Buzz on the Street: Around and Around We Go
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
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. Below are some excerpts from this week's Buzz. Click here for a 14 day free trial.
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Monday, January 7, 2013
It's been a lethargic day for the tape--but only the tape--as we meander under the flat line; the bulls will offer that this is a healthy digestion of last-week's hot-popper gains and they're right...as long as S&P (INDEXSP:.INX) 1435 and NDX (INDEXNASDAQ:NDX) 2700 remain underfoot.
Remember, market action (time, price or both) is basing above support and churning below resistance. Through a technical lens, we're in the former camp until proved otherwise, which is why technical analysis is a context than a catalyst; if and when this is no longer the case, the market will already be lower.
I've been busier than a one-arm paper hanger today so lemme recap a recent gold vibe, along with a Minyan Mailbag from Friday. This may be old hat to some--and for that I apologize--but all you can do is the best you can do!
First, the yellow metal...
Check the chart below--the first circle is where Minyanville published The Gold Scold on September 8, 2011--this is not a victory lap; rather another example of the email indicator (we caught all sorts of heat for that one). The second circle is the 200-day moving average, which was recently broken like a bad habit (it tested it again today, and failed).
And now, the Minyan Mailbag...
I began a trial subscription in early December and you wrote about the S&P possibly breaking out and having a quick extension to the 1500's. We had the breakout but you haven't written about this again. Your writings infer you are developing a posture for this year, rather than being a raging bull. I was interested in your present thinking. Thanks, Minyan Jim
Thanks for the email; you are correct that we spied two patterns: If the S&P broke 1435 to the upside, it "worked" (in a pure technical vacuum) to S&P 1520 and if the NDX breached 2700, it "worked" to NDX 2900.
Why am I not a raging bull? Let me count the ways:
1) Between the family health, philanthropic endeavors and business matters on both sides of the new year, I haven't had time to rage in any way, shape or form...except, perhaps, against the machine.
2) While I wrote about the potential breakout -- as well as my sense that the fiscal cliff would be averted, the banks traded great throughout, etc -- I always paint both sides of the fence. In this community, my goal is to provoke the thoughts necessary for better and more informed decision making. From there, that path is for your steps alone.
3) I took the lion's share of my 2012 trading gains off the table into December and played very small given the emotional crosscurrents surrounding the political unknowns. I'll edge back into exposure when I see advantageous risk-reward but my days of performance anxiety passed long ago -- and I have the war wounds to prove it!
4) I'm watching, digesting, feeling, thinking, marinating, absorbing and otherwise assimilating a lot of crosscurrents. That, in and of itself, is a job and a half -- layering risk on top of that, in a public forum, no less -- takes the pressure to another level. It's not that I don't thrive under pressure; it's just that I sometimes prefer to build my (and other people's) investment in Minyanville than look to scalp trades all day.
5) Honestly, I've been exhausted and needed to take a break. Not from the 'Ville -- I'm the Zach Mayo of Minyanville -- just, well, everything, and there's no shame in admitting it's hard, there's only shame in pretending it's not.
Hope you hit it hard and straight, and thanks for the reminder that the aforementioned patterns "work" to S&P 1520 and NDX 1900, respectively.
In other news...
We've got earnings coming up -- before the Austerity Shoe -- and while there is a conditioned complacency (or an ability by the tape to react well to bad news, if you're a bull), my buddy Doug Kass coined a phrase today that warrants a mention -- the "Earnings Cliff." I don't know if it's a cliff or a pothole, but we strive to see both sides in the 'Ville...and now you do.
Fare ye well into the bell!
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Between the Ticks
Going into the mid-November low we noted a number of factors that satisfied a cluster time and price harmonics indicating a significant turning point:
1) The 808 pt range from the March ’09 low to the Sep 2012 high squared mid-November. In other words, 808 was 90 degrees square mid-November. A squaring of the range.
2) From March 2009 to the September 2012 peak was a period of 42 months. On the Square of 9 Wheel, 42 was 90 degrees square of November 20.
3) From the March 6, 2009 low to November 16, 2012 is 1351 days which dies to the closing low of 1353 scored in mid-November.
Now we had a major pullback into December, which ostensibly scored a major higher low above the November low, the first major higher low.
So, the question is whether this first major higher low following the November low was a launching pad that pulled the rubber band back for substantial new highs or nominal new highs.
Was it the beginning of something or the beginning of the end, a buying climax exemplified by the non-confirmation between the DJIA (INDEXDJX:.DJI) and the Transports?
Tuesday, January 8, 2013
Buzz Op-Ed: Nuvasive Outlook
Nuvasive (Nasdaq:NUVA) has been on one heck of a run since late October, but is giving some back in today's session. Is this it for NUVA or is this the buying opportunity bulls have been waiting for? Only time will tell...
The chart below shows what I'll be watching before initiating a position. Nuvasive was first brought to my attention a few weeks ago and appeared extremely bullish at that time. I've been waiting for an opportunity to enter long, but I do find today's early sell volume concerning. The Daily EWave count has NUVA firmly entering the 5th wave to the downside on the reversal from $16.50 recently. If my EWave count is in fact correct, a $6 handle could be in NUVAs future. If it's wrong (I'm a bull and would like to see NUVA go higher) a gap above $17 could materialize in the blink of an eye with its sights set well over $20.
