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February 15, 2006


The metals market continued their vacillating ways, with silver dropping 14c and gold coughing up 6 bucks. Two percent daily moves are now becoming the norm for precious metals, so today's action seems relatively tame! Mining stocks, which initially showed strength this morning, eventually paid the price, closing down 3% on average. I have no doubt that the current drop in metals will provide an excellent chance to reload the call options I sold a couple weeks ago, but I'm still hesitant to make a move. I'd like to see a bit more disdain from the general public.

I made a similar comment yesterday regarding oil… I'd like to see the peak oil story debunked before loading up on oil assets again. A reader was kind enough to send an e-mail today to let me know me that CNBC ran a story about the peak of the big oil. Such stories are a step in the right direction, psychologically speaking, but I'm not quite ready to release the hounds. I am still suspicious that recessions in the U.S. and China are on the horizon, and I haven't fully worked out how to navigate oil in such an environment. From a technical perspective, oil is sitting right on a long-term trend line after today's $2 drop. It could very well put in a bounce here. However, oil failed to set a new high during its last move, so I'm going to wait and make sure the trend line holds.

For the most part, today was a sleeper. We got a couple nice moves up in names like Apple and XM Satellite, both up a little more than 2%, as well as Yahoo, up about 1%. Retail stocks also followed through on yesterday's euphoria, with those names up another 1% on average. The standout was Best Buy, which launched itself to a new all-time high. The diminutive put position I opened on Best Buy several months ago has little chance of returning my capital, but the initial position size was small, simply because I was ready to dabble at the time, but not ready to take a substantial position. The time for the latter will likely come in the near future.

Overall, today felt much like yesterday: a technical rebound day from an oversold position. I will be watching the NDX closely as it approaches the underside of its moving average, a key resistance point. The S&P 500 broke above it MA yesterday and held above it today. The next couple of days will tell whether this move is a head fake (which we see more often in the more widely followed indices) or something indicative of further upside.

Disclosure: Long YHOO, BBY Puts


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