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, November 11, 2013
Earnings Season -- How We Doing?
just updated earnings season stats for the S&P 500 (INDEXSP:.INX),
which again point to the idea of earnings needing to catch up to stocks.
Here are the highlights:
-446 of 500 companies have reported.
-73% have beaten on earnings vs. 4-year average of 52%.
-Companies are beating by 1.8% on average vs. 4-year average of 6.5%.
-52% have beaten on revenues vs. 4-year average of 59%.
-Earnings growth rate for Q3 is 3.4%.
-Revenue growth rate for Q3 is 2.9%.
-Strongest sectors are consumer discretionary, materials and information technology.
-Weakest sectors are energy and financials.
-For Q4, 85 companies have issued earnings guidance, with 73 (or 86%!) being negative. 5-year average is 63% negative.
-For Q4, analysts are forecasting earnings growth of 7.3%, down from 9.7% on September 30.
So we have weak revenues, small earnings beats, and terrible guidance.
It's actually pretty reminiscent of last quarter! Oh well, eventually this stuff's gonna matter... right?
Upside for Twitter
This morning’s Daily Market Report
showed the following 10-minute Twitter
TWTR pionocchioed the bottom of its little channel and stabbed back above it in the first hour, so it may be viable on the long side for a trade.
Click to enlarge
All News Is Good News
Bullish Sentiment in US equities hit extreme levels last week, as reported by Investors Intelligence.
The spread between Bulls and Bears moved up to 39.6%, the highest level since April of 2011, which preceded a 20% correction in stocks. Looking at the reaction to Friday's payroll report, it is easy to understand why investors are so excited here.
While equities initially sold off on the news that payrolls beat expectations (presumably because this increases the odds of a taper), they quickly reversed higher and are now trading up close to 1%. In the last payroll report on October 22, when payrolls came in below expectations, equities also rallied higher.
For the time being, all news seems to be good news for US equities.
Tuesday, November 12, 2013
Tesla May Be About to Move
Quick FYI -- Tesla's
(NASDAQ:TSLA) Elon Musk's interview at the NY Times Dealbook conference will be broadcast on CNBC very soon.
The stock is down 5% on rumors of a Model S recall. I would not be surprised to see this rumor denied by Musk, which would presumably cause a pop on the stock. (it's already ticked off the lows).
Note that CNBC
is already citing a source saying there will be no recall, but there will be much more weight if it comes straight from Lord Musk.
Position Update -- Organovo Holdings
Back on September 5, Duncan Parker posted a buzz
on Organovo Holdings
(NASDAQ:ONVO). It piqued my interest. On September 9, Duncan asked me about the fundamentals, and I bought it. I have buzzed about it a couple of times. Boy has it been a good run! Sometimes you have to take profits just for the sake of taking profits.
I am selling one-half here above 10.00 for a 70% gain in three months. This is what I always loved about the buzz; guys that are smarter than me sharing ideas that I can evaluate on my own and see if they are a fit. I love this stock for the long-term (hence a one-half position sales here), but I also believe in trading around core positions.
I like getting lighter into parabolic moves and buying against quality moving averages. I will look to buy against the 50-day moving average the next time I see it.
Click to enlarge
Hello Minyans -- nothing really new in the world of corporate credit other than it continues to be white-hot. Of course, if an asset class is successful, you can count on Wall Street engineers to repackage it, add some steroids, and resell it; and that's what is happening with Collateralized Debt Obligations (CDOs) i.e. sausages of various debt instruments, which after lagging badly behind its Asset Backed Securities brethren for the last several years, are coming on strong once again.
SIFMA reports that through October, $68B of CDOs were sold vs. $45B in 2012, $11B in 2011, and $3B in 2010. Bubble you say? Maybe not. ABS issuance is clocking at about $180B for 2013, a far cry from the 2007 peak of $290B. (Thanks Prof. Atwater for flagging the site - very handy)
The bottom line is that if you think that demand for corporate credit must be exhausting itself, it just may be the opposite. What's holding it back (if such a description applies) is a LACK OF SUPPLY and of high enough yields. And so buyers are once again flocking to structured products to find both.
Yes, it will end horribly badly once again, worse than '07-'08 (much much worse if you ask me) but, by all evidence, not now, not next month, not next quarter, and probably not for the next few years.
Wednesday, November 13, 2013
The banks still matter as a predictive tell, as they encapsulate many of the macro issues in the marketplace. And high-beta remains a proxy for performance anxiety, as discussed yesterday
. I am watching them in tandem.
