Buzz on the Street: Q4 Begins on a High Note
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, October 1, 2012
Kibbles and Bits!
NDX 2830 is the "right shoulder" of the dandruff we spied earlier; if this pattern is to remain in play, the bears will want to keep the cash index below that zone.
I am offering out the last 20% of my Facebook (NASDAQ:FB) long as Sheryl Sandberg, their COO, does her thing on CNBC. At a point, and in the interest of remaining disciplined, I should unwind the QQQ out-of-the-money puts that I had on against it (this was my alpha trade).
Perhaps I'll simply use a stop above NDX 2830 and see if I can leg out at better prices? Yep, that's exactly what I'll do.
And, I'm lifted on that Facebook common. In real-time!
Opening Spike to Begin Quarter
The beginning/end of quarters often mark turning points, especially when the market has spiked up or down into them following persistent advances or declines.
This was the case at the at the July 1, 2010 low, the April top in 2011, and again at the April top in 2012.
Ditto the last major swing low on October 4, 2011.
This was also the case at the major bear market low in early October 2002 and the major top in early October 2007.
I can’t help but wonder if this morning’s opening spike to the new quarter is analogous to the opening ‘misdirection’ spike to begin a reversal day, or the opening ‘misdirection’ spike on a Monday that often marks a reversal week -- like last week for example, as seen in the hourly SPY from last Monday through today. (seen below)
Is it real or Memorex?
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Natural Gas and BOIL Meet Next Upside Target
The "mysterious" vertical advance in the ProShares Ultra Long DJ-UBS Natural Gas (NYSEARCA:BOIL) since last Thursday’s large build in inventory continues this morning.
Another thrust has propelled the BOIL to 56.00, which happens to be the highest of my current upside projections off the Aug-Sept base pattern.
While meeting this target certainly in no way indicates the BOIL cannot, or will not, continue to rocket right up to test the July 31 high at 59.72, my technical work does suggest that holders of long positions lighten up around current levels.
Otherwise, stops in the BOIL can be raised from 50.88 to just beneath today's low of 52.88.
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Tuesday, October 2, 2012
T Report: Again, Still, More of the Same
We are seeing yet another risk rally on stories that this is the weekend Spain asks for a bailout. Let's for a minute ignore that we had the same rally on the same stories last Thursday. Let's ignore the growing effort in Germany to challenge OMT (unlikely to be successful but still not a positive step).
Let's instead focus on what happens if they ask and if the terms aren't to strict and if the programs are implemented immediately? My sense is the actual effect will be similar to the effect of one hand clapping. I would like to be proven wrong, but at these prices and the history of this Spanish government, I don't see any real near-term boost in the real world, so the markets won't sustain the rally.
ISM was far more interesting. It seems like an outlier and again the markets couldn't sustain the gains but if we get more economic data indicating strength stocks could go higher, at least until earnings and earnings outlooks start fast and furious next week.
I remain bearish and seems like another day of fade the opening hopefulness and wait for a more stark reality to set in.
Watching the Refiners
RBOB gasoline futures have been on the move, which we put to the test last night. Similar historical moves show 11-for-12 up with double-digit percentage gains on the RB contract. Therefore we are watching a few refiners from the long side: Tesoro (NYSE:TSO), Western Refining (NYSE:WNR), Delek Holdings (NYSE:DK).
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AAPL Trading Heavy -- Watching Pivot Support Closely
After trading lower on Friday and Monday, Apple (NASDAQ:AAPL) is beginning to look heavy. Pivot support resides in the 655-660 area, and since this area has been tested recently, it would be wise for traders to revisit their current risk management and trading plan. Understanding and identifying support and resistance levels helps traders keep their emotions in check and follow plans based on risk profile.
In short, AAPL could stumble to 615-625 if pivot support gives way; this area marks the prior breakout area and 4-month uptrend line.
One hope is that the 50 day moving average around 650 will hold. But holding that level could be a tall order if pivot support doesn’t hold.
Trade safe, trade with discipline.
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Wednesday, October 3, 2012
Ken Wolff & Shawn Wolff
Netflix (NASDAQ:NFLX) has a sizable gap higher this morning, with Citigroup mentioning improvements in customer satisfaction. The pre-market volume is low, so it does look a bit like the price was “placed” there rather than “pushed” there, and that can make all the difference in follow-through momentum.
It is however nearing an interesting place technically. Check out a daily chart. It is very close to a collision of the 5MA, 15MA, and 50MAs. That is often a do-or-die level, and whichever direction it breaks from that collision is usually worth a play, so I’m keeping a close eye on it for opportunity.
Here’s the risk though:
The stock has a small 54M float and 28% of that float is short. Less supply = more violent reactions to any buying or selling demand, so any news the company gets tends to send the stock 20-30 dollars up or down. That can be a great play if you are on the right side of it, and a disaster if you don’t keep your stops. Yesterday the company announced they will post earnings on October 23 and who knows what could come out ahead of the announcement. Keep an eye out, but be cautious.
Ocwen Blasts Off
We've talked about mortgage servicer Ocwen (NYSE:OCN) for the past 4 months, gaining ground in anticipation of a MBS based QE. Over the past couple months, the stock has more than doubled, and continues to skyrocket this morning after it announced the purchase of a loan servicer from Wilbur Ross.
This comes on the heels of record refinance rates this morning from the MBA. The MBA Refinance Index reached the highest point since 2009 (not seasonally adjusted), for the obvious reasons of lower mortgage rates and Treasury rates. I would love to say that I caught this entire move, but alas, I have watched the entire move from the sidelines.
