El Paso Agrees to be Bought by Kinder Morgan for $21.1B

Earlier today El Paso (EP) agreed to be bought by Kinder Morgan Inc. for a 40% premium to Friday's close, creating North America's largest Nat-Gas pipeline operator. I see plenty of M&A's in the pipeline industries future so I put together a screen of the companies similar to El Paso (EP) that I think are most likely to be snatched up next.

Check out the screen after the break:

Tomorrow's Gameplan

Make no mistake that this market is OB, but guess what? It doesn't matter. With Europe looking "solved" (yeah right), and earnings season kicking off with a Google-sized bang, the bulls are in control. This rally could go another week, but when we're OB like this my research tends to lead me more towards finding good stocks to short, not buy. I may snag some Apple (AAPL) and Qualcomm (QCOM) to play Wednesday's earnings report but only if I see a good entry. Also, one of my screens shows that Nabors Industries (NBR) and CVR Energy (CVI) have historically run on avg 8%-9% from where they closed Friday, over 95% of the time! Not bad odds right? I'll be picking some up early in the AM. But on the short side, another one of my screens turned up three names that historically have fallen, on avg, at least 5% over 70% of the time they became OB. It's not time to short since they're not quite OB yet, but I'll be watching Rio Tinto (RIO), DineEquity (DIN) and Rubicon (RBCN) very closely. Harbin Electric (HRBN) is already flashing "Tech OB" so I shorted some on Friday. Last time Harbin Electric (HRBN) registered "Tech OB" in my screen it fell over 12%. Chinese stocks are getting killed anyway recently so if the market turns, this one could test it's 200d MA. Harbin Electric (HRBN) closed at $22.09 on Friday and it's 200 day MA is $18.10.

This is not a recommendation to buy or sell any securities. DAK was long AAPL and short HRBN at time of publication but positions can change at anytime.

Tomorrow's Gameplan

Google (GOOG) reported a stellar quarter after the bell, handily beating eps estimates by 11%. I'm guessing we'll be up off the news tomorrow (tech anyway), but this rally has been long in the tooth since Friday. If we are up, I'll be using it as an opp to close out my longs and add to my shorts. It's hard to get short into Apple's (AAPL) earnings due out Wednesday after the bell, but this market has been OB for a while. I'd rather miss some upside and perserve capital, than get caught too exposed.  If anything, let's pray Apple (AAPL) is down Monday so we can get in before earnings, but don't count on it. I promise we'll have a better entry point than tomorrow. I started a position in Western Refining Inc. (WNR) which is red hot right now. I started another position in $VXX and will open one in $FAZ if we have a real melt-up. PLEASE BE WARNED: There is pain ahead in this market so don't get caught up in the "jubilation" tomorrow.

This is not a recommendation to buy or sell any securities. DAK was long AAPL at time of publication but positions can change at anytime.

A little perplexed is I...

Not knowing what to do sucks. I've been waiting for a correction that's looks like it's never coming and missed an ass-load of upside doing so. I'm not in "panic-chase" mode by any means, but yesterday and today I've slightly increased my long exposure via $TZOO and $WNR. I'm hedging those bets with some $VXX and should be about 65% cash, 25% long and 10% short by day end. I'll be looking to increase my short exposure by trimming down my long position to about 10% and adding to my $VXX, and staring some $FAZ if we gap higher from here.

This is not a recommendation to buy or sell any securities. DAK was long TZOO, WNR and VXX at time of publication but positions can change at anytime.

I was too damn early

My technical indicators have been flashing OB since Friday and now are even in the upper end of the OB range, but it doesn't matter. Stock fundamentals have been too low for a while, and with Europe looking solved for the time being and the good companies are playing "catch-up" with fair value. Damn the technicals. It's dumb to get in front of this upwards momentum. Call me dumb. I had to cover all my shorts and sell my $VXX and $EDZ today. I got aggressive with some $TZOO and still have some $AAPl, $ARCO, and $ALXN but remain almost 80% in cash. I know I'm probably going to miss a few days of upside but 20% long exposure when we're this OB is fine with me. Remember the motto: Perserve capital.

This is not a recommendation to buy or sell any securities. DAK was long TZOO at time of publication but positions can change at anytime.

Slovakia!! God bless you....

