Buzz on the Street: Feel the Heat, Burning You Up, Ready or Not!
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.
Here is a small sampling of this week's activity in the Buzz.
Monday, April 1, 2013
Bring It Home Buzz
It's a quiet riot to start the second quarter, or that's how it sounds at MVHQ given we've yet to hook the TV up at our new digs. Being alone with your thoughts can be a dangerous thing when trading the tape -- which, I suppose, is precisely why we started Minyanville (so none of us would be alone when it comes to proactive risk management decisions.
Some top-line observations? Sure! In no particular order...
I've only got six (out of eight) screens working today; I wonder if that makes me 25% less productive or 25% more focused?
I haven't touched my BlackBerry (NASDAQ:BBRY) position yet; it was light to begin with and I thought I would have had an opportunity to buy it lower (after the post-earnings reversal last week). Either way, I will force myself to make some disciplined sales as the mechanics of the swing always trump the results of that at-bat.
Ditto the S&P SPDR (NYSEARCA:SPY) short the other way, the 5% round-up this morning notwithstanding (I currently have 25% of a full position). While I'm inclined to keep this as a basis (and add on rallies toward S&P (INDEXSP:.INX) 1580), I will trade it as a function of time and price. In other words, if we see slippage into the close, I will likely peel out of some risk to keep the mechanics in good standing.
My wife and I had an agreement that if Syracuse and Michigan got to The Final Four, we would take a road trip together. They play each other Saturday night but given we'll be in Atlanta the following weekend for The Social Mood Conference, she gave me the hall pass to attend with some buddies. That's love.
Speaking of social mood, the "tricky tri-fecta" of societal acrimony, social unrest and geopolitical conflict continues to be an unintended consequence of policy gone awry. It takes time to play out, mind you, and perhaps that's why I'm not surprised to read about tensions rising in North Korea or buttons being pushed in the Middle East. It's not something one would wish for but if wishes were knishes, I'd weigh 300 lbs.
Matt Flynn? Really?
Market breadth is 2:1 negative (noted), the semis, small caps and banks (to a lesser degree) are under-performing and there is a decidedly drifty tone to today's price action. Sounds like a recipe for trading a little "in between," which is what I'll do as soon as I hit the send button on this Buzz.
Fare ye well into the bell, and have an excellent Monday night.
GasStar Lighting Up
Last Tuesday, I recommended GasStar (NYSE:GST) as a speculative shale play for those with strong stomachs. This morning shares are nearing my first target of $2.00 (high $1.94 at time of writing). Although I'm still bullish on this name (and energy in general), rules are rules and 17% in 5 sessions is nothing to scoff. Small/Micro Cap names with momentum/rising buy volume don't usually obey trends in the larger market, but this morning's ISM and (more importantly) the market's ability to sell off without a quick V shaped rebound has me queasy.
I'm getting juju from fellow traders that there may only be another 1% - 2% upside here in the S&P 500 (INDEXSP:.INX). We may indeed get close to 1600 before culmination of this incredible bull run from December, but anecdotal sentiment tells me the pop will be sold into.
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Connecting the Dots -- Louisiana Crude Contracts & Japan's LNG futures
Please find an interesting article that I came across on the CME Group site regarding the pick-up in volumes of the Louisiana Light Sweet (LLS) contracts.
The LLS-WTI and Brent-WTI spreads are already compressing in 2014, with LLS-WTI showing a far greater compression, in anticipation of the supply of WTI crude to the US gulf coast and east coast refineries in late 2013 – early 2014.
Now jumping ship a little towards Japan and connecting these two headlines that have appeared over the last month –
1. The news of Japan extracting 'fire-ice' gas from the seabed -
2. Japan to start to World's first LNG futures within two years
A couple of interesting lines n the above article that caught my attention –
"LNG futures will allow consumers and producers to hedge against price swings, while challenging the current method of linking the fuel's cost to oil."
"It also plans to encourage LNG buyers in South Korea and Taiwan to participate to increase liquidity, he said. The government will ask Singapore, which is vying to become Asia's LNG trading hub, and the US, which is becoming an exporter of shale-gas-derived LNG to Japan, to list a similar contract."
Connecting the dots above:
-It is evident that for Japan to follow Abenomics sustainably, they need a solution to their burgeoning LNG bill. The futures exchange in conjunction with Singapore and the US could presumably reduce the spreads between LNG prices in the US and Japan courtesy financial arbitrageurs
-A delinking of prices with oil could presumably have a dampening effect on the price of crude as the use of Natural Gas picks up globally
-A similar effect may also happen through the actual physical availability of WTI crude to East and Gulf Coast refiners which in turn brings greater supply to the global markets
Consequently, we could potentially be on the cusp of a structural decline in crude oil prices over the next few years.
