All day and every day, some of the stock market's best and brightest traders and money managers share their ideas, insights, and analysis in real-time on Minyanville's Buzz & Banter.
Here is a small sampling of this week's activity in the Buzz.
Monday, August 12, 2013
GLD Following Through to Upside
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In keeping with our morning note that a bullish ‘hook’ had been put in, SPDR Gold Trust
(NYSEARCA:GLD) held the upside breakout on Friday and is following through with a large continuation gap.
Friday looks like a Pause Day following Thursday’s thrust - an overall TNT pattern (Thrust, Pause, Thrust).
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Today’s outsized gap is over the 50-day and is threatening at least 2 key bullish technicals:
A stab through the lateral 130 key resistance and prior breakdown line from June
An offsetting of the gap on June 30th.
Also, declining trendlines shown in this space last week are being snapped.
I was finally impacted by the CBS
(NYSE:CBS) and Time Warner Cable
(NYSE:TWC) dispute and continuing blackout when I tried watching the PGA Championship. That stunk. CBS said on Friday that total viewership is only down 0.2% W/W from before the blackout and that it has had a minimal impact on its ratings. This means that not a lot of Time Warner Cable's 14.6 million cable customers are watching CBS owned channels (which include Showtime, so I found out).
is on a tear to the upside today and is making continued bullish movement, but the rest of the technicals remain bearish from a longer-term view. The trend remains down, and at the very least, we need to see a recapture of the upper rail of the downward channel that on May 28.
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On the other hand, crude failed right at the 61.8% retrace, which the bears needed to happen. Net-long positioning in the weekly COT report was only reduced marginally by 5.4K contracts to +357.52K , representative by a few shorts being added. So that downside catalyst remains.
For rates, the 5-year yield has now flipped into a bullish trend, though the 10-year and 30-year remain neutral and very close to turning positive. They had all been in a bearish trend since the second week of May. Positioning remains more neutral via the JPM survey, SMR survey, and COT futures, so upside catalysts are possible there. Using the long bond future
(US1) as an example, open interest has declined to 580K contracts from a peak of 744K contracts in early May. For this morning's action, we saw strong buying show up at the NY open, and that has now gotten flipped back at higher prices. Demand during the NY sessions has been stronger than the Asian sessions, for what its worth.
Equity breadth after the first 30 minutes was almost exactly 1:1 neutral for NYSE all securities. After the first 60 minutes, this was relatively unchanged with a tiny amount of decliners added.
While looking through positioning charts, I re-stumbled across the net-long positioning of speculators in S&P 500 futures, and it looks like another bearish divergence from the prior market highs. Net longs decreased to +97.4K, with longs being reduced by 40.5K contracts. Shorts increased by 40.97K. See it below.
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Apple Vs. Gold: Parallel Bull Market Structures
Apple vs. Gold.
Got your attention? Okay, I’m having a little bit of fun here. But really, there is a rhyme and reason to time and price and to how investors herd to a particular stock, commodity, or trend. A look at a chart of Apple
(NASDAQ:AAPL) vs. gold highlights the parallel bull market structures… and declines.
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Investor psychology is reflected through price movement and is a big reason why I am a proponent of technical analysis. Support, resistance, trend following and exuberance.
Trade safe. Trade disciplined.
Tuesday, August 13, 2013
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I hate to sound like a broken record, especially since the downside move I have envisioned has yet to materialize. I will, however, say that the stock market's upside momentum has waned since my July 19 timing date even if prices have not gone down. Still, the weight of the evidence suggests this is not a time to be playing very hard with stocks as the divergences continue to mount. Yesterday, the astute Jason Goepfert wrote, "Despite the fact that most broad-based stock indexes are hovering near new highs, 'sentiment' has deteriorated, forming a kind of negative divergence (see chart)." This is what happened right before May 22. Jason goes on to note that the Option Speculation Index is flashing cautionary signals as well. Similarly, when I run many of my indicators, they show the same kind of negative divergences. For example, the credit spread between "junk" bonds and Treasuries failed to make a new high. In the past that divergence has been a cause for pause. Then too, the number of stocks in uptrends is declining, yet another negative divergence. And while in the past the Hindenburg Omen Indicator has not worked all that well, when it does work, it is impactful. Recall a Hindenburg Omen is registered when: 1) the daily number of NYSE new 52-week highs and the daily number of new 52-week lows are both greater than or equal to 2.8 percent; 2) the NYSE index is greater in value than it was 50 trading days ago; 3) the McClellan Oscillator is negative on the same day; and 4) new 52-week highs cannot be more than twice the new 52-week lows. All of those metrics occurred last week. If the Hindenburg works, we should see the Dow Diamonds
(NYSEARCA:DIA/154.03) close below 154 followed by a break by the S&P 500
(INDEXSP:.INX/1689.47) below 1684.
