Week in Review and Plans for Next Week

What a week! The market continues to amaze me with the resiliency. Again, I understand we are at lofty levels in the market and at a certain point this market will correct, and I anticipate that correction will be rather violent, but, I do not think that time has come yet. There is still a lot of negativity and pessimism in this market. This tells me that there are a lot of uninvested money that are clamoring to get in.

Thursday's action was an opportunity for those who have been on the sidelines a chance to get in. But I am willing to bet that many got frightened into inaction because of the possibility of the dreaded correction. We are embarking on uncharted territory. There are many reasons why one should stay defensive in this market:
1. The market has run up without meaningful pull back since March.
2. Economic numbers continue to show slowing.
3. "Sell in May and Go Away".
4. Subprime Slime.
5. Fed did not cut interest rates.

Yet, the market rarely acts to consensus notions. I do not think that the market is due for a pull back, yet, for the following reasons:
1. Everyone is expecting one.
2. There is too much excess liquidity in the market.
3. There are many "retail" investors that have not yet participated in the market.
4. Subprime slime appears contained (I was wrong).
5. Inflation is moderating which increases chances for a rate cut.

My trades are in Crox June $75 call and Target June $62.50 calls. Crox is consolidating its gains nicely and have held the $70 mark. It may be possible that level may be retested next week as options expire. It is also entirely possible that the option may be pinned at the $70 level but it is also possible that the options may expire at $75 level due to high percentage of short positions. After the options expiration, I believe there will be a rush to get the stock before the record date of 5/31/2007, which may have the stock run up to the $80 to $85 level heading into June. If these conditions are not met next week, I plan on closing out my calls.

Target (TGT) June $62.50 is a gamble, in light of the weakening retail numbers, but, I do believe that the negativity has been priced in and that the markets will begin to price in for the retail recovery and eventual rate cut that the market expects. I hold a small position and I am willing to take this gamble as the risks versus reward is justified here. There is too much possible upside in this trade.

Amazon (AMZN) is forming a short stroke pattern as it has been digesting its 40%+ monster run up for the past 5 days. I believe that the stock still has too much momentum and is due for another break out into the options expiration week as this stock is still heavily shorted. Same story as Crocs here. I may be taking a small 10 contract position into the June $65 position here.

CPI is important and I believe it is the most important economic number next week as that will determine the continued uptrend or beginning of the break down of the uptrend. We will see.