Tuesday, April 2, 2013
Looks like markets performed a classic April Fools joke yesterday on the bulls. With all of the hype and excitement over the S&P SPDR (NYSEARCA:SPY) closing at new all time highs, it ended up being the bond market which got the biggest bid. Manufacturing came in softer than expected, bolstering the case fixed income is making about slower growth than the stock market seems to be discounting.
There is a major tell going on now. U.S. markets have largely decoupled because of QE and bets on escape velocity in terms of domestic growth. Yesterday, small-cap stocks which are by definition more sensitive to domestic factors cratered, and today as of this Buzz there is some weakness creeping in. If small-cap stocks begin to falter relative to large-caps, it may be the biggest tell of all that things are not right within the market, as it counters the notion of decoupling to some extent. Our ATAC models used for managing our mutual fund and separate accounts continue to sense a deflation pulse, and caution very much remains warranted in the near term.
The iShares DJ Transportation ETF (NYSEARCA:IYT) has been a beast this year, but it has been leaking for several days now and looks to be losing its leadership quality. On a daily DeMark chart there are no active exhaustion counts, but TD RefClose Down price is $109.26, and today we should finally see the print of bar 1 of a TDST Buy Setup. Alone, these signals would be only marginally important, but on a weekly chart we do have a completed TD Combo Countdown Sell 3 bars ago, A weekly close below 109.66 will print a price flip, violate the TD RefClose Down price (also at 109.66) and lock the TD Megaphone 7 Sell level. Unlike the daily chart, the weekly does argue that the upside move may finally be exhausted. "Risk Level" on the Combo signal (i.e. where the Combo signal would be invalidated) is $115.33.
Between the Ticks
While the DJIA (INDEXDJX:.DJI) is making a new high, the Dow Transports (INDEXDJX:DJT), which led to the upside, is diverging and following though from yesterday's distribution day eyeing the 50 dma.
The first test of the 50 following a persistent run usually (not always) sets up a nice buy setup.
However, it's worth noting that a possible Head & Shoulders on Transports projects to 5800 which ties to the February swing low.
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Wednesday, April 3, 2013
For some reason, Queen's "Under Pressure" is in my head today. Today we are seeing the first real selling pressure in some time. Small caps have broken down by several measures including the trend line, falling back under the last "break out" area, and now they are trying to break their 50 day moving average, areas highlighted on the chart below. This doesn't bode well for the S&P 500 (INDEXSP:.INX) in my opinion.
I have been ranting and raving about how this move higher looks almost identical to the 2012 analog see previous buzzes on 3/14, 2/27, countless tweets, and conversations over a beer (or two). The 2012 top was almost to the day where this one could be. We can get confirmation of this breakdown with a break of the trendline around 1550-1545. See the attached 2012 That should take us down to the 50 day moving average in the SPX for first support. After that we get the classic last gasp, then hold on to your hats!
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Hello, Wake Up, You're Doing it Again!
No, the market is not rational, not in any sense of the word. The wider market continues carefree while hedgies, their little knitting circle, continue to pound and profit from the metals. We are now entering the final climax of their largess.
Unlike more sophisticated banks, these interests don't sell until a trend change, so don't expect major covering until gold and silver are far higher. If you believe in metals, now is your moment, today, maybe tomorrow.
Obviously there is a chance that Silver (NYSEARCA:SLV) is headed to 18 and Gold (NYSEARCA:GLD) 1250. But if that is not your thesis, then the time is now.
Last Line of Support
Quick follow-up on my previous post: we are hitting the lower rail on the 30-minute time frame. I believe this is the last line of support that would theoretically give way to a flush into the 50 SMA. The TLT:SPY ratio breaking out today to help confirm.
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Thursday, April 4, 2013
Will Silver See a "Silver Lining" Soon?
There's no shortage of bearish opinions right now that say silver's poor fundamentals give it no reason to rally. So let's take a technical view.
Wednesday's intraday trading saw Silver (NYSEARCA:SLV) fall to $26.67, an 8-month low -- but then prices rebounded up to near $27 an ounce.
Ron Feinstein, intraday editor of Elliott Wave International's Metals Specialty Service, said in his latest subscriber update yesterday afternoon that the rally probably won't stick in the short-term.
...wave 5 is most likely underway, with a target for a 26.50 washout. (See chart below)
In other words: Until the developing wave 5 lower is complete, silver should fall even lower.
Basic Elliott wave analysis tells us that after a fifth wave is done, prices should correct in the opposite direction.
A common target for such corrections is the price area of the previous wave 4 -- which, in this case, stretches at least to $27.33. So silver might get a break soon.
Click to enlarge
Best Buy Hooks Up With Samsung
Samsung just announced that it is setting up mini-stores inside Best Buy (NYSE:BBY) stores this summer, with 1,400 coming by the end of June. Best Buy has about 4,200 stores worldwide.
This is a pretty interesting development -- especially when you consider that there are mini-Apple stores inside Best Buy shops already. Will they need to bring in bouncers to keep the Samsung and Apple people away from each other?