While stocks are not going down, they are not really going up either. The sideways action has caused my phone to light up with the question, "Jeff, are you softening your downside call?" So far my answer has been, "No!" Our financial advisors have been getting questions too. The question du jour is, "Okay, we raised some cash, but the downside did not show up. Isn't it time to put that money back to work?" Of course, in most cases these are the same folks who didn't want to buy stocks on the back-to-back Upside Volume Days of 12-31-12 and 1-2-13 that kicked this buying stampede off. This morning, however, they are right with the pre-opening futures up on hints of stronger economic data on both sides of the Atlantic.
Getting Long BBRY
(NASDAQ:BBRY), which has fallen over 95% from its all-time stock price high of over $230 about six years ago, has recently been making rapid rebounds in the market after news that CEO Thorsten Heins might be taking the company private. Prices spiked upwards about 7% to $10.42 this morning on positive speculation from reports that Heins wants to get out of the public spectrum and allow BlackBerry to catch its breathe. The company has not yet begun its search for prospective buyers, and BlackBerry is quite an unattractive prize for any enterprise interested given its 13% stock price drop YTD, EPS of -0.41, and steep loss of subscribing customers. However, there are other enterprises like Silver Lake and CPPIB that have shown some interest in the failing mobile network provider.
Analysts project that if Silver Lake is successful in taking Dell
(NASDAQ:DELL) private, it may become partners with BlackBerry as well. Dell has struggled with the changes in the technology industry, from desktops to mobile devices. A pooling of the companies' efforts and resources could solve their problems. Another interested suitor, Canada Pension Plan Investment Board, said it would consider purchasing BlackBerry if the company went private. No buyout offers or negotiations have been made yet.
To widen its arsenal of assets, BlackBerry announced today that it created a strategic operations committee in charge of both bolstering sales for its newest BlackBerry 10 smartphone and seeking possible partnerships or joint ventures to counter the ferocious competition from companies like Apple and Samsung
(KRX:005935). Timothy Dattels, chairman of the committee, said:
During the past year, management and the Board have been focused on launching the BlackBerry 10 platform and BES 10, establishing a strong financial position, and evaluating the best approach to delivering long-term value for customers and shareholders. Given the importance and strength of our technology, and the evolving industry and competitive landscape, we believe that now is the right time to explore strategic alternatives.”
Heins, who will also serve on the special board, stated, “We will do our homework and assess what we think is best for the company and then we will have discussions and they will either yield partnerships, alliances or not.” He went on to say that in the meantime, the rest of BlackBerry will continue its original plan to reduce costs and take advantage of the opportunities that arise.
In the midst of restructuring its marketing strategies, BlackBerry has also decided to reevaluate its operating infrastructure, putting the company in a very precarious situation. A report by CBC news found that BlackBerry not only fired 250 employees who were stationed at a test facility in Waterloo but also got rid of three crucial veteran executives: global manufacturing and supply chain senior vice president Carmine Arabia, corporate information technology vice president Doug Kozak, and service operations vice president Graeme Whittington. Rebecca Freiburger. A spokeswoman for BlackBerry, stated, “We are in the second phase of our transformation plan where we will be assessing our organization - from top to bottom - to ensure we have the right people in the right roles with the right skill sets to drive new opportunities in mobile computing.” No news is available for how many other jobs BlackBerry plans to cut this time around, though not all sectors within the company are necessarily involved in the restructuring program.
