Option Investor

Jekyll and Hyde Markets

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After starting the week off with a post expiration -174 point drop the Dow has rallied off those lows to close at a new high for the year at 10841. The S&P also closed at a new high at 1211. The Nasdaq however is still dragging with a respectable +40 point bounce off the lows but well below its highs for the year by about -130 points. The big cap techs, MSFT, CSCO, DELL along with the Internets AMZN, GOOG, YHOO and EBAY are barely off their lows and in the case of MSFT and CSCO they are threatening to break strong support. We are definitely seeing a tale of two markets where energy stocks, commodities and homebuilders are pushing the upper limits and the tech sector can't find any traction.

The entry on Toll Brothers last weekend worked out well. The Tuesday dip to $81 let any procrastinators get in a little cheaper if they saw the gap down in the markets and waited. The good news from homebuilders all week pushed it back to $90 and our other builder play Ryland tagged along and posted a new closing high at $71.40 on Friday. With the record low inventory level of homes as we head into the buying season these stocks should continue higher.

Unfortunately the energy stocks just keep rocketing higher as though they were burning their own fuel. The XLE closed just over $44 on Friday and another new high. This is great for our XLE play but terrible for trying to get long some other energy stocks. I keep hoping the March demand slump will give us an entry but it would come at the cost of the XLE profits. I am going to start moving the stop tighter to prevent much giveback on a retreat.

EBAY is holding in a very tight range and was hampered by the downgrades on the other net stocks this week. GOOG, YHOO and AMZN pushed to new lows and their weakness kept Ebay from gaining any ground. It did however hold its own and I am going to add it in as a new play today despite it not reaching either of our targets. The flat line performance for the last week has compressed option premiums and the close at $42.25 on Friday is just about perfect for an insurance put at $40.

RIMM finally imploded once it broke support at $74 and ended up dropping -9 for the week. We were stopped out at the open on Monday and did not have to endure the -9 point drop but it was still painful. New competition was given as the reason for the decline.

On the bright side PCAR finally got it kicked into high gear and soared off to close at a two-month resistance high at $75. It was looking grim last weekend but the view from $75 is a lot better

I am still hesitant to add any new plays given the weakness in the Nasdaq. The stocks that I would like to buy are too high and need to pull back and the tech sector is still telegraphing weakness ahead. I will continue to be selective until the time is right and then back up the truck.

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