Buzz on the Street: This Bull Is Half Honey Badger, Half Terminator
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
Wednesday, May 15, 2013
Long-Favored SunPower Breaking 52-Week Highs, Another Short Squeeze?
My long favored number-one name in solar, SunPower (NASDAQ:SPWR), is finally acting like a top stock should and is breaking to a fresh 52-week high as well as challenging multi-year highs. While the froth in the group is evident, I am still respecting price action and think this name could set up as yet another Tesla (NASDAQ:TSLA)/Netflix (NASDAQ:NFLX)-type short squeeze. I've already bought and sold this one once today (trading around my core position) but am now contemplating and will likely be employing a buy stop strategy (rinse and repeat) as I think it will see numerous breaks into fresh highs in the coming days/weeks.
MEMC Electronics (NYSE:WFR) could also see a similar short squeeze but the % of float short is much higher with SPWR, and the machines can run this one with much more ease in my view.
Bull Market Behavior
Buyers in this market have been waiting for bears to sell, and then they come in after lunch and push everything higher. In told, this was a regular occurrence during the summer months in 1987 -- so how many bears just perked up in their chairs?
If you want to look for exhaustion, then we need to see a bid at the open and they take them into the lunch hour, and then jam it into the close. If we start seeing this, then we know hope has been given up and they want to own them. A few days of this and that would get me concerned. A 4-7 handle drift and then consolidate, which we have seen the last 75 handles, says nothing of bearishness.
Much of this change in posture the market rotated out of over the past 75 days will go unrecognized by the crowd. They are stuck pointing at a top they called 2 or 3 years ago based on similar metrics. Every metric has a life span and this action looks like 2004-2006. You could walk in and buy a. 2-3 handle dip in Google (NASDAQ:GOOG) and kick it out by the bell. Rise and repeat and it worked 3 out of 5 days a week. I would reference the mid-1990's or early 1980's price action, but needless to say I was not trading stocks at that time.
A crude short looks attractive. The bond short is still attractive, today's gap up was a good opportunity to fade TLT. The dollar long trade is another one in its infancy.
Long-Term Vs. Short-Term
The honey badger stock market continues to disregard any weak economic data, pushing higher today with leadership in defensive sectors like utilities, consumer staples, and health care. Indeed, markets have rallied in the face of their outperformance, which is historically unusual, but I still think that it is important for dividend-paying stocks to meaningfully and persistently underperform for a real long-term uptrend in stocks to take place.
Cyclicals remains comparatively cheap and oversold, but by the same token, the last 7 days have been extreme in dividend sector weakness. I would not be surprised at all to see some strength kick back into low beta-sectors. For a real move to take place in cyclicals, which have badly lagged this year, the longer-term direction in dividend stocks relative to the S&P 500 should go lower.
Thursday, May 16, 2013
Monday, May 20 is 90 degrees square 130.50.
So, a test/undercut of the presumed selling climax on April 15 in gold (NYSEARCA:GLD) may be playing out as the volume at that time dwarfs anything we've seen this year.
Once again, I would look to be a scale-in buyer near 130 GLD.
See GLD daily for 2013 with volume here:
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Just a quick observation: I was struck by the number of comments I saw this morning using the term "melt up" but in the future tense - that is to say the melt up is yet ahead of us, not behind us.
Market tops and bottoms are moments of extreme extrapolation. What is good or bad now will only get more intense from here.
That so many pundits are suggesting that we are only in early 1999 now with the real momentum yet to come gives me pause, particularly as many of these same pundits were talking about the markets two weeks ago as if we were in 1994.
Was That the Bottom in Bonds
Weak economic data continues to suggest that the bond market is (still) much more right than the stock market, as yields on longer-duration Treasuries fall after declining very hard for the past two weeks.
The honey badger stock market continues not to care, however, as many intermarket trends remains out of sync. Defensive sectors are now very oversold themselves as money begins rotating into more cyclical trades. The US Dollar remains an important issue to watch.
Should the recent surge reverse, commodities and emerging markets will likely catch a strong bid. However, the Fed has let the cat out of the bag as far as a potential end to QE, complicating the overseas trade. Within bonds, Treasury Inflation Protected Securities appear to be a good play for now.
Friday, May 17, 2013
Inflationary Pressures Are More Wishful Thinking Than Reality
A quick screenshot of a random assortment of commodities shows virtually all are down this quarter-to-date. (see chart 1)
So inflation isn't coming from commodities.
In spite of the "great" NFP data release, we aren't seeing real wage inflation pressures. (see chart 2)
The average YoY change in hourly earnings is under 2% and has come down from some signs of life early in the year. This comes from that "great" NFP report, which frankly was really only okay and mostly reduced fears that the job market had been falling off a cliff, rather than showing any real "jump for joy" strength.
They were not bad numbers, but they were also nothing out of the ordinary for the past 3 years, so it would be surprising if wage inflation was suddenly a material concern at the Fed or for the markets. The markets are almost desperate to have wage inflation, but it doesn't seem real.
This leaves housing inflation, which is real. That area is doing well, and at 40% of the CPI, it is important, but it has less influence on the Fed's favorite measure and will struggle to stoke inflation fears by itself. Without wage inflation (still hard to get with so many people around the globe willing to work at a fraction of the price) and commodity inflation, the "inflationary" pressures seem more wishful thinking by the "growth" crowd than reality. Growth and Inflation may be less correlated than many realize.
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Tesla and the Principle of Tests
In keeping with the Principle of Tests, yesterday Tesla tested Wednesday's large-range reversal and turned its dailies down today.
It's worth noting that following an ORB this morning (a downside break of the first ½ hours range), TSLA squeezed higher before the real directional bias reared its head.
Stocks have their own personality and TSLA has the squeezage issue down pat.
The behavior following this turn down on the dailies after a test of the signal reversal bar will be important to watch for clues as to the stock's position.
See daily TSLA from April and 10 minute for today here:
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