What a day. We started out basically flat for the day while trading within a tight range. At around 2:00pm we saw a nice spike / head fake, whatever you want to call it as a result of the FOMC minutes making some comments about the possibility of a QE3. We continue to feel the pressure of the Euro crisis, specifically Italy as now Greece seems to be totally on the back burner as far as I can tell. Regarding Italy, Burlesconi the Italian PM made a statement today that the country is doing fine, banks are strong, and that an austerity package previously discussed will be pushed ahead and voted on later this week. The finance minister is working hard on this project and is actually someone who is held in high regard on an international level. Not a public person, but apparently very capable. I feel pretty confident that the Italian crisis, if you can call it that, is based more on speculation than on real tangible issues of default, but let the media get a hold of a rumor and the bears run wild. If you listen to CNBC all you hear is what will be the consequences of an Italian default and further contagion to other Euro zones. I still have not heard them actually discuss if this is a really plausible? I wish they would spend some time on the real numbers regarding Italy and not just the CDS spreads and bond yields which are the result of speculation to date. I do not think a default will come to light, but that is just my opinion. Ok, now at the end of the day Moodys downgraded Irish long term debt to junk status. Initially the market fell a little, then recovered back to positive territory. As we wound down the day I believe it was the Moody's comment that caused us to close on our lows, 59 point to the downside. Did we not know about Ireland already? To me this is just old news being piggy backed on top of the Italian issues.
As for trading today, I was somewhat active opening some new positions...
1. $MT - I opened a long position in Arcelor Mittal as I feel it is close to a bottom with near term target of $36. I did not go full boar, I purchased half a position in shares and the other half in options, buying the Sept 34 $CALLS as I have seen this strike/expiration hit week after week causing me to believe that some big money, smarter than me of course, knows something that I do not.
2. $RIG - I purchased some shares of Transocean today as I like the level where they sit and believe that once things clear up shares of RIG will move to the high 70's range and possibly even go over 80 per share. The dividend of $3.25 per year is also a nice stipend while I wait for the shares to move up.
Well that is all for today. I do not expect the markets to bounce back strongly just yet as I think we need some real news out of Europe before we get back on track and that will probably not come until some time over the weekend. For now we can look to U.S. earnings as a hopeful boost, although the financials seem to be in focus towards the end of the week and they do not excite me. Although their earnings may be robust on the bottom line, I believe trading volumes and loan originations will be abysmal at best. Lets cross our fingers and hope that I am wrong. Full disclosure I am long $JPM $NYB via shares and hold long calls otherwise knows as leaps for $GE $BAC $C and $MS.
Stay firm and buy smartly. We will surely see some short term turbulence, which in my opinion provide us with some great mid to long term values.
Please reply with your comments as I am always interested to hear what fellow investors have to say. I am no pro by any shake of the stick, just an investor who is interested in sharing my opinion and hearing yours.
Sincerely,
TraderJive
Follow me on Twitter: @TraderJive
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