Prem Wasta, BlackBerry’s biggest investor, announced today that he is also leaving the company “due to potential conflicts that may arise” while taking the enterprise private. He still supports Heins in his efforts to redirect BlackBerry’s momentum, though he speculates it will take some time before the company starts seeing major gains again.
Though the company has experienced heavy losses, BlackBerry will not "go gently into that good night." The latest developments in its fight to stay afloat include authorization from the Defense Information System Agency (DISA) to operate as a mobile network provider on the U.S. Department of Defense’s broadband. DISA plans to incorporate 10,000 BlackBerry 10 smartphones into its network this fall and add another 30,000 by year end. To be authorized by the DoD is an impressive achievement that involves meeting incredibly strict security standards, which BlackBerry has been very familiar since its network normally deals with managing private corporate information. With news of the approval, Scott Totzke, Senior Vice President of BlackBerry Security Group, stated, “Being the first smartphones to be supported on U.S. Department of Defense networks further establishes BlackBerry’s proven and validated security model. With foreign entities - governmental and criminal - ramping up attacks on electronic communications and information systems, BlackBerry provides government agencies with a proven partner that follows top-to-bottom security protocols.”
Investors will surely keep an eye out for Blackberry’s activity in the near future. Meanwhile, the company’s stock continues to hover around $10.35, up 6% for the day and trading at the highest prices in the past 30 days.
Where there is smoke, there is fire. I think that BlackBerry has more upside potential, but I always want to define my risk vs reward. This is a longer term play in BlackBerry, but if it breaks to the upside, then this trade has a potential reward-to-risk ratio of 3 to 1.
: Buying the BBRY Jan 13-16 Call Spread for $.70
$70 per 1 lot
$230 per 1 lot
Reward vs. Risk:
I will look to sell 50% of the Spread if the position doubles and hold the balance until Expiration
Boring Is The New Black
This morning's WSJ
has a great article on the proliferation of "safe" bank CEO's in the aftermath of the banking crisis. Read the article here
As I discussed last week at TEDx Wilmington, changes in confidence alter our preferences and actions. When confidence is low we choose safe, whether we are alone, in the boardroom, or among other banking regulators. That financial institutions are picking boring executives at the same time they are selling off their far flung global operations, boosting risk management departments, and experiencing weak loan growth all fits together. Confidence doesn't affect just one aspect of behavior, it impacts everything - and simultaneously too. Wednesday, August 14, 2013
Ducking in and out of meetings yesterday afternoon, I blinked twice when I saw the Apple "news" that Carl Icahn bought a large position in the stock -- and then took to Twitter to ‘talk it up.’
The SEC ruled
that social media is an acceptable medium for company announcements in April, 2013. Still, yesterday’s events felt a world away from when the SEC warned Netflix
(NASDAQ:NFLX) CEO Reed Hastings about posting his prognostications on Facebook
(NASDAQ:FB) last December.
Is social media, and the ways in which we communicate, moving that fast? Evidently, the answer is a resounding yes.
To be sure, other high profile investors have posited their positioning on Twitter - Bill Gross at PIMCO comes to mind. But at what point have we jumped the proverbial shark?
With HFT to the left of us and social media disclosures to the right, the investing process is morphing at warp speed. As Josh Brown eloquently observed yesterday—on Twitter, of course
—“Apple adds $20 billion in market cap, or Chipolte + Under Armor, on a pair of tweets from Carl Icahn. Baller.”
I won’t take the other side of that statement -- Carl Icahn is
a baller -- but we’ve seemingly entered into a new realm in the investing landscape, a social sphere situated somewhere between “Pump & Dump” and “Post & Boast.” Mr. Icahn’s 52,000+ Twitter followers got a gift -- or at least a first-mover advantage -- as the rest of the global financial marketplace, many of whom are not on Twitter, were left to play catch-up
And you wonder why mainstream America thinks they're at a disadvantage
I have no horse in the Apple race. I had a level I was looking at, but it never got there and my greatest cost was one of opportunity. If nothing else, however, yesterday’s sequence served to fortify the frustration felt by investors who feel the investing process is unnatural -- and yes, in the words of Stan Druckenmiller,
T-Report: Worst Volume Day for CDS Ever
The IG CDX Indices had their lowest volume of the year yesterday as far as I can tell.