I spent a few days in Cuba at the end of last week; it was like stepping in a time-warp back to 1957. When the embargo is lifted--and I think that happens within the next five years -- there are going to be a ton of opportunities there. Unfortunately, many of those seeds have already been planted and cultivated by insiders.
If and when Twitter retraces, I plan to buy it for my long-term account, much the way I bought Facebook
(NASDAQ:FB) at $19 (which I unfortunately treated as a short-term trade). Maybe the trade is to buy Twitter (market cap of $23B) and short Facebook (market cap $114B) on a pairs trade?
As year-end edges closer, emotion will jimmy higher; remember to stick to your knitting regardless of what's going on around us.
Sniffing around the street, I continue to sense that 'flat' is the new 'short.' Prolly for good reason (the bears have been burned every time they've gained a semblance of confidence this year) but worth noting nonetheless.
The Ruby Peck Foundation for Children's Education
will be donating 100% of net proceeds raised through the rest of 2013 to the Typhoon Haiyan Disaster Relief Fund. Every little bit helps so thanks kindly for your consideration.
May peace be with you.
Searching for Resolution
The market appears to be falling from a two-day consolidation off of Friday's key reversal. I would pay less attention to the broader indexes and focus on single issues. We are seeing tech momo generals cool off as money is rotating into the original tech giants Hewlett-Packard
(NASDAQ:INTC), along with another round of buying the nifty 50. This is likely institutional players putting money to work as the perpetual rotation out of the long end of the curve continues.
I have held a bullish bias on the market for the entire year. Though the tape that has traded in a straight direction, you certainly wouldn't say it has been stress-free. The target laid out in the spring was 1780-1820. After the reversal witnessed Friday, I willingly suggest that we saw the high for the year on Thursday. Every move needs confirmation. Bears have not received it all year. Maybe this time is different, and it's the bulls that fail to follow through.
The keys remain the same. Semis look like they want higher. Banks were poised to break out and provide continuation. With Morgan Stanley
(NYSE:MS) at a 52-week high, I wouldn't be shorting the stock. The market tends to find a bottom near Thanksgiving and trade flat to higher into year end. Let the market sort out what it wants to do here. If you are having a profitable year, protect your gains, be opportunistic, and pick spots. Don't press here. My gut has been saying we see rates tick up, metals weaken, and the market begrudgingly move towards a bull market top in the spring. You can have an opinion and a plan, but if the winds change, so must the sails.
Thursday, November 14, 2013
As if out of nowhere, the phrase "income inequality" now seems to be everywhere.
Below is a chart I showed clients last week that highlights how "income inequality" correlates to economic confidence.
Not since the weak economic confidence days of Occupy Wall Street have we seen such a strong surge in "income inequality." As someone who studies the correlations of human behavior with confidence, the connection is not at all surprising. As confidence falls, perceived inequities of all kinds come the surface.
I would be careful to assume, though, that this is just a passing phase. Given that it has been an additional two years of weak confidence since we last saw this phenomenon, we could easily see a movement far more significant than Occupy Wall Street, particularly if mood falls sharply.
While I don't wish for it, given the clear breakdown in correlation between investor confidence and American economic confidence, something akin to Occupy Capitalism would not be at all surprising to me at this point.
Click to enlarge
APA Accelerates From a Big-Base Formation
I entered a 100%-long position in Apache
(NYSE:APA) this morning at 91.33 into strength in the aftermath of yesterday's key-upside reversal day, 88.84-90.89, which triggered new-buy signals in my intermediate-term pattern work.
You can see on the daily chart that APA is starting to accelerate to the upside from a near 2-year base formation, which projects next to 94.00 and to 98.00, thereafter, possibly on the way to 105-110 several months from now.
Only a sudden-downside reversal that breaks and closes beneath 88.85 will compromise my currently constructive outlook.
Click to enlarge
Friday, November 15, 2013
Italy has finally burned off its overbought nature from the rocketship move it had. The dollar had its fun in the sun on that recent spike and is now drifting lower. This allows hot overseas markets to refresh and gain some internal power to move higher on both a dollar basis and a pure basis.
I am adding the iShares MSCI Italy Index ETF
(NYSEARCA:EWI) today to bring the portfolio back up to 80% long. Italy is coming into its 50-day moving average on a beautifully controlled pullback. This type of move usually sets the stage for another leg higher.
Click to enlarge
(10-year future) retraced 50% of its pit session move from the FOMC high and stalls at 126'290. The bull case is not made until we close above. Today's move to 126'290 lines up with the daily chart, which so far is just bear flagging.
Click to enlarge