Buzz on the Street: The Futility of Utility Stocks
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
Here is a small sampling of this week's activity in the Buzz.
Monday, May 20, 2013
News From the Front
They sure do make em honest down in Texas. I watched the interviews with Richard Fisher this morning on CNBC and they were rather enlightening. The key takeaway, even from the most realistic and honest person on the FOMC, is that we can't cut back too sharply on purchases as it would be too much of a shock for markets.
Supposedly there was chatter or strategist comments going around earlier today that Bernanke would hit favorably on the tapering subject at Wednesday's testimony. I don't have any confirmation for either so please take it as only opinion. This was said to be a catalyst for today's reversal in Treasuries. Personally, Bernanke has never been one to give away much at Congressional testimonies. MBS have also been getting scorched, but I imagine the Fisher comments this morning aren't helping. Fannie 2.5's are +2.2 to Treasuries.
1-800-GET-ME-IN is still lit up with SPDR S&P 500 ETF(INDEXSP:.INX) 1670 and Russell 2000 (INDEXRUSSELL:RUT) 1000 in the rear view mirror. As my dad would have said if he were here today "when they call, I will answer, and most certainly sell to them."
For what it's worth, general repo collateral rates have trended down throughout the month along with Fed Funds rate. General collateral is now down to 3bps from 21bps at the end of last year. This is similar to prior LSAP programs where securities used for collateral becomes tight. You can see a graphical representation of the number of bonds borrowed from the SOMA account below. Oddly enough, the problem persists of not enough high quality collateral.
Speaking of low rates, 4-week bill sizes have gone back up to $45 billion from the $20 billion that it was over the last three weeks. Maybe that might help the situation of tight collateral some.
Ok, something that's not monetary policy related. Solar name Real Good Solar (NASDAQ:RSOL) has turned over its entire float today, for the second day in a row and is now going completely parabolic.
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The Good, the Bad, and the Ugly
Big Board Breadth is 2:1 positive (update: 9:5).
M&A activitiy is upticking, be it Yahoo (NASDAQ:YHOO) in tech or Actavis (NYSE:ACT), in the specialty drug sector.
Banks are elevated to levels last seen in 2008.
All-time highs, everywhere you look; trend followers and momentum players are feeding on the frenzy, which will work (until it doesn't)
The chasm between commodities and stocks, which has most certainly mattered in the past.
The chasm between the stock market rally and a legitimate economic recovery.
Massive amounts of short covering, which removes a forward layer of demand.
Social mood vs. risk appetites, the haves vs. have nots, Main Street vs. Wall Street.
The NASDAQ-100 (INDEXNASDAQ:NDX) just flipped the downside switch, despite strength in Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG).
My recent feel for the tape (since discussing my performance; this is the second year in a row this has happened, and it will be the last time).
Charlie's Angels Sell Signal in GMCR
Green Mountain Coffee (NASDAQ:GMCR) looks set to leave a Charlie's Angels sell setup…3 Tails (in this case, Topping Tails) in close proximity.
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Tuesday, May 21, 2013
One stock in focus is Cisco (NASDAQ:CSCO) and its behavior after the post earnings jump and consolidation. The best tool for analyzing that progress is volume profile. Note that on the day that followed the earnings release, the VAL (value area low) was at 23.55. That is the line in the sand in terms of either retracing or not into the empty volume "hole" of after-hours earnings release squeeze.
The profile shape is a "P", indicative of short covering, so it behooves bulls to show that they have fresh buyers coming in and holding the break. So far, that is the case, with three days of consolidation. But today, we have a slightly bearish pattern, which is losing yesterday's VAL at 23.79 (current resistance to the tick as I type). The low is 23.59, the first real retest of the 5/16 VAL of 23.55. If long the stock, you want to set alerts at that level. If short the stock, 24.23, 5/17 VAH is your line in the sand.
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"They were symbols of a new, more structured way of thinking about investing. But as times change, so do the investing paradigms that capture the essential issues and challenges of those times. In that spirit, Paul Samuelson was right to insist that we speak and write about operationally meaningful theorems in understandable ways. In the institutional investing world, today's essential issues revolve around delivering sustainable wealth creation and post-work income security for real people in an aging slower-growth world. Alphas and Betas are only useful concepts to the degree they help deliver these outcomes."
And so wrote Kurt Ambachtsheer, author of The Ambachtsheer Letter. That quote was sent to me by a portfolio manager whose interest was piqued by reference to Alpha and Beta in yesterday's discussion of Rich Bernstein and his comments that, "We are beta managers, not alpha managers because correct asset allocation is the key to outperformance in the markets." I don't know a lot about Alpha or Beta, but I have always attempted to, "Speak and write about operationally meaningful theorems in understandable ways."
Take yesterday's letter where I wrote, "Over the past 40 years the leading space for stock performance has come from 'dividend growth' stocks, with 'dividend payers' being the second best performing group." And "dividend paying" stocks led the market higher in 1Q13, but that has changed in 2Q. So far the S&P 500 is better by almost 7% for 2Q13, but this time it is not "dividend payers" that are leading the charge. Indeed, the leading group appears to have been the stocks with the highest "short interest" ratios.
Recall my report of a number of weeks ago with the quote, "He who sell was isn't hisin, must buy it back or go to prison." This is obviously an old market "saw" that has stood the test of time; and, it seems be to playing again in the current quarter. Unsurprisingly, these stocks are poorly rated by Wall Street analysts and possess sketchy fundamentals. Still, it appears the stock market's strength is causing the short sellers to cover their short positions and buy back those "shorted" shares.
Unfortunately, this is the kind of action that tends to occur toward the ending of a rally. I have also said that the stock market's daily energy level is extremely low and the SPX could pause before resuming its up move toward my 1700 price target into the end of the quarter. Verily, last Friday the SPX punched through 1660, and stayed there, but it is difficult for stocks to extend on that move with its daily internal energy so low. Therefore, expect the SPX to stall the balance of this week as it re-energizes its internal energy for another attempt to rally toward the 1700 level into the end of the quarter. Still, if the SPX can stay above 1660, the short sellers should panic, and continue to "buy" into quarter's end ...
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