Only $2.5 billion of IG Indices traded, and IG20 barely topped $2 billion. That used to be a couple of big trades.
HY20, the on the run CDX volume got to only $665 million. iShares High Yield Corporate Bond
and SPDR Barclays Capital High Yield Bond ETF
(NYSEARCA:JNK) combined for almost $500 million of volume (though over 70% of the volume was in HYG). While high-yield CDS remains the hedge of choice, two things are clear:
The ETF’s are becoming as big or a bigger technical factor in high yield as CDS.
Other low volume points had been April 29 and July 15. While low volumes in April preceded the first big bond scare and spread widening, the low volumes of middle July preceded a gap tighter. So I am not sure that low volumes are indicative of anything other than apathy.
Name That Move
Not that 10 points is a big move given the outright level of the S&P 500, but it is big enough that I would like to be able to explain them.
S&P Futures for Past 2 Days
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I would like to say that spike up was due to lower inflation data, the drop was because of a weak auction, and the bump was good earnings.
I am sure if I tried hard I could attribute each of the moves to something, but it feels like I would have to try hard. Normally it is pretty obvious to me why the market did something (in hindsight). Whether you agree with the move or not, it is relatively easy to pinpoint. Yet another sign of apathy?
A Random Crawl Down Wall Street
So little is going on that to call this a random walk down Wall Street would be doing the phrase injustice. There really seems to be a tone of apathy.
Relatively few people want to discuss “taper”. Fewer still want to examine whether “tapering” will impact the equity market. In theory, QE supports the economy (good for equities and bad for bonds), and over the past few months, the monthly $85 billion of Fed money seems to eventually find its way into stocks rather than bonds.
For now the “meme” is that the Fed will only taper because the economy is doing so well and that they will time it perfectly so growth continues without fed support. That Higher interest rates are not a drag. That the Fed times things perfectly, and their growth projections make sense. I have far less faith in the Fed and far less faith in the growth story.
Bunds Finally Crack
Ten-year Bund yields moved 8 bps higher. At the same time, Spanish and Italian bond yields moved a bit lower. This is a very bullish spread tightening.
We are starting to focus on Europe again as we near the one and only German debate on September 1. That will be a key date as we will get a sense of whether an “anti-Europe” faction will develop or not.
The popular view seems to be that the German elections and election results will usher in a new wave of the European financial crisis. I’m not so sure. It could happen, but several factors are at play that may make it less of a risk than many think.
We will take a closer look at Europe over the coming days, but for now, we continue to dislike bunds. We also think the most likely case for sustained U.S. growth will come from a rebound in Europe. That isn’t our base case for the European outlook, but it is an important factor in our analysis. We find few compelling growth stories in the U.S. without a rebound in Europe, and by compelling, I mean +2.5% GDP or more.
Silver Gains on Gold
Between gold and silver, silver has had a rougher year despite gold stealing all the attention. The white metal, though, has outperformed the yellow metal percentage-wise
since both metals' lows. Gold and silver reached their most recent 2013 lows on June 28. Since that date, silver has rebounded about 17% while gold has rebounded about 12.32%.
Since iShares Silver Trust
(NYSEARCA:SLV) June 27 low, it has rebounded about 17.8%. GLD has gained about 12.3% since its June 28 low. The charts below show the ratio of SLV to GLD. For perspective, I've included two sets of charts, showing the SLV-GLD ratio constructed both ways.
The shorter-term trend of GLD outperforming SLV has reversed, and the GLD-SLV ratio is nearing an important resistance point from a trend that began at the end of last year at just under 6 . Flipped, the SLV-GLD ratio is nearing resistance at 0.167.
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Silver correlates with gold, and it usually outperforms gold when gold rises and underperforms gold when gold drops. So far, silver's price has exhibited this behavior, and it may be a better play than gold, based upon historical behavior, if gold continues to trend upwards.
Below, see 1-year chart of SLV's and GLD's percent changes.
Thursday, August 15, 2013
When Is Cisco Gonna Pull A Viacom?
