Buzz on the Street: The Wild, the Innocent, and the 200-Day Shuffle
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, November 12, 2012
After twelve days of borderline Biblical living conditions, power was restored to our home on Long Island on Saturday night.
While yesterday it felt like the previous two weeks were a bad dream--life was seemingly normal again; the weather was superb, our Peewee football team finished the season undefeated and the Raiders got creamed--I'm all too aware that any sort of celebration would be in extremely poor taste. There is still a slew of suffering on the east coast, which is why we're directing the proceeds from this year's Festivus to benefit educational efforts surrounding children impacted by Hurricane Sandy. Click here to register; it's a rocking good time!
Turning our attention to the tape....
I had breakfast this morning with Frank Boulben, the CMO of Research In Motion (Nasdaq:RIMM). As Minyans already know, I've been trading this stock from the long side (buying dips to sell blips) for the last year, sometimes successfully (catching a 40% move higher last December) and sometimes not so much (getting stopped out for a flat trade a few weeks ago, missing the latest 40% rally).
While I'm compelled to disclose that there may be a commercial relationship in our future, I will also share that I got a sneak preview of the BB10 operating system (which will launch on January 30, per the press release this morning) and it blew me away. This isn't your father's BlackBerry; it's completely revamped, extremely user-friendly and it has numerous features that can't found anywhere else.
As discussed before -- when the stock was trading at six and change -- my sense is that this puppy sees double-digits into the launch. The timing of said launch -- January 30 -- helps cement that sense as this stock lost ground in 2012 and fund managers may purge it from their sheets into year-end, much like last year. The "easy" trade, from my perch, is the move into the launch, but that may only be the beginning of the rebirth.
Away from that individual play--in which I have no position, at present--we are sitting on some pretty serious levels as we power up for another five-session set.
With last week's election drama in the rear-view -- we mapped it in the 'Ville, lest you missed it -- the two top-line topics on the lips of money managers are the Fiscal Cliff and Greece, both of which had on-the-margin positive news over the weekend. The agenda not on their lips, but very much in their minds, is the percolating performance anxiety and I will again say that the buyers are higher and the sellers are lower.
S&P 1380 (the 200-day) is the level to watch (it should hold the first test) while the "lower highs" (technically negative) remain in play in the Semiconductors (INDEXNASDAQ:SOX), Banks (INDEXDJX:BKX), and the Nasdaq (INDEXNASDAQ:.IXIC). With regard to that latter matter -- the tech tape -- Apple (Nasdaq:AAPL) continues to lead that complex, as discussed Friday morning on the Buzz when the stock was trading in the $535-540 range:
Apple (AAPL) is down 24% from it's 2012 high two months ago, almost in a straight line. For those of you looking for a Snapper---which could then feed into upside performance anxiety--this is setting up as a decent risk-reward with a stop below $530, per the chart below.
The 200-day for Apple is $594, which corresponds to the 200-day in the NDX at 2664 (2.5% higher). Thus, IF (big if) the S&P holds this zone, a rally back to the 200-day moving averages in Apple, and by extension the NDX, may be the forward-looking trade (before further slippage). See both sides, define your risk and remember that discipline must always trump conviction.
Good luck today.
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NBG, Yeah You Know What That Means
News coming out on Greece with wranglings over the restructing program has continued to push the National Bank of Greece (NYSE:NBG) lower and lower. In the beginning of the year, Greece grabbed headlines as fears of a Eurozone breakup were rising. On a number of occasions back then, I argued Greece did not matter, largely because reflationary behavior was underway in markets and because it seemed everyone was focused on it. Now, no one seems to care about Greece because everyone is focused on the next 4 years under Obama and the Fiscal Cliff. It is rare that what is directly in front of you is most dangerous. Rather, it is that which is in the corner of your eye which can make you most vulnerable to a negative surprise.
With the complete collapse in Greek stocks, collapse in Treasury bond yields, and collapse in Eurozone attention, I suspect the real surprise is not what happens here at home but what happens in Europe once again. Tread carefully here - our ATAC models used for managing our mutual fund and separate accounts remain out of equities until conditions improve in risk sentiment based on intermarket analysis.
Two Sides of the Shining
Gold (NYSE:GLD) exploded through its 200 dma in the summer and recently pulled back toward the 200 and the prior pivot.
If we're going off the fiscal cliff, then the dollar is going south and gold is likely going higher and the pattern going into next year may be a bullish big picture Cup & Handle.
If we're not going off the fiscal cliff then gold may have carved out a double top in 2012.
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Tuesday, November 13, 2012
Market Staging an Early Bid for Turnaround Tuesday
As the futures were down double digits, I saw multiple reversals being put in. I don't view this as a lasting bottom at the moment. With a 60 minute close above the 1385 area on the S&P 500 (^GSPC), we should see a bounce into 1400-1405. I am viewing this as an area to short.