Slovakia’s Prime Minister Iveta Radicova

Tonight, after much speculation they would vote it down, the Slovakian government voted on the EFSF package to save Greece and did just that. This is just political posturing by the Slovakian opposition party to sway voters, as Slovakia, just like Germany and France, have presidential elections coming up next year. I'm 100% sure they will pass it eventually, but not until they've thrown the current president, Iveta Radicova, under the bus. The fact that all this bullshit fell on an election year in the three most important countries on the planet has just added to the boondoggle. Alcoa $AA reported a stinker of a number after the bell and while everyone expected a disappoint, no one (except the options risk pricing) expected this crapola. The stock is plunging more than 5% after-hours. Between $AA and Slovakia, we're set up for some pretty rough action for the bulls tomorrow. Today I added to my $VXX and shorted some $CRM. I unloaded most of my longs save for a little Apple $AAPL, Alexion Pharma $ALXN and Arcos Dorados Holding $ARCO, only cause I think I can buy everything back cheaper later this week or next. I bought some Activision (ATVI) based on the chart, it looks like it's ready for a break.

This is not a recommendation to buy or sell any securities. DAK was long ATVI, AAPL, ARCO, ALXN, VXX, and short CRM at time of publication but positions can change at anytime.

Today's Gameplan

So I've been tweeting how OB we are for a couple days but the hammer hasn't come yet. I don't even think it comes today so I actually bought some $QQQ this morning when we were down and  I am already showing profit. I'll be selling out of them a day end and will be in about 70% cash. I've lightened up on all my longs since I think I can buy them back cheaper in a few days. I still have my $EDZ and $VXX which I'll add to them if we rally hard. Many stocks are cheap but they could be cheaper. We've come up pretty fast from 1074 and we need a breather.

This is not a recommendation to buy or sell any securities. DAK was long QQQ, EDZ and VXX at time of publication but positions can change at anytime.

Yay Socialism...Yay Beer

So the first European bank falls prey to the debt crisis. We're down 400 right? Wrong, face-melting rally actually. Dexia sold itself to the Belgium government for $4B (something you would have known hours before it actually happened if you follow me @freemrktcptlst) and instantly futures responded positively. Add to that the "promise" (ha!) by Merkozy that the whole thing we'll be handled in 3 weeks and it's off to the races, right? Well, yes this is very good news, but the algo's are still showing me we're much closer to OB (overbought) than OS (oversold) so I'd be using these rallies for taking profits and quick trades. I'm in about 48% cash and will be using today and tomorrow to lessen my exposure to ARM Holding (ARMH), Netflix (NFLX), and yes, even Apple (AAPL) because I see a 5%-7% correction in our not so distant future. I just want to raise cash so I can position myself well for the next leg up. Let's talk about Apple (AAPL) and Netflix (NFLX) for a second. Both are rallying today for different reasons. Apple (AAPL) reported that they shattered previous presale records with their new handset the iPhone 4S, selling over 1M in the first 24 hours of availability. Netflix (NFLX) (a FMC takeover target) is up over 6% on word the board has decided against spinning the DVD-by-mail business off into 'Qwikster', which has investors hopping. I bought Netflix (NFLX) around $110 and it's hovering around $126 today so I have to take profits, but I reiterate this stock is cheap and primed to be bought by, oh let's say Amazon (AMZN).

This is not a recommendation to buy or sell any securities. DAK was long AAPL, NFLX and ARMH at time of publication but positions can change at anytime.

Today's Game Plan

Two days ago I outlined my short term strategy of getting long, and yesterday I covered all my shorts early into the dip. I picked up Decker's Outdoor (DECK), Spyder S&P 500 ETF (SPY), Russel 2000 ETF (IWM), Apple (AAPL), and, believe it or not, a nat. resources company Cliff's Natural Resources (CLF). I also started a position in the Powershares DB US Dollar Index Bullish ETF (UUP) as a play on the strengthening US Dollar. This is one of my favorite Q4 themes. Tomorrow I'll be looking to add to my Euro shorts via the (EUO) since I think this rally continues on more "good" news out of Europe which should bring up the struggling currency. With the exception of my FOREX moves, all my other trades are very short term. I'll look to start selling all my other trades in 5% or so except for Apple (AAPL), because it's P/E is too low, Netflix (NFLX), because it's oversold and a prime takeover target, and Alexion Pharma (ALXN) because approval of it's drug could come as early as Q4. I wouldn't buy any commodities here except copper for a quick bounce.

