resistance levels. For SPX, it would be 1300; and, for Nasdaq, it is 2350.

Good night and HappyTrading! ™