There is a lot of chatter on the fiscal cliff. Many are complacent on the topic, again putting faith in Washington to see the warning signs of dealing with an urgent debate or kicking the can one more time. This time could be different. There is a sense of panic in Washington as many are licking their wounds from the election and lucky to be still afloat. The hope is that everyone slides to the middle. But we can't place capital on hope.
I sent an email out to a few friends in the trading community last week suggesting the coming fiscal cliff is shaping up like August 2011, with regard to the debt ceiling debacle. Let me remind you as I did last August. When Congress vetoed TARP on the first vote, the Dow (^DJI) dropped nearly 1,000 points. Yes, there is a large amount of fear being built up. If the talking heads come together this market will experience a rip your face off short covering rally. If not, it's the same old bump and grind.
Important Spot for Natty, MLP Stops the Bleeding, German Chatter
Natural gas broke through two levels of resistance this morning, and has put the downtrend in jeopardy. If we hold this level throughout the rest of the day and the inventory level on Thursday shows the demand growth as expected, futures could be on a beeline towards $4. Before today, I thought that the effects of Hurricane Sandy and the cold front that was behind it would have a bigger effect on the price, but today seems to be the day to factor that in.
MLP's such as Prudhoe Bay (NYSE:BPT) and LINE Energy (Nasdaq:LINE) have been under considerable pressure since the presidential election culminated last Tuesday. I don't have anything extraordinary to add, but the bleeding appears to have slowed today after taking a 7%+ pounding.
German Finance Minister Schaeuble said earlier that Germany considering paying out all three tranches of aid to Greece at once, echoing the headline from the German newspaper Bild this morning, saying a similar thing. The rub is that they need a "control mechanism" to control the payout. This essentially reads like, controlling the payouts so they don't spend it all in one place. Again, I'll point out that the EU and Germany are attempting to limit the opportunities for the German parliament to veto something.
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ES View: Short-Term Bullish
We are short-term bullish in the ES (SP futures) 1369 area.
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Wednesday, November 14, 2012
Honey, I Shrunk the Spreads
Spreads on the Credit Default Swaps of large US financial institutions have dropped like stones over the last 30 minutes. JPMorgan's (NYSE:JPM) and Merrill Lynch (yes, it's still out there) are testing multi-month lows, and approaching some multi-year support trendlines. Because of the incestuous relationships of financials' balance sheets to their businesses, there is a very tight inverse correlation between CDS spreads and the underlying stocks. So, while the fiscal cliff has everyone on edge, the "gorillas" betting against these financials seem to be getting nervous. The chart of the SPDRs Financials ETF (NYSE:XLF) doesn't look so hot so I'm hesitant to get long. But fighting the obvious improvements in the CDS is a tough way to make money. An alternative to consider if the XLF inches closer to $15 is a risk-reversal (buying calls / selling puts).
Research In Motion
Todd has sparked my interest in Research In Motion (Nasdaq:RIMM), and I decided to take a look at some charts. When I first approach an issue, the first thing I look at is a weekly chart. Score one and a big one for the bulls (chart 1). The stock is now closing above its 20 weekly ma (now at 7.58) for the 1st time since February 2011. We have had head fake moves above that key long term average before (notably in late 2010), but the big difference now is volume. For the week of September 24, note the huge volume bar at lows, often a strong indication of capitulation.
Next up in the long term charts comes YTD volume profile (chart 2). There too, things are getting interesting. Note the bumping along VAL (value area low) at 6.22 with a strong volume nudge on 9/28 pushing up above the POC (point of control) at 7.62 (these levels are dynamic, obviously). Not surprisingly, that is exactly where the 20 weekly sma resides, give or take a couple of ticks. This confirms the tremendous forces applied to that area, validating the nudge above, which so far we are holding. Score 2 for the bulls.
Closer to home, charting the hourly volume profile since September (chart 3), another confirmation is given with the critical VAL of 9/27, which of course is right above that famous 20 weekly ma. The key level to hold is 7.62, in order to preserve that strong push of late September. So far so good. My guess is that the test already succeeded in late October and we are now trading above the VAH of that key day, at 8.06, which happens to be exactly were weekly S2 is located, a level that was bought to the tick on 11/9. There are no random numbers in the stock market.
Conclusion: we have a potential long term reversal for RIMM still in its infancy, as long as we hold the 7.50 area on a weekly closing basis. Minimum upside price target is around 13.50, which is 60% higher from here.
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Thursday, November 15, 2012
Two Quick Observations
by Peter Atwater
First, it feels like there are a lot of "buy the bottom I feel a short covering rally coming" comments out there this morning. While the markets are oversold, bottoms don't bring with them the belief that THE bottom is in.
