12:45pm (EST)
The bears are feeling giddy as they seem to be gathering momentum ahead of Friday’s unemployment report. The losses have been somewhat contained but the bulls have given up some nice round numbers that is making Wall Street nervous.
There are some interesting headline stories today including the Department of Justice’s move to block Anheuser-Busch Inbev’s (BUD, $87.15, down $6.99) $20 billion deal to buy Mexican brew-daddy Grupo Modelo and owns the brand Corona. The zombies believe the marriage would lead to higher brew prices and diminish the competition in the U.S. beer market. They contend BUD would control nearly 50% of the beer sales and the company has said it will go to court.
In 2008, we predicted a takeover of Budweiser and we made our subscribers a nice chunk of change playing call options. There were several triple-digit winners we recommended and the highest return was 588%. That year was also one of our best years ever to trade options as the volatility was insane. There were triple-digit moves on the Dow nearly every day it seemed like and we are hoping 2013 becomes just as volatile.
Research in Motion (RIMM, $12.83, down $0.95) is down another 7% and we mentioned this morning shares could test $12, possibly $10, over the near-term. The company dropped the ball by not making the phone available in the U.S. until March despite the boatload of cash they spent to do a SuperBowl commercial. The hype is nice but consumers will likely forget about the phone in a month.
The real proof on how well RIMM does or doesn’t do will depend on how many of their 70 million users upgrade to the $199 phones. It is still cheaper than Apple’s (AAPL, $455.19, down $1.64) iPhone but there are still holes in RIMM’s execution plan.
The market action will likely remain in a tight range with risk to the downside and the final hour of trading will be crucial to see how the bulls respond. There is still a chance tomorrow’s numbers throw everyone for a loop and there is a massive short covering, blow-off the roof type rally. We have said we are expecting an explanation point at the end of this rally like the spike we saw at the beginning of the year. However, there is a chance the numbers do come in lousy and the profit taking begins.
As we head to press, the Dow is down 30 points to 13,880 while the S&P is lower by 3 points to 1,498 and is below the 1,500 level. The Nasdaq is declining a point to 3,141 while the Russell 2000 is up 3 points to 900. The S&P Volatility Index ($VIX, 14.36, up $0.04) has traded in a tight range and is only slightly up.
We have a lot more to cover inside our Members Area, including action to take on a current trade as we continue to wind down the portfolio to get ready for the next batch. Subscribers, check the Members Area for the updates and we will be back in the morning with a full report.