-Good Luck, let's make some money.

This is not a recommendation to buy or sell any securities. DAK was long DECK, SPY, IWM, AAPL, CLF, ALXN, and NFLX at time of publication but positions can change at anytime.

Kicking myself...

I let go of my precious metal shorts a little early today (which is annoying), but I'm happy with the move. I'm not quite ready to get long yet since I've been calling for gold to hit $1500 for a few months now, but it's time to start watching for the opp. I actually prefer investing in gold in euro terms which I mentioned yesterday. It's a more advanced trade because you have to both short the euro via a currency market trade, and get long gold in dollar terms, but this trade will be well worth it if you can swing it.

This is not a recommendation to buy or sell any securities. DAK was short the Euro at time of publication but positions can change at anytime.

Have you heard??

Don't know if you heard, but Apple (AAPL) announced the latest upgrade to it's iPhone today to overwhelming disappointment (at least according to the blogosphere). I mean people are pissed! Just search "Apple" on twitter! It looks like they'll maybe sell 10-11 iPhone 4S's if the comments are to be believed. If you don't believe in Apple (AAPL) you are more than justified. I mean how can one company keep winning, time after time, after time? They can't right? Everyone falls eventually. So I'll tell you what I'll do. If any of you have Apple (AAPL) stock you don't want, The Free Market Capitalist is taking donations, just send your stock certificates to the adress on. Look, all kidding aside, was it a disappointment? Yes, it was. But you can bet it will be the best selling disappointment of all time. Subsequently, after the announce, the stock was hammered 5% and dragged the whole market with it. After rallying back from the morning lows, the S&P 500 was just turning positive when Apple (AAPL) announced the iPhone 4S. In a matter of minutes, the whole market had reversed with Apple (AAPL) leading the way. Then call it "cooler heads prevailing" or some rumor out of Europe about bank solvency, but we turned around and turned around hard. The Dow ended up 153, the NASDAQ up 69, the S&P 500 up 25, and look at what we have here, Apple (AAPL) closed down a mere .56%! That's a bloody rally!

This is not a recommendation to buy or sell any securities. DAK was long AAPL at time of publication but positions can change at anytime.

Crushed

I told you yesterday I was setting up a "go for broke" scenario this morning and I covered all my shorts, got long some names, and held my Apple (AAPL). While I had predicted that the announcement today would take down the stock, I didn't listen to my own advice and remained heavily invested. What I underestimated was how much this market, nay, this world needed something magical out of Cupertino today. With China collapsing, Europe on it's way out and our government looking like a chicken with it's head cut off, all eyes were on Apple to show us something that we "had to have". Something that would inspire everyone to find a way to get $300 so they could acquire the "must have" phone. That is why when Apple (AAPL) disappointed the whole market began to sell off. I actually already bought some Apple (AAPL) off the news because I told you yesterday, this is an earnings story. They're still going to make $45 next year and at $356 per share, when you back out the $72 in cash per share they have right now, that's has them selling at a 6.3X next years earnings. For a company growing at 20% YOY, this multiple seems pretty low. The biggest danger in the short-term is if one of the 181 hedge funds that holds Apple (AAPL) decides to liquidate it could send the stock down another 20%. When big growth gets hit, it gets hit hard

This is not a recommendation to buy or sell any securities. DAK was long AAPL at time of publication but positions can change at anytime.