Second, there seem to be a lot of frustrated gold bulls out there who are scratching their heads now wondering why gold isn't doing what they thought it would during a big sell off. As I offer in "Moods and Markets" one of the things that bothered me about the peak in gold last year was that in the months leading up to it, I saw the exchanges and many banks willing to take gold as margin for other transactions. This mirrored what I saw in the home equity space right near the peak of the mortgage markets.
From my perspective, the problem with folks using gold as collateral for other things is that it correlated gold to other financial assets instead of leaving it uncorrelated, which most gold investors believe.
Not sure where this will head, but with GLD holding the second or third largest position in gold in the world, I would offer that the benefits of liquidity on the way in may be subject to the consequences of liquidity on the way out.
To be clear, I don't have any dog in the gold hunt bullish or bearish.
by Janice Dorn
Friday's options expiration is on the approach as is the ES (SP futures) mid-round at 1350, which gave us a good hard move to the upside on the last go-around when the contract last dropped down below 1400. ES is now down 104 points off of the 2012 high and yesterday gave us the first close below the 200-day moving average as well as the -2.5 lower Bollinger band, -2.5 standard deviations below the 50-day moving average.
The contract has now completely traversed the +2.5 Bollinger band (1468) to the -2.5 Bollinger band (1362). We are still looking for a sizable short-covering move in the short-term (days).
by Peter Prudden
Loose hands are being shaken, while dip buyers are testing the waters. When looking at the $NYMO for a potential oversold and extended low, this is what you need to do.
First we find an exaggerated fear low in the -100 to -120 area, here now. Next we look for a bounce, along with broader market price, forth coming. From there this is what you need to identify, a positive divergence between the oscillator (NYMO) and broader market price (SPX). You need to see the oscillator make a higher high while the market makes a lower low in the price. Then we know the tradable bottom is in place. Until then, this is noise and bottom feeders being early.
Looking at the Fibonacci retracement from the June 2012 low to the September 2012 high, we can identify SPX 1346 (61.8% retracement) as an important juncture for bulls to support. Again, as I stated yesterday, the Feb. and July 2011 highs should come into act as support (SPX 1338-1348). Once we have a trading bottom in place, this should come in short order as % bulls is sitting in the single digits, much like it did at the June 2012 bottom. Look for a rally back to the 1408-1412 area for an A wave, followed by another decline to a slightly lower low for a B wave that would set up an intermediate term set of bullish divergences for a C of B rally to correct the entire decline from the September high. That will be a buy for a month or so, and the resulting high would set up a big sell for a C wave down that should last a large portion of 2013.
We will identify that juncture once our path has more clarity. Chin up, Festivus is only a few weeks away!
Friday, November 16, 2012
Drink the Sand
by Michael Sedacca
First off, I wanted to point out that breadth was 3:1 negative this morning (and worse) before using up a lot of energy to get back to flat. Now we're giving that back. The reason for the rally was Pelosi, Boehner, and Reid came on TV with the "all clear" sign. It reminds me of a quote from the Hunt for Red October:
Jeffrey Pelt: Listen, I'm a politician which means I'm a cheat and a liar, and when I'm not kissing babies I'm stealing their lollipops. But it also means I keep my options open.
Or as Professor Branden Rife just pinged me with: "The market feels like it will drink sand if there is no water. We are at the mercy of US political PR."
mREIT's, namely Annaly Capital (NLY) are rebounding some today after catching an upgrade from Wells Fargo this morning. I think this falls in the "too late to short, too early to get long" category for the time being. This is also taking place in a number of closed end bond funds that have been utterly demolished. However, I'd point out similar type of action took place last October, so it's still touchy for now.
High Yield Spreads
by Fil Zucchi
I'm not making light of the carnage in equities. As bearish as I was on Apple (AAPL) pre-earnings, I am on record that I thought $530 was the downside target. As they say, "been there done that".
On the other hand, parallels to the beginning of a repeat of 2008-'09 just don't rhyme in my humble opinion. The credit measures I outlined in this article are still exceedingly benign with the corporate bond market absorbing new bonds at a truly bizarre pace, and the cherry is this chart showing the spreads for high yield bonds from Jan '08 to the end of October. "Abyss" is the only way to describe the difference between the two backdrops.
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The State of the Onion
by Peter Atwater
Some of the reviewers of "Moods and Markets" have questioned how you use the principles of socionomics in real time. Let me give you a live example.
So far this morning I have seen 5 articles on secessionism and the following cartoon was on the editorial page of my local paper.
Thoughts of secessionism definitely don't happen in bull markets and the fact that they are now abundant suggest to me that we are getting near a significant bottom. Why? Because secessionism reflects an extreme view of "Me, Here, Now" self-interest.
Based on the past, I expect that we will see some kind of market bottom over the next 2-3 trading sessions. And if you see CNBC announce a market special, you know we are getting very close. Back in June the network called the equity market bottom with a special and they did the same thing in the ag space with their drought special the first week of August.
The media doesn't make mood, they reflect it. Watch what they focus on and they will tell you the direction of the markets.
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