Chris Tyler, Optionetics.com
March 31, 2011

A barrage of mixed reports and potential “fear or cheer” in front of Friday’s jobs report take a backseat to intact window dressing efforts. As of 11:10 ET the SP-500 (SPY) is off -0.10% as bulls’ and bears take a break near the end of regulation play for Q1.

In what’s been at times a period of March Madness for both bulls and bears, the final trading session of the month and Q1 is largely dictated by the now in control bulls playing solid defense and simply looking to win the game by finishing with the SP-500’s strongest Q1 gains since 1998.

On a mixed economic front which Thursday’s bulls are willing to overlook, weekly claims disappointed slightly. Filings for first time benefits for the week ended March 26 came in at 388,000 compared to views of 383,000. At the same time, today’s data did fall by 6,000 from the prior week’s 394,000.

Regional manufacturing from the Chicago PMI for March registered a slight beat with a reading of 70.6 versus forecasts of 69.5, though still slipping from February’s 71.2 reading. Separately, February factory orders showed a surprise drop of -0.1% compared to Street estimates of a 0.4% increase.

Across-the-pond, European unemployment fell from 7.3% to 7.1% during the month of March. UK-based consumer confidence was unchanged at -28. Consumer prices in the Eurozone rose by a sharp 2.6% in March, while retail sales for the region fell -0.3% in February compared to January’s 0.4% increase.

Elsewhere and in those sometimes influential markets of notice, shares of the US Oil Fund (USO) are up 1.85% and attempting to break out from a small consolidation set above prior up-channel support and just below its early March intermediate highs. Supporting Thursday’s bid, investors appear interested once more in concerning themselves with supply fears as rebel forces in Libya continue to lose ground to Khadafy’s regime.

Added strength in black gold and its listed proxy has come from the US Greenback (UUP). UUP is off -0.40% but looking weak in its downtrend pattern following word the ECB may be eyeing a “series of rate hikes rather than just one” according to Investor’s Business Daily.

On the corporate front, shares of fertilizer outfit Mosaic (MOS) are off -0.75% after posting mixed results for its latest quarterly effort. The company announced an earnings beat of $0.14 on profits of $1.21 per share but saw below views sales growth of 27.9 on revenues of $2.21B versus estimates of $2.34B.

Trading in Mosaic shares has been volatile with Thursday’s range swinging around the 50SMA which has acted as bearish resistance for a flag pattern.

Investors in MOS are also shaking off an overall bullish crop report released this morning by the US Dept of Agriculture which is still working its muscle with the company’s Aggie peer group (MOO, MON, IPI, AGU, CF and POT) which are busting similar bearish patterns with their intact and beefier relative strength gains on the session.

In other news, shares of Berkshire Hathaway (BRKB) may be seeing some undecided value after key officer David Sokol, widely believed to be in position to take over the helm for Warren Buffett, opted to resign. Intraday, BRKB is off -1.75% and testing key congestion and 50SMA support following a momentum style move from the valued 200SMA during less optimistic days spied not so long ago.

Finally, a top and bottom-line miss in dry bulk operator DryShips (DRYS) has nonetheless and maybe not entirely surprising, resulted in a “buy the news / better-than-feared” reaction. By the numbers, DryShips reported profits of $0.25 per share versus estimates of $0.26 and sales growth of 9.9% on revenues of $215.8M compared to views of $221.1M for its fourth quarter.

Intraday, shares of DRYS are up 2.50% or a less impressive $0.13. That said, could Q2, which is now on deck, be an appreciative one for the “lowly-ranked” former growth juggernaut? Looking at the weekly chart and the idea of second or maybe third chances comes to mind.

Looking at the bigger weekly picture of the last couple years and DRYS could be sporting a deep, deep technical value play. It appears shares of DRYS are crafting a low within a nascent uptrend far removed from the high seas growth chartered by bulls during 2007 – 2008. Time will tell if it all works out, but if you’re bull eyeing the name, options might be a wise course to set your sights on.

Despite its wayward ways, option liquidity in DRYS remains remarkably active, sports ultra-tight markets and one point wide strikes. As much, using durable protection, in case any further sinking does comes about, is definitely an available option and one looking widely used by more than a few bulls (and bears) in Thursday’s heavy volume action.

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site