A couple of weeks ago, Viacom
(NASDAQ:VIAB) upped its buyback plans to $20 billion or about HALF of the company's market cap. Looking at Cisco's
(NASDAQ:CSCO) balance sheet and cash flow, the company has $50 billion of cash on hand vs. $16 billion of debt, and it generated more than $12 billion of free cash flow in the last 12 months. Cisco 7-year bonds trade at a YTM of 2.7%. Cisco could borrow $50 billion, buy back 40% of itself, and be nearly debt free on a net basis 12 months out. Assuming its business stays at current levels, in four years its net cash on the balance sheet would be back roughly to where it is today.
Escaltor up, Elevator Down
I have been chatting about things changing and prepping for the breakdown. I reduced exposure, so now, I'm sitting on dry powder. Today, we finally get the breakdown and the confirmed head and shoulders. At this point, we have gone from a trend and momentum market to a traders market, so I'm dusting off the old trading manual and putting the portfolio in the drawer.
Process wise, I look at the market to tell me what the easy trade will be.
On one hand, I am looking at the best short entries. The best short entries would be a rise into 1682 (the old neckline) for a sharp move to the 50-day. Though, I see this as less likely at this point.
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On the other hand, where are the best long entries for a bounce? There are a couple of gaps below the 50-day moving average that I have marked on the chart. If we get a break of the 50-day, then those quickly become targets, maybe as soon as tomorrow. My old pal NYMO had its breadth rotation tell, and now, he is in full puke mode. Probably going to close the day out around -80 or so. When it gets that low, I look for a long trade. If we get a nasty gap down tomorrow, I will buy it and go fishing. Why go fishing you ask? 1) So I don’t sit there at my screen and second guess my way out of the trade. 2) It is dropping into the low 70s in the morning, which would make it gorgeous out on the river tomorrow.
Basically, as I see it, we have some unfinished business around 1680 with a new low for this range coming soon probably in the 1640s or possibly the 50-day moving average.
SLW Emerges from its Apr-Aug Base Formation
Purely from a pattern perspective, you can see my minimum, optimal, and outlier targets for the upside breakout in Silver Wheaton
(NYSE:SLW) from its April-to-August base pattern.
Only a break that sustains beneath 25.20 will begin to weaken the pattern, while a decline that breaks today's low at 24.31 will neutralize it altogether.
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Friday, August 16, 2013
The Freaky Friday Level of Lore
Check the S&P chart below. As discussed yesterday
, there 'was' room to S&P 1650, and we almost got there on the close. The 50-day moving average is in play now (1657) and 'horizontal' support is directly below at 1650.
Expect the bulls to circle their wagons there on a slinky August Friday -- and they should have an opportunity to do so.
Beware the Ides of August
My ears are buzzing this morning.
Yesterday, I heard a strategist say that there was no reason to be concerned about a decline here as you don’t get trend changes in August. He went on to say August is just ‘too thin, not enough conviction.’
Really? What about August 1982, August 1987, August 2000, August 2007, which was the blow-out low prior to the last ditch rip to new highs in October. August 2008 was the pre-crash pivot high.
Beware the Ides of August.
I believe that changes in confidence alter our choices and actions.
In researching confidence, I developed a framework that I call "Horizon Preference," which states that when our confidence level is low, it is all about "me, here, now". When confidence is high, it is all about "us, everywhere, forever". (My book "Moods and Markets" covers this much more thoroughly than I am here.)
What brought this to mind today, was this quote from Der Spiegel regarding Egypt:
Welcome to Egypt under General Abd al-Fattah al-Sissi. The country is so polarized that people are no longer able to feel any empathy whatsoever for others. It is a country in which the smartest and most critically thinking intellectuals are now spewing little more than propaganda, with people on both sides of the deep political divide displaying a penchant for simplification, vilification and agitation. Those who ask critical questions run the risk of being physically attacked, an experience that many foreign journalists have encountered in recent days.
Read the article here
Talk about a litany of very weak "me, here, now" human behaviors: "polarized", "no longer able to feel any empathy whatsoever for others", "deep political divide" "penchant for simplification, vilification and agitation."
That the Egyptian market has sold off sharply, hardly comes as a surprise. Changes in confidence transcend everything we do.
Disclosure: Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.