We don't need another Double Seven.
Here are some thoughts that come to mind:
1) It's probably a good use of space inside the stores, especially with so many consumer electronics categories slumping. (video games, PC's, physical media) And if some brands get squeezed out of the showroom (can you tell the difference between all the lookalike products?), that's probably a good thing, especially if Best Buy's getting paid good money here, which brings us to...
2) Is Best Buy getting paid big money for this? Samsung has been dropping HUGE amounts of money ($12 billion a year) to push its smartphones and other devices, so it's not out of the question that Best Buy's getting a sweet deal here, especially since it was probably already selling plenty of Samsung products.
3) This should be construed as a small negative for smartphone makers not named Samsung, because Best Buy's obviously cozying up to them, which comes at the expense of everyone from Apple (NASDAQ to BlackBerry (NASDAQ:BBRY) to HTC to Motorola/Google (NASDAQ:GOOG). Whether it moves the needle for any one company is questionable, because there are still many other places doing huge volumes in smartphones. (other retailers including online ones, phone carriers)
Facebook Concentrating on Software and Data, Not Hardware
Ok, I'm finding the endless stream of Facebook (NASDAQ:FB) phone talk pretty annoying. But I also find it telling, as for a company so widely maligned there is a sure a lot of talk about what they might do. Thus, maybe FB is actually a lot more important to the global web's future path than many would like to admit?
As far as my view goes, I'll save my evaluation until after I see the announcement today. But I feel pretty confident in a few things and most if not all of them are good for FB's prospects.
Here's my preview of what I think the company is working on:
- FB is working on OS software and big data analysis, not making a hardware device.
- Don't be surprised to see more news/integration with Social Graph search.
- Don't be surprised to see the Algo's try and attack (sell the news).
- I expect deeper integration or encouragement of use of the FB Connect platform -- which is one of FB's crown jewels.
- My best guess is that FB is creating a HUB product in Android. This could look a lot like the new BlackBerry (NASDAQ:BBRY) HUB on the Z10.
- FB aims to helps users organize data and App use.
Would a Euro Rate Cut Help?
Peter Tchir mentioned this morning that the ECB's transmission mechanism is broken. I'll give an example of one of the "whys".
The 3-month Euribor rate is currently at 21bps, with the main interest rate at 0.75%. The overnight rate is at 7-8bps. So, if the ECB even lowered their rate to 0, the real benefit is probably slim to none.
Comparatively, the Fed Funds rate is at 16bps with 3M LIBOR at ~28bps.
The end result is that the LTRO essentially lowered the rate to 0 so adjusting the rate probably isn't going to do a whole lot. This means the recent article from ECB leaker Jeff Black, saying that a plan mimicing the BoE's Funding for Lending Scheme may hold some water in terms of potency.
Friday, April 5, 2013
With the S&P (INDEXSP:.INX) down 20+ points, I've peeled out of my S&P SPDR (NYSEARCA:SPY) short -- I took the entire 30% position off -- as I'm in hit-it-to-quit-it and make-it-to-take it mode. If we break the trend-line below, I can revisit (using support as future resistance)
I may be early but that certainly wouldn't be a shocker, and as I'm leaving for Atlanta this afternoon, I can do so with a clear head as blind risk is bad risk.
Map Out Areas -- No Job Growth and Faulty Signals
Some faulty technical signals under the hood are finally taking their toll. Combine that with North Korea, Cyprus and no job growth and today the S&P (INDEXSP:.INX) is finally playing downside catch-up to the weakness in the Homebuilders (NYSEARCA:XHB), Tranports (NYSEARCA:IYT) Russell 2000 (NYSEARCA:IWM), and high-beta tech.
S&P 1530-1538 should be a spot that tries to hold today. A spot to potentially cover some shorts is S&P SPDR (NYSEARCA:SPY) $153-153.50-ish. The 50-day is 1529-ish, and the more macro level is 1512-1515.
So far, April has given no reason to doubt that the Gann Panic Zone of 49 (49 months from low) won't play out big time.
Remember that the crash in 1929 tied to this 49 day count from high. Ditto the 1987 crash.
It looks like the S&P (INDEXSP:.INX) will indeed play Ketchup and test 90 degrees down from high around 1531/1532 in the first blush today.
This is a key level as it ties to the mid-point of the February/April range as well as being the February peak.
1530 may hold today, but it is NOT an invitation to buy in front of the weekend. Remember the accelerated momentum into the weekend preceding Monday, October 19, 1987?
Market participants who were trading at that time have always been put on their heels when this scenario threatens only to be a non-event.
That said, the 25-year cycle which shows crashes back for several sequences may exert its influence this time.
1530 could snap on a gap on Monday resulting in accelerated momentum resulting in a move to the next 90 degrees down or 1495.
Below that, it's every man for himself.
April Showers is not just the name of a Playboy Centerfold.
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