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Buzz on the Street: No Crash. Denied!


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.

Note: Some links may require Buzz subscriptions.

Monday, February 4, 2013

Monday Midday Blues
Peter Prudden

Over the weekend, publications from across the nation printed Dow (INDEXDJX:.DJI) 14,000 on front pages. The market is overbought and working that off here now. With that in mind, I am reducing a piece of my S&P 500 (INDEXSP:.INX) short into this dip, although I expect 148 to 147.50 to print in the coming sessions.

I purchased a small starter in Gold (NYSE:GLD) and will look to add to the position on a trade through $163, per Scott Redler's chart. My broken record continues. I reduced long positions as we traded above 1500 and began shorting spyders against it, be it a bit early. The road should see us trade down to 1482-1474 where we will want to see if buyers step in and push us higher. A failure there and we know something bigger is brewing.

A Reminder of Risk-Off
Michael Gayed

Markets have essentially given back the gains made last Friday as of this Buzz, and for the first time this year markets appear to be breaking in a more meaningful way. The National Bank of Greece (NYSE:NBG) is down 4% as Europe headlines re-enter the media, and Treasuries are catching a nice bid as stocks fall.

As I have been stressing in my various writings, and specifically the Lead-Lag Report, the odds of a correction are very high here based on intermarket deterioration. Our ATAC models used for managing our mutual fund and separate accounts remains completely out of stocks. If indeed the time has come for markets to refresh the fear, a surprise drop is likely just as the Nouveaux Bulls focus in on Dow 14,000.

Amazon Back to the 50 DMA
Jeff Cooper

It will be interesting to see how Amazon (NASDAQ:AMZN) behaves on this test of its 50 dma and if it will echo the December test of its 50 dma.

Remember, 289 was a potentially significant square-out in AMZN which was tagged on the earnings spike.

See recent bar charts and sq of 9 chart pointing to 289 here:

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Tuesday, February 5, 2013

Michael Sedacca

There has been a huge buyer of quarterly March SPX 1450 puts, I see 7 large block trades totaling upwards of 13,000 contracts. Doesn't look like a spread trade, so could be outright portfolio hedging. Note this is the day after the temporary sequester measure is supposed to expire (Minyan h/t). Somebody has also started buying a lot of at the money March monthly puts as well.

I would point out that there was similar buying of "crash puts" in the late December time frame in front of the fiscal nonsense. Then it was $5b in notional, today closer to $450m.

Treasury futures volume on the very low side, which is interesting given that last week was the highest volume week since Jun 2012 and had more than one day where the whole open interest was turned over.

Two floating rate notes today on the agenda today. IBM (NYSE:IBM) is pricing $1b of 2-year floaters at 3-mo LIBOR -2bps, which equates to 27.5bps as of this morning's LIBOR fix. That's only 1-2bps above Treasuries for those keeping score at home. So who's a better credit, IBM or the US? The market says it's nearly a tie. Paccar Financial (NASDAQ:PCAR) priced a 3-year floater at LIBOR + 27bps (this doesn't appear to be for deposits of financing).

At the end of January, CMBS issuance is already at 2.5x the expected pace for 2013 with $10.7b priced, according to JPMorgan (NYSE:JPM).

They also pointed out that much of the inflows into equities is coming from cash and money market funds rather than fixed income funds, which matches up with the fund flows I pointed out yesterday. So needless to say, they aren't a believer of the great rotation (confirmation bias).

There is a rumor that the IRS is going to allow solar companies to be classified as REITs, take a look at First Solar (NASDAQ:FSLR), Sunpower (NASDAQ:SPWR). Apparently, the only way this would make sense is if they had a Power Purchase Agreement.

Lights Out
Jeff Saut

Not only did Joe Flacco, the Super Bowl winning MVP quarterback of the Baltimore Ravens, play "lights out" and not only did the lights go out at the Superdome just after the start of the second half Sunday night, but the Bears also turned out the lights yesterday. Similar to the Super Bowl getting delayed as a result of the power outage, on a short-term basis only, upward momentum is slowing as buying pressure is being balanced off by increasing selling pressure. This is evident by the DJIA recording its first triple digit loss for 2013 yesterday, down almost 130 points. 29 of 30 DJIA components closed lower. In addition, all 10 S&P macro sectors closed lower. Technology was the biggest loser, down 1.61%; Telecom Services the smallest loser, down 0.50%. Speaking of such, the relative strength trend of the Telecom Services sector is starting to curl up! This is a good place for "value buyers," versus trend followers.

