Monday, May 3, 2010

Market Take: May 3, 2010

To the end of 2nd Quarter into 3rd quarter:


Airline Industry


Ideally, I think the SPX still has room to the upside given a relative stability we are seeing in the US markets with strong earnings (still questionable is the demand side of the story to continue this bottom line growth).

With dollar strength, again relative stability (too much political/fiscal issues vs major pairs EUR/GBP/JPY/ and even AUD).

Oil and Airline industry has seen huge divergence of higher oil and suppressed stocks prices over the past years. With current consolidation (UAL and cont), and summer season, demand will pick up for travel given a somewhat better off consumer. Considering demand won't outstrip higher cost from higher dollar of oil, I would expect oil to fall and the airline industry stock price level to increase. Higher profits from the larger merger and increased travel with cheaper oil.

One could Short oil and long airlines if one were looking for an intra-hedge idea if one was trading either side of the two.

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