Market Commentary

Here are some thoughts about the current market conditions.

We have been in need of a correction after this bullish uptrend since August 06. Did we expect that kind of drop? No. Are investors on nerve right now? Yes. Will selling continue? I think so. Is it time to start looking for a short off a bounce? That's what I think. Are defensive stocks safe? Depends on how long you hold them and if you believe in dollar cost averaging. Here's some sobering realities.

In October 1987. GE saw its stock close at 50.75 on Friday, October 16, 1987. On the following Monday, known as Black Monday, it dipped to as low as 38.75. Even a safe, defensive stock like JNJ had more than 18 percent of its value disappear during that awful day.

I love it. Please investing world let the hedge funds have their year. More panic, more money for the contrarians and less for the herd.

Still in cash position right now looking for shorting opps.

OK BYE BYE BIDU

The lower outlook seemed to be enough for traders today to take profits and take a hike. The stock was down over $13 earlier today but closed down just under $9 to 106.18.

No Bye Bye Yet On BIDU?

Will this after market reaction turnaround at tomorrow's trading? So far BIDU up over $4.00 at 117.20ish.

In a Reuters report the company tempered revenue growth for the next quarter saying it was likely to decelerate sharply. Even so investors are excited for now it seems about the 4oo percent increase in 4th quarter net profits.

Maybe no bye bye yet....

NFI or NEW? You Choose

I have been tracking the subprime lenders too long now. By that I mean I should have been putting/shorting these troubled companies a long time ago. Oh well, such is life as the saying goes always a day late and a dollar short.

Well maybe not this time. As of 2/9/07, Morningstar just posted a fair value valuation on NFI and NEW of "BANKRUPTCY". Yes that's not a typo.

Here's two reports to chew on that probably will be a negative going forward for these two bad boys. NFI Judge certifies class in suit against NovaStar bizjournals.com (Fri, Feb 9)

And, Subprime Lenders Face Challenging Market at Forbes.com (Fri, Feb 9)

So what will I do about it. Unfortunately, the bad news is being baked in to the stock price but I think there's more bite than bark to the downside. I'll wait for a rally of sorts if any and then look for an entry in either one. Even with extremely high IV, there is now lack of sharkbait.

I might take a bite at the NEW Mar 12.50 Puts currently trading around $0.65 with over double the option volume to open interest or the Mar 10 Puts with over 6 times OV to OI (already released earnings 2/8/07). Or the NFI Mar 12.50 Puts at 1.10 or Mar 10 Puts at .50 (next earnings 3/5/07).

Remember this is a deeply speculative play because any hint of good news could propel this stock higher.

Stay tuned...

Bye Bye BIDU?

Is it time for BIDU to be the next sell on the news victim? Apparently, Cramer expects profit takers to emerge after the company reports earnings this Wednesday and since he's the mighty "oracle" we should all listen, right? Well actually in this case yes.

This is setting up to be a potential call credit spread play with the FEB 115/120 Call net credit trading around 2.20. Not the best r/r but should see some nice premium degradation from the IV decline that probably will result and maybe some underlying help.

Current IV levels on these calls are 90% which is above 52 wk highs (see IV chart below).

We'll see what happens....

Oh My OMTR

Anyone heard of Omniture? Sounds like a furniture store for trendy people from Germany who wear black clothes and say "touch my monkey", doesn't?

Well apparently not. This web analytics company has been busting out of a sideways slump since last October after it went public last July and has not looked back. Looks like we need a pullback for a possible long entry.

Earnings just came out and looks like the uphill trend might be slightly altered. We'll see how traders react tomorrow.

Keep an eye on this one going forward for a possible rising bull or sleeping bear.

NTY Status

Isn't amazing how I sometimes feel as though I have the non-midas touch? Right after I post about NTY they come out today and announce lower than expected sales for January and all of a sudden there is nothing but negative sentiment in the air for NTY.

Could that be a trend wrecker or a long entry opportunity?

We'll have to wait and see if the profit takers plow in. NTY closed down $3.32.