I'm calling a short term bottom...so sue me

Well bears, here's your chance to make me look foolish. On a day when we breached the lows of the year, something I warned would spark a huge amount of selling, I'm calling a bottom. Well a short term bottom at least. I tweeted earlier that I just didn't feel all that bearish here even though we breached some key support levels. If we open up down tomorrow watch the 1090 level cause that's where I think we turnaround, and that's where I'll be buying. I'm not sure who'll lead the way, but I'm guessing it will be tech since Apple (AAPL) is in play tomorrow. Once I see who's leading the way I'll be looking for some longs and for a 6%-8% bounce in the major indices over the next week or so. But I would use this rally to unload any big losers, and take profits on winners, because I see nothing good on the horizon concerning Europe or China which is what's driving the action. Even if the Greek default is "manageable" and China has a soft landing, it will take some work to get there (and by work I mean lower equity prices). When this market starts to become overbought, and the VIX creeps below 30, I intend to be long only a few issues like Apple (AAPL) and Alexion Pharma (ALXN). I think Netflix (NFLX) is oversold and just begging to be bought by Amazon (AMZN) or Apple (AAPL) so I'll hold on to it. I'll be long the dollar index and short the Euro. I'll also be covering my gold and silver shorts on any weakness in the coming week and will look to start to getting long the precious metals in euro terms. That's a bit of a complicated trade but I think you'll see much greater upside in the price of gold and silver in euro terms vs. dollar terms.

This is not a recommendation to buy or sell any securities. DAK was long AAPL, NFLX, and AMZN at time of publication but positions can change at anytime.

Looking ahead to next week

Today's economic data wasn't all that bad, but China and Europe are driving the action. We'd be down a lot more but America is actually getting healthier, and our companies have strong fundamentals, unlike Europe. On the other hand, if you're company even knows where China is on the map, it's selling off today. Anything related to China is getting swept up in talk of what could be the hardest "hard landing" in history. Throw in an SEC investigation into the balance sheets of Chinese ADR's, most of which are traded on the Nasdaq, and you have a real problem. I forever the optimist don't think it will unfold like this, but it's not the time to be buying anything Chinese. Next week we get a slew of economic data, starting the week with the ISM Index, then construction spending, auto sales, truck sales, and factory orders. At the end of the week we get the big ones, Nonfarm payrolls and Unemployment. We'll see if the US data moves the market, or if it's still all about China and Europe. My guess is on the latter with one caveat, Apple (AAPL). If you read my blog you know next Tuesday, Tim Cook will release the much anticipated iPhone 5 and iPhone 4S. It's hard for me to say whether the market will like the phone or not until it's unveiled, but if Apple (AAPL) gives us a positive surprise or two, I think it can take the tech sector up along with it. ARM Holdings (ARMH) and Broadcom (BRCM), both of which are down close to 2% today, will be great ancillary plays off any good Apple (AAPL) news.

This is not a recommendation to buy or sell any securities. DAK was long AAPL, BRCM, and ARMH at time of publication but positions can change at anytime.

Me thinks this market be crazy

If you invest in momentum stocks like I do, you're not really sure what rally the lame-stream media is talking about today. Up 140? The Dow once again masks the ugly, underlying action that, at least for the time being, is the true tale of this market. I have about 100 companies I watch on a regular basis, and five had green arrows today. Five. This looks like a big move away from risk, or as the kids are saying "Risk Off." But, I did do some shopping today. I bought some Alexion Pharma (ALXN) as it was down 4%. I had been looking for this one to pullback for a while and today gave me the opportunity to add to my position. Also, I am now speculating on a Netflix (NFLX) takeover with the NOV 135 calls. I covered some of my shorts in Fossil (FOSL) only because by mid-day the stock was down almost 12%! It ended the day down 7% so I'm already happy with the move. I still think there is plenty of downside risk out there, so I'll be leaving the rest of my Fossil (FOSL) shorts on until I see some better data points out of Europe and China. China took center stage today as fears of a hard landing have accelerated. If it's not Europe, it's China. We can't get a break! Add to that the SEC is now probing Chinese companies to make sure their balance sheets aren't air, and that made for an all-out sell-off in the Chinese ADR's. Baidu (BIDU) and New Oriental Education and Tech (EDU) were down huge but parred their losses going into the close. At one point New Oriental Education and Tech (EDU) was down over 18%! I had to literally leave the office so I wouldn't buy these names, but it looks like I would have already made a handy profit had I just listened to my instincts. I wouldn't have held anything overnight, but it would have been one boss of a day trade. 

This is not a recommendation to buy or sell any securities. DAK was long ALXN and NFLX, and short FOSL at time of publication but positions can change at anytime.

