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Monday, April 11, 2005

thoughts of the day

As goeth oil,so goeth stocks, at least for now oil is down,stocks are up and vicey versi. For the past several weks the direction of oil determined the days market action. Today, however we see a breaking of the linkage as the continued bad news out of the us automakers overshadows the drop in crude.Ford shares are down almost 6% on the day as the reduce guidance and their bonds are downgraded yet again.As approach midday we find the mkt off down slightly and well of the highs of the day. Which factor determiners the afternoon trading..Bad corporate news or falling oil will make an interesting statement about the markets frame of mind.

At 20 times earnings, the market still feels "heavy" to me with the past of least resistance being down.Indeed since the high put in back in early march the market is off by 4% in the spooz and about 4.5 in the nazz. For the year, the nazz id down a gut dropping 9% or so and continues to lead on the downside.Looking at the backdrop we find that for the short term, sentiment is developing a slightly bullish undertone, suggesting a short bounce in here after recent declines. The NASDAQ in particular is showing very bullish readings in short interest and available cash in margin accounts. Bulls bears is a little more mixed with aaii very bullish and ii neutral but off the very bearish readings seen earlier this year.Price action is hanging on the low side of midrange right now with the sp range being 1160 to 1210, with current reading of 1179.The NASDAQ composite is a little closer to oversold, with my bottom range being 1950-1960 and top being 2040-50,against a current 1994. The 1160 number comes up in several different studies across different time frames and could be a critical point as as i suspect pure technicians will be selling heavily below this price

Volatility remains spite of the general downward trend in prices since early march.It is worth noting however that the vix exceeded the top of its 20 day deviation bands. This was accompanied by 4 down closes and would have put us long at the close of 1172 on march 22.Also worth noting is that if you look at a spread chart of vix relative to sp 500 price levels we are seeing the relationship near the very high levels that spurred longer term corrections. A bounce off the march buy signal could well take us to serious long term overbought conditions in this indicator. The only other time in the last 15 years this spread was this far above its one year average was in 2000.

In my personal account,I remain long volatility with a valuation bias. I am long otm puts on sbux,erts,hot and yhoo while being long otm calls in twtr,dtc,issi and pfe.Both erts and sbux have gone from deeply out of the money to in the money since the positions were established on Feb 2. The original erts position was closed on 3/28 for a 200% gain and I rolled down to a deeper otm strike. The calls are all generally under water to about even at this point. I am also long atml as a play on the long term recovery os semiconductor and tmas as a deep,deep turnaround candidate.

03/30 8:37A (DJ) PRESS RELEASE: TIMCO Aviation Services, Inc. Announces 2004 Results Story 3092 (TMAS, I/TRA, I/TRS, I/XDJGI, N/DJIN, N/DJN, N/DJWB, N/CAC...) GREENSBORO, N.C., March 30 /PRNewswire-FirstCall/ -- TIMCO Aviation Services, Inc. (OTC Bulletin Board: TMAS) today announced its 2004 results of operations. Revenue for year ended December 31, 2004 was $323.5 million, a 33% increase over the 2003 revenue of $242.5 million. Net income for 2004 was $0.9 million ($0.03 per basic and diluted share), compared to a net loss of $0.3 million ($0.01 per basic and diluted share) for 2003. Net loss from continuing operations in 2004 was $0.7 million compared to $4.3 million in 2003. Net loss from continuing operations during 2004 benefited from a gain on the settlement of a warrant obligation of $0.2 million. Net loss from continuing operations during 2003 benefited from the elimination and reduction in accruals of $2.7 million based on settlements and revised estimates, from the collection of a $0.9 million account receivable that had previously been written off as uncollectible and from tax benefits of $1.0 million resulting from the conclusion of an IRS audit and receipt of federal and state tax refunds. Without these benefits, the net loss from continuing operations for 2004 and 2003 would have been $0.9 million and $8.9 million, respectively. Roy T. Rimmer, Jr., the Company's Chairman and Chief Executive Officer, stated: "The ongoing improvement in our operating results, at both the revenue level and at the bottom line, demonstrates that we are on the right course. This strengthening of our operations combined with the enhancement of our capital structure as a result of our recently completed tender offer, will enable TIMCO to be a better business partner with our customers in meeting their aircraft maintenance and modification needs." Gil West, the Company's President and Chief Operating Officer, stated: "Our customers are continuing to look to TIMCO for a larger portion of their MR&O requirements, as evidenced by our 33% year-over-year increase in revenue. Our focus on improving the quality, efficiency and scope of services offered to our customers has been critical in securing this increased business." TIMCO Aviation Services, Inc. is among the world's largest providers of fully integrated aviation maintenance, repair and overhaul (MR&O) services for major commercial airlines, regional air carriers, aircraft leasing companies, government and military units and air cargo carriers. The Company currently operates four MR&O businesses: Triad International Maintenance Corporation (known as TIMCO), which, with its four active locations (Greensboro, NC; Macon, GA; Lake City, FL and Goodyear, AZ), is one of the largest independent providers of heavy aircraft maintenance services in the world and also provides aircraft storage and line maintenance services; Brice Manufacturing and Aircraft Interior Design, which specialize in the manufacture and sale of new aircraft seats and aftermarket parts and in the refurbishment of aircraft interior components; TIMCO Engineered Systems, which provides engineering services both to our MR&O operations and our customers; and TIMCO Engine Center, which refurbishes JT8D engines and performs on-wing repairs for both JT8D and CFM-56 series engines

.Voltility remains too low and we need a rise in vols together with a drop in prices to return to some level of normality inthe relationship of volatility to prices.Valuation does seem to matter as its the high flyers that are getting slapped by incoming black swans and swelling option prices.

Just one knuckleheads opinion.

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