Bad Open on July 22

Wow…didn’t take long for more bad news to hit the stock market.

Merck and Pfizer and other big pharmas are getting killed today and in after-hours. Merck is down to $33 from $37 just a couple days ago. Glad I am out of Merck and Pfizer.

Apple is also getting beat up. Bad earnings report and disappointing I-Phone sales (just a few days after the launch of the new 3G version was declared a major success). There is also a story about Steve Jobs being sick. But this just shows how neurotic the market has become.

Financials were looking better and then, wham!, along comes American Express’s Q2 report and depresses the whole market. The good pop on UYG and XLF this morning were all but gone by the end of the session and are well below their closes in after-hours.

So, if the market continues to act grumpily in the morning, I will be selling forward my recently acquired (this morning) UYG August sold puts to September at the same strike of 25. This will get me a little more premium and also more time. It should not be too hard for the Financials to get back the 25 strike when the market decides to be happy again, as it was there as recently as early June. The BAC and C quarterly reports showed clearly that unless there is another big bomb in the Financials, that the market should start repairing itself. C and BAC look good as does JP Morgan and Goldman. Freddie and Fannie have been backstopped, so no real danger there. I don’t think Obama or McCain will get tough on government bailouts. Obama would be very favorable to bailouts as a large government Democrat. And affordable housing for the middle class is sacred to Democrats, so politically, Financials should do well as the elections approach.

Jeff, you must be happy the market is finally looking kindly at Valero. Funny how a little story in Barrons makes such a big difference.