Within the context of a healthy overall uptrend (the short-term trend is stretched above various moving averages) and yet an unfriendly short-term seasonal period I ask, "Was yesterday's tape action more than profit taking?" In looking at the stock market's internals readings from yesterday, NYSE volume contracted yet declining volume equated to 85% of total advancing and declining volume. New 52-week lows on the NYSE contracted and remain fewer than 28, yet the ratio of declining stocks to advancing stocks was over 3.5 to 1. Also, at the close Friday, there were 151 buying climaxes last week, versus 113 the week before, a sign of short-term distribution - please refer to the chart. A buying climax occurs when a stock makes a 12-month high, but closes the week with a loss. This is a different type of indicator yet it also shows how buying pressure is being balanced off by increasing selling pressure and why short-term risk should be managed.

In summary, one day never creates a trend. Therefore, it's too early to think yesterday was more than profit taking. In order to think something is cracking with the overall uptrend, there would need to be a lengthy pattern of distribution over a period of weeks. A critical guidepost if such selling occurs would be what the internals look like during the first rally try, after such a swing lower, i.e. today.

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Gate Sniffage!
Todd Harrison

I feel so naked! I just sold my remaining cannabis proxies -- my self-proclaimed Single Best Idea for the Next Decade--as I've learned that stocks that rip 50% percent over and over and over again are in the blow-off phase of that particular move. And yes, I left some money on the table -- but that's OK; I don't wanna be greedy, I want to be profitable.

The homebuilders are pretty in pink in an otherwise sea of green. It's early, but remember that tapes tend to probe the previous direction (yesterday, down) at least once during a session. If and when that happens, I'll be watching the banks--their action/traction/reaction will speak volumes as to whether the bears have any teeth.

Denial, Migration, Panic; we know it, we live it and yes, sometimes we love it. Now is such a time for the bulls, and they're eating it up. The mainstay market averages up 5-7% one month into our young year, you can't blame them; annualize this performance and we're talking about 2013 returns in the 80-125% range!

While we'll likely see select stocks achieve returns like that -- some already have, although they're microcaps -- odds are that the broader market proxies won't continue at this pace. The trick to the trade -- and to investing as a whole--is to see the entire probability spectrum and adjust risk based on your perceived outcomes while managing risk along the way.

It's easier said than done; since the November lows, "buy the dips" paid off in spades. In bearish phases, sell the blips is the stylistic approach of choice. If you're not in one camp or the other, or if you have the means, ability and desire to trade actively, hit-it-to-quit-it (my chosen method) is a good way to rat-a-tat-tat your way to performance without the constant nagging stress of out-sized risk.

With S&P 1520 approaching (that's been our target) and the four-letter freaks breaking out (NDX 2700-2750 remains the level of lore into the close), I'm getting some mixed signals on the top-line technical stuff. Yes, the tape acts great and the banks don't break but therein lies our task at hand: respect, but not defer to, the price action.

As always -- yeah, you know! Hit 'em Hard Minyans, but Hit 'em Straight!


Wednesday, February 6, 2013

The Used Burrito in Chipotle's Earnings
Fil Zucchi

Through the lens of my short position, I'll comfortably say that the Chipotle Mexican Grill (NYSE:CMG) earnings call was a total "used burrito" show.

Lowlights: this quarter the company is not in a position to give comp sales guidance (unlike previous quarters), but it will be a "very tough comp" versus Q4; it would not shock me if they came in flat or even negative for Q1. COGS for the year are guided at 33.5-34% even worse than Q4 and I believe a new all-time-high; no price increases until 2H of '13; full year guidance on comp sales of flat to low single digits, excluding price increases; back of the napkin I come up with full year comp sales of 2-3% including price increases.

If you consider that most of the revenue growth will come from new stores, that those new stores comp at about 25% less than existing, and that they won't be open the entire year, I am modeling that revenues for the year are going to miss current estimates by a mile. Speaking of which, if you throw in the added marketing costs they harped on on the call, my EPS guess for '13 is for basically no growth ($9.00-9.25 vs $8.75 in 2012).

Care to pay 30x EPS for this little gem? Sold to you.

Jeffrey Cooper

This week we showed several charts on SLV (see below).

Last Friday we followed up with a note on Silver Wheaton (NYSE:SLW).

This morning SLW is following through triggering a Rule of 4 Breakout over a declining 3 point trendline----while SLV is FLAT.

This is bullish action.

