Sunday, January 10, 2010
Weekend Review 1-10-10
Well the Jobs Report was not that terrible...but rather more disappointing, coming in at a minus 85,000 for December. The job losses were disconcerting as a rebound in employment is key to a sustained recovery in the economy. But the market likely focused on the fact that a pickup in the labor market often lags other improvements following a recession. We were losing 600,000, 700,000 jobs a year ago and we are now toggling around zero. My play off the Jobs report, was that a stronger than expected number would of been bullish for the dollar. Which would of caused a sell off in gold, commodities and perhaps even oil. But, it now appears that things will stay status quo. Silver, platinum, palladium and gold were up tall week and performed strongly since December 31st.
However, one should keep in mind that the Federal Reserve has stated that their program to buy mortgages will end on March 2010. This has sparked fears that mortgage rates could rise and knock the fragile housing recovery off course. Bottom line, sooner or later, jobs will be created and things will improve...maybe not this month, but the market is sensing that very soon. It's like musical chairs, this time you got a seat, but next time who knows?
This market can change direction on a dime, first of all the UPS guidance Friday I believe kept the markets from selling off hard. We're in a transitional period now, the market is setting up to see if earnings coming up starting with Alcoa (AA) can justify p/e's. The rally from the March extremely oversold bottom is over...now its back to reality.
I've been stressing a shift into stocks that benefit from an improving economy, like silver (over gold) and oil stocks as global demand rises. I also like technology, but more on the enterprise side than consumer side, hence RIMM over Apple. Juniper (JNPR)& Google (GOOG) on the build out of broadband. Financials like JP Morgan (JPM) and Lincoln (LNC) will benefit from the bullish yield curve, matter of fact JPM reports earnings on Jan 15th, Jamie Dimon will prove he's the 'Best of Breed' and I see JPM going to $50 very quickly. On the health care front ABT & UNH are doing great! As for oil...I'm extremely bullish on the drillers, specifically RIG & PDE and have suggested this week the Canadian NatGas Trusts PWE & PGH.
The Volatility Index ($VIX) is at 18, which as I highlighted the otherday as not necessarily being a bad thing. This market now needs to justify the P (price) with some E's (earnings)...if the earnings improve that will lead to a stronger economy and more jobs eventually.
The Itz Pix Portfolio is beating the S&P 500 the 1st week of 2010, the portfolio is up 6.34% while the S&P 500 is up 4.38%. The top 5 performers are GNK +14.75%; SLW +14.51%; RIG +12.32%; VLO +11.46% & AUY +10.2%.
Update on covered call positions. The Yamana AUY-AP was bought back to close on 12/16 for $0.10 cost basis is $7.70 [AUY]. For SLW the Dec. 16 call expired cost basis $12.05. Two open positions are ABT Jan $52.50 call ABT-AX, With ABT trading at $55, I would suggest letting the stock get called for a +$8.96 (20% gain) in 5 months. As for GNK the Jan $25 call GNK-AE, lets wait until a day or 2 prior to OPEX, most likely I'm going to suggest buying back the call and rolling up to $28 strike and out to April. This stock is very volatile and 5% daily moves are to be expected.
Weeks Economic Events: Monday Alcoa (AA) starts off earnings season, Wednesday-Beige Book, Thursday- Intel earnings, Friday JPM earnings and CPI.
Two stocks in the energy sector (drillers) that I have suggested for Itz Pix Portfolio, that I believe will break out to higher levels very soon.