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1. Earnings Housekeeping

By Timothy Collins

8:48 a.m. EDT


(NTES) - Get Report

is not living up to the high expectations of the Street, even with the beat. I have seen at least one downgrade this morning at PacCrest. NTES shares are down about 7% right now. I will sell at least half my August 49 puts around the open.

Urban Outfitters

(URBN) - Get Report

is getting a nice pop in the premarket as revenues were in line, but EPS beat. This wasn't a big call spread for us, but I will do my normal, which is sell half, then set stops for the only long call spreads.


(WMT) - Get Report

came out with solid numbers and solid guidance, though it was a tad disappointing on the revenue shortfall for the quarter. The short straddle looks all right here, since we were short twice as many puts as calls at the 50 strike, but I will have to see where it opens. My inclination is to close the trade if there is a profit there, no matter how small. This one may gravitate toward $52.50 for expiration.


Bally Tech


was solid on EPS, light on revenues, and gave a similar outlook to last quarter. There is a decent size short interest in this one, and I am apt to let the August 35-40 call spread sit for a bit here.

Long BYI, URBN, short NTES, WMT Aug 50 straddles.

2. Profits, Economy

By Robert Marcin

9:32 a.m. EDT

The most surprising aspect of this economy is the fact that corporate profit margins have held up so well. Now that most of the reports are in, margins for the large-cap industrial index were 7% after tax in June vs. 8% last year. That's a non-GAAP, "operating" number. The reported margin is much lower, down to 4%. Which one do we pay for?

Retail sales and claims prove that economy is not gaining consumer or employment traction. Stocks and bonds may be soaring from all of the


liquidity and direct securities market intervention. But business is not feeling the same love. For now, the market and economy are delinked, but at some time they have to get on the same page.

I still prefer quality over not and defense over offense in the stock market, but I have been incorrect on the ability to reflate a speculative bubble. I have a friend who is taking LIBOR plus money loans and buying stocks up here. Who says you can't get a loan? One can, if only to daytrade. Good job, Uncle Ben!

No positions.

3. Retail: Just the Facts, Ma'am

By Kristen Koh Goldstein

1:42 p.m. EDT

Reality check:

Retail HOLDRs

(RTH) - Get Report

has been


most of today and

SPDR S&P Retail

(XRT) - Get Report

is off only 22 cents, or less than 1%. Absolutely incredible considering the stats that we got this a.m. I would have expected a down-200 day with retail indices off more than 5%. I sold half of my trading portfolio yesterday and I'm not exactly feeling warm and fuzzy about it. Let's see what the shorts can do at the close.

No positions.

4. Not Seeing A Bubble... Yet

By Geoff Johnson

1:48 p.m. EDT

I believe things are getting better and the stock market is justified to go up. I spend a good chunk of every day concerned that I am wrong, but in the end conclude that I am most likely to be wrong on the timing (in that it is delayed modestly). Perhaps it will take a little longer than I suspect (my timing is Q4/Q1) for the less bad news of spring, which has given way to the almost, but not quite good news of today, to become actual good news. This means I will have moments of doubt and the market will correct on me by as much as 5% to 10% when I least want it to, but that's par for the course in any bull market, including just a short-lived cyclical bull.

Fitting with my view that we are in a

cyclical bull market

, I do not expect the "good news," assuming it comes, to be as absolutely good as the good news of a secular bull, nor will it be as long lasting. However, it is likely to come and because of all the cost cutting, I believe it is not fully baked into stocks.

I also remind myself that the good news we got off the bottom in 2003 seemed very good to most, even though, arguably, it was just the kind of good news one gets in a cyclical bull in a secular bear. I further remind myself that even that good news was not good enough for the typical long/short long biased hedge fund, as in 2003 the long/short-long biased average trailed the index signficanlty. If things do start getting good, I suspect it will mark the point at which the market parts company with that long/short-long-biased index with the index shooting higher and the hedgie index lagging behind.

No positions.

5. Retail

By Alan Farley

1:55 p.m. EDT


Retail HOLDRs Trust

(RTH) - Get Report

is 34% weighted in


(WMT) - Get Report


Home Depot

(HD) - Get Report

, two


stocks that are up today. No surprise why it isn't bleeding red.

"The market is never wrong."

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