Stocks & Commodities Fall as German Parliamentary Vote Takes Front Stage

These late day fades are killing the bulls. You wonder how much longer they can take it before they just throw in the towel. We were dancing between gains and losses all day, opening up 100 points only to give it all back and then some by 3PM. Then, as usual, the fast selling started and took us another 100 points lower in the last 15 minutes of trading. I'll reiterate my view that you shouldn't be buying anything in this market except Apple (AAPL) and Alexion Pharma (ALXN). Overnight or early tomorrow morning there is a vote in the German Parliament to decide on Greece's bailout package. If it fails, you can bet we'll be taken down hard. Remember, when TARP was first introduced to Congress it was shot down, then the market plummeted and forced Congress' hand. TARP was finally passed, eventually saving us from a total collapse. You have to think, over in Europe they have a bunch of lefties in office who are anti-capitalist to begin with. You think they want to bailout the "fat-cat" bourgeoisie bankers that got them into this mess in the first place? Talk about moral hazard. They hate the bankers over there more than we do. Then, even it passes, it has to be the right plan. How did we react when the Fed didn't give us the stimulus we wanted last week? Down 700 in the blink of an eye. Gold and silver resumed their drop Wednesday but expect and bounce back up to the $1700 level if the vote fails. I'll be adding to my Proshares Ultrashort Silver ETF (ZLV) and Proshares Ultrashort Gold ETF (GLL) positions if we do bounce on a failed German vote, but if it passes, look out below.

This is not a recommendation to buy or sell any securities. DAK was long AAPL, GLL, ZLV, and ALXN at time of publication but positions can change at anytime.

Europe still driving the car...

We've rallied off the lows of the year, again, on the idea of a German TARP-like plan that will save Greece from a classic default, and bring the entire Euro Zone back from disaster. If we had some sort of solution over there it would be huge positive for this market, but what about Operation Twist? Didn't we get a little more stimulus than we expected from the Fed? What happened after that? Down 700 points in two days. Maybe it doesn't happen this time, but until this market breaks out of the 1120-1220 range it's been trading in, I'm a very selective buyer. This may be your last chance to get in on the Apple (AAPL) train before the next big leg up. Amazon (AMZN) is debuting it's iPad competitor dubbed the "Kindle Fire" or some nonsense like that. I think the Kindle Fire is DOA like all the other "serious competitors" that have come and gone (I'm looking at you Xoom, Galaxy, and Playbook!), and if it brings Apple (AAPL) down today and/or tomorrow, I'll be adding to my position. I actually like Amazon (AMZN) a lot, but this tablet is NOT an iPad competitor. It may take share from the Nook. Gold is basically unchanged and silver is down a percent. I bought back some Proshares Ultrashort Gold ETF (GGL) a little cheaper than I sold it on Monday for, and I started a position in the Proshares Ultrashort Silver ETF (ZSL). I think both precious metals have 10%-15% downside form here. Yesterday's rally fading hard into the close is disconcerting, but right now it looks like today may be a non-event. With all the different investment vehicles I watch, I'm stressed to find one that's even moving by a percent either way. Europe is basically unchanged right now down about 30 points on the DAX.

This is not a recommendation to buy or sell any securities. DAK was long AAPL, GLL, and ZSL at time of publication but positions can change at anytime.

Cautiously Optimistic

It's amazing how quickly things go from the "end-of-the-world" to "Paradise Island" nowadays. This is one broad rally with all but 2 of the stocks I watch rising over 1%. Volume is pretty normal out of the gate, but will see how the day unfolds. As much as I'd love to jump into the names that are rebounding like Baidu (BIDU), Arcos Dorados (ARCO), and Wynn Resorts (WYNN), I think it's best to continue to be cautious here. We've been following the pattern of pricing in a "smooth" default in Greece before it actually happens, and then at any sign we were wrong we sell of, and we sell off violently, hence my caution. The lows of the year held again, the best contrarian investor out their, Doug Kass, has called a bottom, and investor sentiment is almost as bearish as the 09' bottom. These are all very positive signs, but any bad news out of Europe will take precedent over anything else. I'm still buying Apple (AAPL) and Alexion Pharma (ALXN) as I continue to believe these companies will buck any macro trends. In fact, I'd like to talk about the report form JPMorgan yesterday citing parts suppliers, that Apple (AAPL) cut iPad orders for Q4 by 25%. My sources are confirming something I suspected the minute the report dropped and mentioned twice twice yesterday. Not only is Apple diversifying it's supply chain in Asia, it is moving an unknown amount of production to Brazil. How much you want to bet that "unknown" amount is 25% ;) Even if we do continue this rally, we should take a breather the next couple days because we've come up so quickly. I'd lighten up on your aggressive longs and add to any solid shorts as I think tomorrow we could see a pullback. If you have any shorts not working out, like the Fossil (FOSL) puts I bought before the big rally yesterday, than don't sell them for a loss, wait for tomorrow to unload. If you don't have a short position in gold or silver, I like starting one right here. Both precious metals are rising hard today and I think they have a good 10%-15% downside form here. Put on half what you'd like to short today and wait to see what happens. We could see $1700 before $1500, but I expect $1700 to act as resistance if we do get there. The Euro is also rising today and I'll probably add to my shorts via the Proshares Ultrashort Euro ETF (EUO) by day end. Regardless of how the European debt crisis unfolds, I belive the Euro comes out the other end much cheaper than today. I'll be using days like this to add to my position and look to start covering around $1.28-$1.30. Don't forget you can always check the twitter feed to see my trades live.