As with any stock in limbo, position size is key. Therefore, I'll look to define my risk with option strangles near the money on low implied volatility.
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Fusion-io DeMark Counts
The DeMark angle on Fusion-IO (NYSE:FIO) is all but bullish. The daily chart shows a break of downside risk level off the Countdown Buy of mid-December, and the weekly price is taking out the TDST Level Down.
We won't know if the break holds or if it is qualified until at least next week.
What Worries Me
In my latest Lead-Lag Report, I noted the stunning strength in Junk Debt (NYSEARCA:JNK) relative to AAA bonds (NYSEARCA:BND), as credit spreads collapse and money continues to chase high yielding investments. While this is normally bullish, one must entertain whether that outperformance could be nearing an extreme phase, which in turn could cause a breakdown in risk assets.
I am very much bullish on equities as our ATAC models used for managing our mutual fund and separate accounts remain positive on the environment in the near-term, but at some point this year there may be a point of reckoning to undo what could be an even more extreme in junk debt yields. This extreme could get resolved in a fast way which would inherently be negative, or gradually, which would be healthy and not necessarily break the stock market. If the former scenario happens, it could be a bad omen for a more nasty correction to come as the Bear Paradox ends, and Nouveaux Bulls rush in.
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Wednesday, January 9, 2013
Yesterday we flagged a move in Netsuite (NYSE:N) in an alert saying it looked like 70 was a magnet.
Note the late pullback yesterday to support, which pulled the rubber band back with today’s gap open telegraphing the agenda.
If you still have a position I would ring the cash register here or use a tight stop.
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Facebook Approaching Target
On November 5th, I posted a chart of Facebook (Nasdaq:FB) outlining an inverted head and shoulder with a range breakout target around 31.50 (chart 1). If you were disciplined and took the breakout (chart 2, current) you will note the precise stall at 61.8% 28.86, followed by today's push above. Now the time has come to start thinking about an exit. The target is still 31.53, but no one ever went broke taking a profit. Sell it when you start feeling really good about the trade, which should be right around now, at least partials.
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Watch the piggies poke lower here--where? There, diagonally! -- as Bank America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan (NYSE:JPM) dip into Red Dye.
And, after trading this complex for 22 years, I would like to remind you that earnings (in this complex more than most) reflect what was rather than what will be (read: it's a rear-view mirror) so keep that in mind as news starts to paint the tape.
BKX 52 is initial support, per the chart below.
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Thursday, January 10, 2013
Burn Baby Burn
Earlier this week in my column on what the headlines are telling us about the markets, I noted that "Few groups respond to changes in social mood like banking regulators."
To that point, I'd note the following chart offered by David Wessel in his Capital column in this morning's Wall Street Journal. Better than any chart I could have created, his chart says it all.
But where Mr. Wessel suggests that Mario Draghi's words last July "may be the most successful central-bank verbal intervention in history, let me instead offer that as a socionomist, all Mr. Draghi did is what policymakers have done for thousands of years, he blew on a smoldering fire that was already set to explode into flames.
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Emerging Markets ETF Conslidating Before Another Upleg
During the first 5 sessions of 2013, the iShares MSCI Emerging Markets Index (NYSEARCA:EEM) made a marginal new 15-month high at 45.33.
It then declined 2.8% from the upper resistance line to the lower support line of the Nov-Jan bullish-price channel at 44.08 where the EEM turned higher today.
As long as the EEM holds support above 444.00-43.80 on a closing basis, my work argues for another upleg that hurdles and sustains above new multi-year highs on the way to 47.30/70.
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Friday, January 11, 2013
Citi Economic Surprise Index
In our good friend Mark Dow's recent blog post he pointed out that the Citigroup Economic Surprise index was beginning to take a major turn.
A bit of expectations catching up to reality? Or high investor confidence causing expectations to overshoot reality. See the chart below.
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Best Buy Rockets on Holiday Sales Report
Last week, I mentioned that Best Buy's (NYSE:BBY) holiday sales report was coming this week, saying the following:
"There is significant upside risk as expectations are extraordinarily low, and in the case that Best Buy actually reports strong numbers, it raises both sentiment towards earnings as well as the market's perception that a takeover will happen -- if sales stabilize, it's more likely to get taken over, right?.
Of course, that works on the downside as well -- if Best Buy whiffs, the stock might drop on the expectations that Schulze will either want to really lowball on price or walk away altogether.
So ahead of this event, I plan on liquidating the $10 puts, and I'm eyeballing the $12 straddle, which at the current price of $1.26 implies a roughly 10% move, which seems possible."
SLAP ME! The stock's up nearly 13% and that $12 straddle's now going for about $1.83, meaning a 45% gain that I'm NOT sitting on right now, though I did make a very small profit on the puts I was short.
This proves a recurring theme of mine -- my best trading ideas are the ones I don't execute.
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