Buzz on the Street: All Eyes on 'Moment of Truth' in S&P 500
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
These articles were originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.
Here is a small sampling of the 120+ posts seen on the Buzz & Banter this week:
Monday, February 24, 2014
The following is an example of an intraday alert sent to subscribers of the Daily Market Report [subscription required].
3D Systems (NYSE:DDD) was a short idea from the weekend stock report [subscription required] based on Friday's Lizard sell signal (a 10-day high with an open or close at or near session lows following a run-up) or Topping Tail.
Interestingly, 3D Systems was under pressure during the last 30 minutes on Friday in front of this morning's downgrade.
Friday's 10-minute chart left a little intraday Head & Shoulders topping pattern. Checking a 30-minute chart for the last week shows a larger possible Head & Shoulders with a projection to around 68.50ish.
This ties to a 50% retrace of the recent snapback to the 50 DMA.
The presumption is that the first bounce from this morning's opening plunge offered a good risk-to-reward short setup.
Below, see a 10-minute 3D Systems chart, a 30-minute 3D Systems chart, and a daily 3D Systems chart.
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Tuesday, February 25, 2014
We touched on the "moment of truth" [subscription required] yesterday as the S&P (INDEXSP:INX) tickled 1850, and that carries over into Turnaround Tuesday. I continue to sense that a lot of traders bought into the breakout, so the longer we remain under that level, the more likely an "off-sides" becomes.
Why does this level matter so much? Check the chart below. A push through 1850 "works" through a pure technical lens toward the S&P 1960s, and every technician in the world is watching that.
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Watch the banks. KBW Bank Index (INDEXSP:BKX) 71.50 is the technical level of lore, but a positive tone would go a long way to achieving the above bullet.
A scathing article about Bill Gross from PIMCO this morning in The Journal, although perhaps not surprising from someone wielding that much power. Losing Mo was a blow to the firm, in my view.
We flagged the Russell 2000 (INDEXRUSSELL:RUT) yesterday [subscription required] as it attempted to push through the January high, which also happens to be an all-time high. Sure enough, the bears whack-a-moled the small caps, creating a potentially bearish double top. RUT 1182ish is the level to watch, per the chart below.
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I learned a long time ago to "let your first sale be your worst sale," and it's served me in good stead.
Twitter (NYSE:TWTR) acted funky all session yesterday and continues to under perform today. I don't have a story, but I have my eyes.
Wednesday, February 26, 2014
Kinda, Sorta, Maybe
For the time being, there is more concern about what a "highly accommodative" monetary policy, with the federal funds rate near zero for more than five years and asset purchases still swelling bank reserves, might mean for risk-taking and financial stability than about what it might mean for wages and prices.
This is the heart and soul of the monetary policy debate in one clear statement. How "accommodative" is policy when LSAP activity is gone? How will "risk taking and financial stability" be affected by the adjustment? If, as many pedestrian commentators have opined, the market is only up because of QE, then it "might mean" something awful.
On the other hand, if (and members know we lean this way) LOW does not equate to "EASY" then the consequences of adjustment filter to an already anemic recovery quickly. The data cluster from the recent market activity is too clouded by year end, EM hot money, and weather to say for sure. The second quarter shapes up to be a big gateway to the path ahead. We are already seeing evidence that money is chasing some "stuff" other than financial assets. This may, may not, or probably isn't "inflation" but certainly changes the narrative.
Unlike prior easy money experiments - oh, say Greenspan - that tolerated financial institution growth and financial asset kiting with underlying GDP growth and low unemployment, the QE era has seen tons of the former and little of the latter. Sometime, in dark quiet moments alone, a Bond King may realize he was just lucky to coincide a career with a secular disinflation. The fighting in the Kingdom is a sign the times are changing.
Thus, Mr. Plosser sizes up the money question perfectly: Without LSAP, how accommodative is monetary policy? More importantly, how will we know before its too late?
Thursday, February 27, 2014
The Narrative Fallacy of Buy and Hold
Stocks have ripped higher since the January correction in the US with the Russell 2000 (INDEXRUSSELL:RUT) and iShares Russell 2000 Index (NYSEARCA:IWM) both having one helluva run. These continuous "V" formations have emboldened the "buy and hold" crowd, but oddly enough, it appears buy and hold only matters for US equities. Very few are even considering the possibility that emerging markets are likely a better buy and hold investment now given valuations and crisis pricing. It is completely illogical to argue that buy-and-hold only works for US stocks, when emerging markets are stocks as well. The narrative fallacy is fitting a story to what price is doing after price has always moved. While no one knows the exact day or time when emerging markets will have a melt-up, we are undeniably getting closer and closer. If you're a trader, maybe you are better off positioning into US momentum spurts. If you are a believer in buy-and-hold, then hold on and ask yourself what makes the most sense.
Friday, February 28, 2014
Bitcoin Exchange Mt. Gox Files for Bankruptcy Protection
This morning, Bitcoin Exchange Mt. Gox filed for bankruptcy protection in Japan after "losing" 750,000 customer Bitcoins worth over $400 million.
Confidence in virtual currencies is going to take a hit.
Ardent Bitcoin bulls are defending the concept, saying that this was a Mt. Gox problem and not a Bitcoin problem.
However, if there is a problem with confidence in safe storage, then there is inherently a problem with what needs to be stored -- ESPECIALLY with something as valuable as a cash equivalent.
And think about things from hackers' point of view: Bitcoin is completely virtual, geographically dispersed, and unregulated.
If you hack a US bank, you have to worry about the FBI. If you counterfeit the US dollar, you have to worry about the Secret Service. If you hack Bitcoin, who's coming for you?
Federal prosecutors want to crack down on people using Bitcoin for illegal activities like drug trafficking, but who's responsible for actually enforcing the safety of Bitcoins?
Let's say JPMorgan (NYSE:JPM) got hacked and $400 million went missing. Someone would cover the loss, whether it's the FDIC, SIPC, or JPMorgan itself.
So what's the answer to problems like this?
One could argue that it's government intervention and regulation -- exactly the kind of entanglements from which Bitcoin is supposed to be free.
Now, I don't think Bitcoin should be shut down, provided people understand the risks. Virtual currencies are nothing if not an interesting economic experiment, and they serve as an interesting model for purely digital market-based financial systems free of conventional bureaucracies.
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