Why a RIMM call makes sense....

RIMM got killed today after reporting earnings and cutting their profit margin forecast by 10%. Oh they are only going to make 48% instead of 52%. That just does not correlate to 25% haircut of the stock price in my book. Anyway take a look at a 5 year weekly. Retraced straight back to the 38.2% Fibonacci line which is slightly above the 200 week EMA. Interesting you say......

(To enlarge charts to full screen just a mouse click away and hit your back button to return)



The daily reinforces again the wonder and amazement of Fibonacci levels. Drawing fib retracement from June highs to today's low brings out the lowest low prior to the gap down or roughly $88 per share and coincidently the 23.6% retracement line. It may take a Federal bailout or a few days, but the likelyhood of $88 is enough for me.

What is LIBOR?

So it's all about the banks......Check out the Reliabilty statement published on Wikipedia back in May as sourced from the Wall Street Journal.

Gleaned from Wikipedia.com:

The London Interbank Offered Rate (or LIBOR, pronounced /ˈlaɪbɔr/) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market). LIBOR will be slightly higher than the London Interbank Bid Rate (LIBID), the rate at which banks are prepared to accept deposits.

Reliability
On Thursday, May 29, 2008 the Wall Street Journal released a study suggesting that banks may have understated borrowing costs they reported for LIBOR during the 2008 credit crunch.[2] Such underreporting could have created an impression that banks could borrow from other banks more cheaply than they could in reality. It could also have made the banking system appear healthier than it was during the 2008 credit crunch.
For example, the study found that rates at which one major bank "said it could borrow dollars for three months were about 0.87 percentage point lower than the rate calculated using default-insurance data."
In response to the study released by the WSJ, the British Bankers' Association announced that LIBOR continues to be reliable even in times of financial crisis. According to the British Bankers' Association, other proxies for financial health such as the default credit insurance market, are not necessarily more sound than LIBOR at times of financial crisis.

Market held captive by Government

The major indicies are crowding up to the trendline off the July lows and the market is definitely being held captive by a Government that requires credit be given to the "savior" of the financial system. I'm holding true to the belief that there will be a deal prior to the opening of Monday and stocks will surge off of the "Relief" to the liquidity situation. However, ultimately this rise will turn out to be the Bears opportunity to reload for the impending doom fall of terribly bad earnings to come.



For now the VIX is providing a nice PUT opportunity with a tight stop at the $36.72 Fib level.

LOW, HD, MAS, & the $$$$

I just love a comparrison chart for perspective......

Does it appear that Lowe's is slowly closing the gap downward?

Wow that Masco investment back in 1988 has reaaaaalllllllly paid off.......Is this the dog wagging the tail or the tail wagging the dog. To me they all have fleas....

Now here's the USD/EUR finding support ot a major Fib line. This looks like a nice cup with a handle. Could this mean Europe is a WHOLE lot weaker than the US in this Financial mess?

Things you can not see by only looking at daily charts

What you don't see about today's action if you are only looking at daily charts is the beginning of a bottoming process. These 20 day 30-min charts show that the "Fade" downtrend from the "Financial Bailout" was broken. Coincidentally the timing of this bull move immediately followed the ending of the Senate committee hearing starring Paulson & Bernanke. And as always Fibonacci lines are marking important resistance/support levels.

GDP growth and Cramer's Cyclical and Investing Chart

In Jim Cramer's Mad Money he references an economic cycle based on Gross Domestic Product and the Federal Reserve's positon on interest rates. It has been said through various other souces that the cycle typically runs on seven year intervals. However, Cramer does not put a timeframe on his chart, but simply puts forth the idea that the Market will react a certain way given cetain circumstances or conditions.

Currently the GDP report is due Thursday and it's consensus estimate is for GDP growth of 3.3%. So let's take a look at where we are and what we should be doing based on Cramer's playbook.

Yearly Chart:


Quarterly Chart:


It is plain to see that the cycle bottomed out in the last quarter of 2007 and GDP has actually risen in 2008. Yes I know, "We are in a recession". Well, not according to the governments data. Given, we may be in the financial crisis of a lifetime, but the data does not lie. Anyway, who cares? The question is how do we make money on what is going on?

Well according to Cramer's playbook if GDP is rising and between 3-4% we should have already bought "smokestack" stocks like DE, IR, CAT, MMM and begin selling financial, housing, retail, & auto stocks like BAC, WFC, LEN, TOL, PHM, CTX, WMT, TGT, F, GM. As GDP tops 4% we should be buying metals and minerals such as: NUE, AA, NEM. Since this was published in 2006 I wonder if he would add Gold stocks like GLD, AUY, & ABX? Oh, was that Monday's show?

The Fed shold be tightening rates based on the growth, but we all know that they are in no position to cut or raise rates based on current commodity price instability and the global financial crisis.

Bottom-line folks is that when this housing/financial mess is cleared according to the market there will be a HUGE upward rocket type swing. Perhaps now is the time to be looking at long leap calls on the majors SPY, DIA, QQQQ, & IWM.

Bank of Hawaii, Oil, & China

Bank of Hawaii has weathered the financial crisis extremely well and looks to be a solid buy. Picking up some long calls with a stop just below the 50 week moving average may pay off huge in the near future. The next three charts give a long term, intermediate, and short term look.




Crude was the story today, but be real careful getting long here as it has only retraced back to a longterm trendline and Fibonacci.

The China index sporting similar action to Crude and could very well be a bull trap. Shorting here or some short-term puts 3-6 months with a stop at the fib line may be the play.