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Two Ways To Play: Closing the Gap


Strengthen your portfolio in good times and bad.


Corn Rises Again

Bloomberg reports corn rose for a sixth consecutive day to a record in Chicago after the U.S. Department of Agriculture cut its forecasts blaming heavy rains delayed planting and flooded fields.

The USDA cut its May 9 output forecasts by 3% and said inventories in the world's largest producer may fall by next summer to the lowest levels since 1996. Prices have climbed 50% this year and are likely to post a fourth consecutive annual increase. Globally, inventories are expected to fall to a 24-year low. See Professor Kevin Depew's Five Things You Need To Know.

From the Bull Pen: The services of Monsanto (MON) will continue to look attractive in a high price environment. A pullback to near $130 could provide bulls with a decent entry.

From the Bear Cave: Bears see continued weakness in Archer-Daniels Midland (ADM) should the high prices in corn continue. Buy-stops can be set near $38.50 on downside attempts.

Gap Consolidating

The Wall Street Journal reports in an effort to reduce the company's square footage, Gap Inc. (GPS) will close a number of its stand-alone GapBody, GapKids, and babyGap stores and test a new strategy of consolidating its brand offerings. At a conference yesterday, CEO Glenn Murphey said "It's been clear to us by doing the numbers and talking to customers in our stores, having kids, baby, maternity, body, and adult in the same box makes sense." Murphy added that the company likely won't see the benefit in 2008, but should see it in 2009 and going forward.

Gap could save $225,000 a year in rent alone by combining a 10,000 square foot adult and body store with a 5,000 sq. ft. kid store. For more context, see Professor Jeff Macke's Retail Roundup.

From the Bull Pen: Bulls agree with the long-term strategy. Saving time for the consumer and costs for the company all make sense. Sell-stops can be set near $16.60.

From the Bear Cave: In retail, bears see further downside in Sears (SHLD) if the stock breaks $80. If and when.

Quick Check Around the World

Asian trading closed with the Hang Seng -0.21%, Nikkei +1.16%, Sensex +1.99%, Taiwan -0.29% and Shanghai -1.57%.

A quick check of Europe finds the CAC +0.14%, DAX +0.06%, FTSE +0.06%

As of 8:30 AM EST, S&P futures areup +3.70 to 1359, and Nasdaq futures are higher +3.75 to 1977.

A Look At Commodities

In commodities, crude oil is higher +2..58 to 133.92. Gold is higher +3.90 to 871.80, but the rest of the metals are trading lower with silver down -0.005 to 16.630, and copper is off -5.45 to 355.70.

The dollar index is lower -0.280 to 73.424.

On the Radar


10:30 Crude Inventories
14:00 Fed's Beige Book
14:00 Treasury Budget

Click here to see the full trading radar.

Happy Hump Day! Good luck!

Position in GPS

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