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When Time is Up, Trend Changes
Our S&P 500 (^GSPC) 1460-1468 projection was hit two weeks ago and the market has gone essentially sideways.
1460 is opposite October 4.
1460 also vectors/vibrates off 741 which was the November 2008 low around the world.
So now that price has met time, is time up.
As W.D. Gann said, ‘when time is up, trend turns’.
Often times this follows 2 weeks ‘on the side’.
Below is a Square of 9 chart I will be highlighting in my webinar today on Gann theory and the Square of 9 Wheel.
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Thursday, October 4, 2012
Romney Bounce? No!
I was pretty amazed in the morning checking out my Twitter account in terms of the number of people arguing that we were ready to have a "Romney Bounce", given his performance last night against President Obama.
In looking at price action though, I immediately began countering the notion. The debate last night and the elections at the core are about the DOMESTIC U.S. economy. If this move were because of last night, then explain to me why U.S. Small-Caps (NYSEARCA:IWM) which are heavily dependent upon domestic U.S. revenue, are NOT outperforming global large-cap stocks?
Price COMPLETELY disagrees with the "Romney Bounce" narrative, and this can not be denied. Furthermore, the more markets act like this, the more negative I become on the short-term. Healthy markets are not led by defensive sectors which are low beta in nature, and yet that is EXACTLY what has characterized market averages in the last two weeks. Look within the market and re-read my latest Lead-Lag Report available exclusively on Minyanville - intermarket deterioration is worsening, and the odds of a May "mini-correction" redux are increasing.
Started INFA Position (Could Be a Quick Trade)
I'm adding a starter in Informatica (NASDAQ:INFA) at (23.98) as I think anything under $24 is getting past the point of ridiculous. That said, this could drop further and thus I'm keeping this at a single tranche. Frankly, this position will probably turn into a short-term trade as I wouldn't be surprised if the stock is $2-3 higher within a week or less. Otherwise, if I see further weakness into the 23.50 area and below at the close, I'll likely add another tranche.
Here again is a 28% sell-off for a company that lowered revenue guidance by less than 5%, and carries over 20% of today's lowered market cap in cash. Frankly, at levels below $25, I think INFA quickly shoots up the list of potential M&A targets.
I'm still looking at QLIK Technologies (NASDAQ:QLIK) and feel that $18.50 or lower is where I'll look to strike, again, at or near the close of trading today.
Bond Futures Before NFP
Bonds are going to finish out the day right on top of the trendline for the long bond future (USZ2). On the short-term 60 minute chart, it's become oversold, but it certainly doesn't rule out it becoming more oversold.
Tomorrow will be pivotal.
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Friday, October 5, 2012
Zynga Gets Hulk Smashed, Facebook Hit With Collateral Damage
Zynga (NASDAQ:ZNGA) is down a whopping 23% this morning after preannouncing not only better-than-expected Q3 revenues, but a major downward revision in Q4 expectations.
Basically, bookings are collapsing due to a big slowdown in social gaming.
In Q1, bookings were $329 million. In Q2, they dropped to $302 million. For Q3, they dropped further to $250-$255 million.
Based on the new guidance, Q4 bookings are implied as coming in at just $209 million, down 32% year-over-year.
And of course, this is very bad for Facebook as it got 12% of its revenues in the second quarter from Zynga. About 2/3 of this business is related to Facebook's high-margin payments business (which processes payments to Zynga), and 1/3 is from ads on pages generated by Zynga apps.
My bear case for Facebook revolved mostly around its ad business, but the faster-than-expected collapse of Zynga-related revenue helps my cause, as Facebook's off by abut 3% in pre-market trading.
Facebook's payments business was about 16% of revenues last quarter, but grew significantly faster (+61% YoY) than the ad business (+28%). Payments revenues have been stagnant over the past three quarters:
Q4/2011 = $188 million
Q1/2012 = $186 million
Q2/2012 = $192 million
A big chunk of this is about to go away.
ES (SPX futures) could be carving out the same topping pattern as we saw in March/April (chart). Investor Intelligence bullish levels are remarkably similar. Let's see how we handle the open. The level to watch is NQ (NDX futures) 2822.50 support, the October 1st high. NDX is still heavily lagging SPX.
ZN (ten year note futures) dropped to the 9/24 naked VPOC at 132'315, a level to watch there.
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Jobs Numbers Real or Fake?
Tweeter is going nuts this morning with allegations and denials that the unemployment numbers are fixed for political expediency. With all due respect, those arguments miss the point. What we should question is whether the numbers reflect reality. The government tells us every month that based on its data, there is no inflation. Never mind that the formula to calculate the CPI has been changed twice since the Reagan presidency, there are purely theoretical statistical assumptions (talk about being twice removed from reality) in the CPI that make it effectively useless to the average Joe who may want to figure out how much extra money he will need the following year to stay even.
Similarly, there are assumptions in the labor figures (the birth/death model being perhaps the most egregious) that also make them irrelevant while still statistically "correct".
It's probably safe to say that the Federal Reserve employs some of the most sophisticated econometric talent around, and yet even the Fed uber-sophisticated number crunching steadfastly concluded that there is/was no nexus between the Fed's ZIRP policies and the rolling bubbles we have seen over the last ten years. Is the Fed lying? I don't think so. I am sure that there models truly come to those conclusions. But is that what happened on planet earth? Look out the window or at the chart of any of your favorite asset class - bonds, stocks, gold, commodities, real estate - and unless one is in complete denial, the answer is inescapable.
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