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FCX: A Recovery Rally Within a Larger Top
Michael Paulenoff

Notwithstanding Leon Cooperman's interest in Freeport-McMoRan (NYSE:FCX), the big picture chart structure of the stock going back to 2009 resembles one major rolling-top formation, with numerous failed rallies that have put increasing pressure on the 30.00-28.35 multi-year support plateau.

That said, since FCX plunged in early December after announcing its buying spree to diversify into the oil biz, the stock has been grinding higher, from 30.54 to 36.03 to be precise, or 18% so far.

Let's notice the price structure appears to be destined to test its declining 200-day EMA, now at 36.89.

If satisfied it will also fill most of the gap area left behind on Dec 5, and, as such, should prove to be an area of intense, and perhaps impenetrable, resistance that will stop the current recovery rally in its tracks and reverse FCX to the downside with power.

If ever FCX presses beneath 30.50, the big picture will be warning us that something very damaging either to the company, the industry, or the commodity biz is approaching quickly.

For the time being, however, FCX continues to claw its way higher.

Click to enlarge

Thursday, February 7, 2013

Einhorn Takes on Apple
Michael Comeau

David Einhorn of Greenlight Capital is picking a fight with Apple (NASDAQ:AAPL) over the company's proposal to eliminate the ability to issue preferred stock from its corporate charter.

Einhorn/Greenlight is a major Apple shareholder, basically wants Apple to distribute a high yield (high relative to its existing 2.3% dividend yield on the common stock) preferred stock to existing shareholders.

Greenlight believes such a strategy could "unlock hundreds of billions of dollars of latent shareholder value."

My take is that the assumption is that there would be strong demand for this high-yielding Apple 'stock', increasing value for existing shareholders.

This kinda sorta makes sense. Personally, I'd rather have an Apple preferred yielding 4-5% than most corporate bonds, especially if it's just handed over to me as an owner of the stock.

However, there are other things to think about. Like, why not just scream and shout for Apple to issue a $75-100/share special dividend or a $100 billion buyback rather than make this whole mess? I don't know about you, but I prefer a big bang today over the promise of many little bangs in the future.

And from a bigger-picture perspective, what would it say about Apple if the company resorted to such obvious financial engineering to boost the stock?

I doubt Steve would put up with Einhorn's demands. Will Tim Cook?

10-Year Breaking Above NFP High
Michael Sedacca

See the 10-year future (TYH3) breaking above the NFP intraday highs at 131-25, and out of a range its been stuck in for the past 9 days. It needs to hold here and see continuation before we can look to test 132 and 132-13.

Note that POMO had the lowest coverage ratio since QE3 started in the long end, which would typically be a bullish signal. I'm not jumping up and down about it yet, but so you see it.

Still long TLT and not making any adjustments.

Also note the BIG reversal in gold off the morning lows. It got smacked right after Draghi only to rip back about 3 minutes after the SPX started to take a dive.

Click to enlarge

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Conviction Rewarded on Akamai Sale
Sean Udall

My conviction on selling Akamai (NASDAQ:AKAM) at higher levels last year has been nicely rewarded today as the company put in one of those "okay" reports that it tends to deliver at least 1-2 times a year, letting the algos completely demolish the stock.

Was this a bad report? Not at all, IMO and the stock is a cash generating machine which has always been one of my prime criteria in stock selection. But they did miss and lower the bar on revenue growth (from high to mid-teens growth) and for a growth stock, that means back to purgatory once again. The biggest issue I have with AKAM as an investment, is that it's just not in the league of Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL), Qualcomm (NASDAQ:QCOM) or... you get the picture.

But a stock doesn't have to be a good investment vehicle to be a good or even great trading vehicle. Thus, the closer to $30 the better here, and I'm going to mark today's low of $33.50 as a good marker for a level to starting building a trading position again. If Mr. Market comes in (as we see increasing volatility), I think we could see the shares in the $30-33.50 range and I will be looking to take advantage of that range should it occur.

Lastly, this is exactly the type of name that the LBO world or a bigger name (AAPL are you listening), could go after and generate a whole lot more return than the 0.25% they get cash. Especially, if the sin of a massive overpay was avoided. AKAM does have a new CEO and sometimes a leadership change increases the likelihood of potential M&A.

Friday, February 8, 2013

Finding Nemo
Todd Harrison

I couldn't resist the title--but it's a bit misleading; Nemo, it would appear, has found us. It's Déjà vu all over again on Long Island as gas lines wrap around the block and folks batten down the hatches. I awoke to a blanket of white--and the hard stuff isn't supposed to hit until later tonight. I remember how awesome days like this were as a kid; as a homeowner still clearing debris from Sandy well, not so much!

