market open only for an hour and a half and already selling off. it is amazing how this #$%$ cant hold at the highs of the day while other over priced dog#$%$ goes up $15 -$20 in one day and stays there. complete dog#$%$
Well, pullbacks are a "natural" artifact of the market and a necessary one. The stock is up 2% on higher than normal volume - which is expected right before an earnings announcement. I think earnings will be OK, maybe to the negative. There will be some residual damage due to Grasberg closure and accident. This is not to say that this anomoly hasn't already been priced in for the most part by the market, but it is possible that we see some panic or additional short term downside (movement will vary depending on the impact) to it after they announce tomorrow. Copper prices have stayed above 3/lb and are averaging for the quarter around 3.30/lb which they've already modeled out and is still 10% above the "worse" case scenario.
However, current numbers are only a small part of it as the market is forward looking. Larger volumes and shipments along with expectations moving forward including any new developments regarding their oil and gas acquisitions. I think that picture is poised to be a bright spot in the announcement. The positives are the fed isn't letting up on the gas pedal, localized growth in China is still outpacing, G20 sent a pretty definitive point to the global markets - growth over austerity (they are trying hard to get Europe online), the US housing market is still improving and companies continue to impress with earnings. I'd say all those things combine paint a nice picture for basics.
That being said you can mitigate any potential drop and even profit from the volatility. For example I bought weekly puts and if we rise enough I will sell far enough out of the money puts to offset any drop even more. For now though the puts are enough and I figure if we jump tomorrow on good news or outlook I can always make that money back buy selling covered calls.
Thanks for an astute analysis. I think Wall Street is expecting the numbers to be bad, given the difficulties FCX has had to contend with this past quarter, but things are looking up and an optimistic forecast should limit the damage.