This is not a recommendation to buy or sell any securities. DAK was long AAPL, ARCO, BIDU, ALXN and EUO, and short FOSL at time of publication but positions can change at anytime.

Rally 276 points? Obviously ;p

This market is confusing as hell but there's one thing you can bet your mortgage on, whatever happens is happening in the last hour of trading. I mean it's like the whole day we're just gearing up for 3PM so the HFT's can drag us one way or the other. We ended the day up 270+ on the DOW and even the NASDAQ got dragged kicking and screaming into the green. Does this rally mean the worst is over? Maybe,but it's too soon to tell and I'm not devoting a bunch of capital until I know for sure. Apple (AAPL) was the story today after JPMorgan reported that the gang in Cupertino has cut it's iPad parts orders by 25% for Q4, the first time JPMorgan has ever observed such a cut by Apple (AAPL). After being down over 3% in the first hour of trading, Apple (AAPL) recovered and only closed down about a buck to $403. I stated earlier that if this is true, it's more telling of the economy, Europe especially, than Apple (AAPL) itself. I shorted some Fossil (FOSL) today based on it's chart and it had already started working, but the big reversal upwards at the end of the day erased those gains. I'll leave them on until I see clear direction and bail if we really start gapping up.  Gold dipped below $1590 early in trading and settled in around $1597. I sold 75% of my short position in gold this morning since I had been short since $1900. I think gold sees $1500 before $1800, but it could bounce around here for a while. I'm seeing a lot of things on sale out there like Wynn Resorts (WYNN) and Baidu (BIDU) but all the technicians are saying "stay away". Admittedly all I see are broken charts, but I'm a contrarian investor, I like to buy when sentiment is most bearish and charts are most broken.

This is not a recommendation to buy or sell any securities. DAK was long AAPL, WYNN and BIDU, and short FOSL at time of publication but positions can change at anytime.

Boys, keep your powder dry.

If we do open higher as futures are indicating I'll be using it as an opportunity to lighten up on all my positions except for Apple (AAPL). I think this rally fades by end of day so I'm going to move pretty quick. Maybe I miss some upside but I don't think it's worth the risk. I still have some Spyder S&P 500 ETF (SPY) calls from last week that I'll close out right after the open and I'll be taking some more profits on my gold shorts. No need to be greedy ;) The Euro is up slightly so I'll be using this strength to add to my Proshares Ultrashort Euro ETF (EUO) positions. I think we still have to work out the European debt crisis before any big moves are made to the upside in this market. I'll also be shoring up any loose positions I wanted to bail on last week but was waiting for an up day to do so. This is why I stress not panicking. Had you closed your book on Thursday when we were down 520 points, you'd be kicking yourself this morning as you could have sold much higher. Never panic! Right now I'm just trying to raise cash and keep my powder dry so when we get some clarity on the direction of this economy, the soft landing in China and the sovereign debt problems in the Euro zone, I'm ready to strike. I'll continue to buy Alexion Pharma. (ALXN) and Apple (AAPL) on any weakness regardless of market conditions.

This is not a recommendation to buy or sell any securities. DAK was long  EUO, SPY and AAPL at time of publication but positions can change at anytime.