Tuesday, January 5, 2010

The spike on yesterday's opening brought GOOG within 28 cents of the 629.79 target flagged here last week. We held no position officially, but longs could have taken profits on half of their positions at the high, even if the intention was to replace the stock on the expected pullback.  It has amounted to $8 so far, with a low at 621.54  -- enough to lower the long-term cost basis of any shares still held.

We are long 800 shares with a cost basis of 12.55 against eight February 17 calls shorted for 0.40.  No further action is suggested at this time.  This is a long-term play, and we therefore won't allow the stock to get called away. However, if the calls finish in-the-money, we'll have $4,000 of profit built into our position.

AAPL's vigor is encouraging me to think we'll be able to spread off our calls just the way I like ("Greed is good!"), shorting two January 240s (AJLAC) for 0.80 apiece against the two January 230s (AJLAY) we hold for 1.00.  Accordingly, I'll suggest offering the January 240s at 0.80 to open, good-till-canceled. If this gambit succeeds we'll have a position that can produce a profit of as much as $1960 but a loss of no more than $40 -- pretty good odds.

Silver faces some challenging peaks analagous to the four that February Gold will need to surpass this week to begin 2010 with a bang.  The topmost  lies at 18.385, implying a move of about 4% from these levels.  I've included a chart that contains a stochastic hint that all will turn out well for the bulls.  The divergence between falling price bottoms and rising stochastic bottoms is quite constructive and suggests that buyers will be lusting for more in the days ahead.

Enjoy the rally, but count on me not to get terribly excited about it, at least not yet.  If this is the real deal, we should see an effortless extension of the bullish impulse over the next two or three days.  That means taking on any or all of the four unbreached peaks immediately above on the hourly chart. It will require a  nearly $50 thrust from here to get past the bunch, the topmost of which lies at 1168.90 and the most immediate of which is at 1142.90.  Let's use the higher number as a "bullish-as-all-hell" benchmark for this first week of 2010.  For those who remain anxious, let me note that the rally is already impulsive on the daily chart (see inset), and that the bullish implications thereof will hold as long as the futures don't relapse below 1086.60.

Wall Street traders bought just about everything in sight yesterday, inspired by news of a strong performance by global manufacturers in December and some loose talk from a Fed muckety-muck, vice chairman Donald Cohen, who thinks tightening to head off perceived inflation threats “could be expensive.” U.S. manufacturing reportedly grew at the fastest pace in more than three years, purchasing managers said. Europe and Asia reported similar surges, although we’re having trouble imagining who’s going to buy all that new inventory. Last week, we tried without success to determine just what it is that is still made in this country. The question drew some spirited discussion in the Rick’s Picks forum, but in the end there were no clear answers. One thing’s for sure, though:  Whatever we still make cannot be easily found at Wal-Mart.  But who cares, as long as the purchasing managers think business is picking up.  At least one brokerage analyst bought into this story yesterday big-time: “The odds of a double-dip recession have gone from one-in-three to one-in-five,” said the resident genius at Morgan Keegan, one Don Ratajczak. As of Monday evening, we had not succeeded in reaching Ratajczak to see if we could get a bet down. Is he perhaps be laying off bets with Kudlow, the only guy we can think of who might be willing to offer the same bet at ten-to one?  Moving Into Healthcare  Manufacturing uptick aside, we are curious ourselves about whether a genuine recovery has begun to take root.  Anecdotally, it’s still the Great Recession, and the local retail scene seems to be growing bleaker by the month. Boulder restaurants in particular have struggled to stay afloat. Thirty have closed in just the last few months, and strip mall vacancies are a blight everywhere you look. Friends who have been