BETWEEN THE HEDGES

Stocks Mostly Lower into Final Hour on Surge in Energy Prices, Profit-taking

Posted by Gary .....at 3:47 PM

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Internet longs and Computer longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is neutral as the advance/decline line is slightly lower, sector performance is mixed and volume is below average. Investor anxiety is slightly above average. Today’s overall market action is neutral. The VIX is falling .7%, but remains above average at 22.3. The ISE Sentiment Index is a below average 117.0 and the total put/call is slightly above average at .95. Finally, the NYSE Arms has been running below average most of the day and is currently .82. The financial ETF(XLF) has a -.93 correlation with the oil ETF(USO). It isn’t surprising to see financials give up much of their morning gains with oil trading back near a record high. I am seeing a number of technical signs that oil could be making a double-top. It is also interesting to note the weakness today in agricultural commodities, despite the rise in energy. The S&P Goldman Ag Spot commodities index is down 1.73% to session lows. Commercials continue building their record short position in gold, while large speculators continue to build their record long position in the metal. I did a link update over the weekend. Please check out the new links on the right-hand side of the page when you get a chance. Nikkei futures indicate an +55 open in Japan and DAX futures indicate an +51 open in Germany on Monday. I expect US stocks to trade mixed-to-lower into the close from current levels on higher energy prices and profit-taking.

Today's Headlines

Posted by Gary .....at 2:13 PM

Bloomberg:
- Washington Mutual(WM), the largest US savings and loan, rallied as much as 19% in NY trading as a group led by private-equity firm TPG Inc. considers a $5 billion investment in the Seattle-based company.
- US Treasury Secretary Henry Paulson Urges Congress to Pass Colombia Free-Trade Pact: Video.
- Global investments in commodities rose by more than 20% in the first quarter to $400 billion, helping boost prices, Citigroup Inc.(C) analysts said. Investments in commodity indexes rose $40 billion in the first three months of the year to $185 billion, a large gain than the whole of 2007. After investments in indexes, commodity trading advisers account for the biggest portion of the total amount invested. At the end of the first quarter, advisers accounted for $94 billion, 18% more than at the end of last year. Hedge funds ranked third, with $75 billion in commodity holdings, an increase of 25% over the end of 2007. In all, Citi estimates $70 billion in additional investment funds flowed into commodities markets in the first quarter. Exchange-traded funds, or ETFs, accounted for $46 billion in commodity investments as of March 31, up 31% from $35 billion at the end of 2007.
- Citigroup, HSBC, 7 Others to Assist Ohio Homeowners.
- General Motors(GM), the biggest US automaker, gained in NY trading on speculation the American Axle strike may end.
- The price of default protection for the debt of Citigroup Inc.(C), the biggest US bank by assets, and Credit Suisse Group, Switzerland’s second-largest bank, fell amid confidence governments will prevent a major bank failure. Credit-default swaps on NY-based Citi fell 23 basis points to 125 basis points, and swaps on Zurich-based CSFB fell 17 basis points to 74, the lowest in two months. Contracts on Washington Mutual(WM) fell to an almost four-month low.
- Crude oil jumped more than $2 a barrel in NY and gas rose to a record as the commodity bubble continues to inflation amid rampant investment fund speculation, notwithstanding another rise in the US dollar.
- Novartis AG agreed to buy 77% of eye-care company Alcon Inc.(ACL) in a two-step transaction totaling $39 billion.
- KLA-Tencor Corp.(KLAC), the second-biggest US chip-equipment maker, rose the most in more than eight months after Citigroup(C) said new orders from Asian companies may fuel sales growth.

Wall Street Journal:
- Polo to Outfit US Team For the Beijing Olympics.
- Carlyle Group, whose mortgage-securities fund collapsed last month, started a $1.35 billion fund last week to buy distressed assets, citing Carlyle co-founder Bill Conway.
- Lieberman, Grahm Say Cost of Quitting Iraq Too High.
- More CEOs Are Saying No (Voluntarily) to Bonuses.
- Saudi Arabian Oil Co., the state-controlled company known as Saudi Aramco, and Royal Dutch Shell Plc are spending $7 billion to expand the Motiva refinery in Port Arthur, Texas, to process heavier, more acidic oil not considered desirable until recently.

NY Times:
- Lawmakers Continue to Allocate Funds to Pet Projects.

NY Sun:
- Charter schools that have been struggling to find homes in NY will receive a boost today from the Bush administration, in the form of a multimillion-dollar grant.

Boston Globe:
- Evergreen Solar(ESLR) plans to boost the size of its solar panel-manufacturing facility under construction in Massachusetts and add about 350 jobs.
- Hedge fund manager make mint on housing crisis. Millions of Americans may be facing the prospect of losing their homes, but a handful of fund managers have become the best paid in their industry – taking home 10-figure paychecks last year – by betting against mortgages. John Paulson, who ran a medium-sized fund until last year, zoomed to the top of the industry’s earnings table when he took home an estimated $3 billion in 2007, double what the top earner made in 2006, according to Trader Monthly.

International Herald Tribune:
- Hedge funds face tougher road ahead. “The bubble has popped, and there is going to be a lot of pain,” said Bradley Alford, the founder of Alpha Capital Management, a hedge fund advisory firm. “There will be a massive reassessment of where money should go.”

Bear Radar

Posted by Gary .....at 1:39 PM

Style Underperformer:

Small-cap Growth +.62%

Sector Underperformers:

Alternative Energy (-.79%), Gaming (-.39%), Networking (-.26%)

Stocks Falling on Unusual Volume:

SCSC, PDCO and WMS

Stocks With Unusual Put Option Activity:

1) GRA 2) MGM 3) JDSU 4) SY 5) BJS

Bull Radar

Posted by Gary .....at 11:06 AM

Style Outperformer:

Large-cap Value (+.76%)

Sector Outperformers:

Steel (+2.87%), Oil Service (+2.1%) and I-Banks (+1.78%)

Stocks Rising on Unusual Volume:

EPL, CHA, BK, TIE, UBS, LIFC, ELN, MW, JOSB, FCFS, IPAR, EOC, ENI, WSCI, OFIX, ESLR, SOLF, SCOR, JRCC, HITT, PODD, HNSN, FSLR, KLAC, LEAP, CISG, STLD, LFUS, CRXL, ISRG, EGLE, NVLS, GRA, SQM, KCI, IHC, FDG, ACL, NRP and WYE

Stocks With Unusual Call Option Activity:

1) DOX 2) BJS 3) IR 4) ESLR 5) PWAV