Over the past few days, we laid out several missives on The Three Things Bears Need to See, and what Three Very Smart Bears do foresee -- a Stock Slide.

Indeed, the confluence of lenses in the latter matter -- the inter-market trends, spooky cycles in the market and the disconnect between perception and reality -- are valid and intelligent takes on the tape. Factor in the length of this "buying stampede," as highlighted by the savvy seer Jeff Saut, and you had the makings of a sloppy session yesterday.

I tapped the tape myself--laying out some Goldman (NYSE:GS) on the opening pop and layering into some S&P puts on the retest of the flat-line during yesterday's contra-hour. Alas, toward the end of the session, while whispering "discipline over conviction" to myself, I shared on the Buzz,

Try as I may, try as I might, I can't convince myself that holding short exposure overnight is anything more than a coin toss. Through objective eyes, the bears had the bulls on the ropes today but they couldn't deliver the knockout punch...again. As soon as I post this Buzz, I'm gonna cover up my Goldman and S&P short. And I'll sleep like a baby tonight, which is to say I'll wake up every few hours crying.

We often write that good traders know how to make money and great traders know how to take a loss. I'm far from a great trader -- and yesterday wasn't a loss, it was a push -- but the discipline paid off, if only for the ability to have a better entry points on those trades, or to move on to new trades altogether. Yes, sometimes you can learn a lot just by watching and yesterday afternoon, it was clear that the bulls had some swagger left in their step.

The ones that got away yesterday? My cannabis proxies, which I tried to buy back after punting them into the froth last week. They are evidently on all sorts of restricted lists these days--likely for good reason, but nonetheless frustrating as they are ripping higher today. I try not to look back -- profits reside in the ride ahead -- but for those involved in the space, your P&L is looking high and higher today.

Lemme get this to you and focus my energy on spying advantageous risk-reward; I'll be back faster than you can say, "Honey, get the shovel and get to work!"

Good luck today


Playing For Higher Prices With Dell? -- DEFINE YOUR RISK!!!
Michael Comeau

Reuters is reporting that Dell's (NASDAQ:DELL) largest shareholder, Southeastern Asset Management has told the company that the $13.65/share offer on the table from Michael Dell and his investors undervalues the company.

This is a tricky situation, because you can call anything undervalued using textbook valuation, and in this case. the offer values Dell at less than 0.5 times sales and about 8 times earnings.

I'm all in favor of brawls over situations like this because they can build shareholder value and also, they're just plain entertaining.

However, let's remember something.

The PC business is doing horribly as shoppers shift focus and dollars to mobile gadgets like tablets and smartphones. The Windows 8 cycle has thus far been a bust. In Q4 of 2009, PC sales rose 22% with the release of Windows 7, according to Gartner. But in Q4 of 2012, PC sales dropped 4.9%, following an 8.3% decline in Q3 when Windows 8 was released.

Because of this factor alone, there's a chance Dell shares could have hung around the $10 level or lower for years. Remember when BlackBerry (BBRY) was trading at three times earnings? So don't tell me Dell can't be stuck at 6-7 times an earnings base that is stagnating.

And then there are other issues like lower government spending and increasing competition with Hewlett-Packard (NYSE:HPQ) in turning into the next IBM (NYSE:IBM).

So if you're a value-minded shareholder, would you rather take $13.65/share now or wait around for the market to "realize" your own perception of what the stock's worth?

Given all the stink, I assume Dell and his partners will up the price on the table at least a little in the interest of looking decent.

But at the end of the day, I like the idea of taking $13.65 today rather than blindly assuming I can get more tomorrow.

However, if you are going to play for a higher bid, I would do some with some type of defined risk strategy (like call options), because deals can and do fall apart. Look at what happened with stocks like Avon (NYSE:AVP), Harman (NYSE:HAR), Take-Two Interactive (NASDAQ:TTWO), and Best Buy (NYSE:BBY). People made huge money on initial bids or discussion of bids only to get wrecked when things went south.

Between the Ticks
Jeffrey Cooper

Yesterday's outside up day suggested the S&P would extend out of a 4th wave triangle.
That was the presumption in this morning's report.

Friday's in a bull rally usually close at/near session highs.
However, this morning's extension has tagged a theoretically important technical level, 1516.

Why? 1516 aligns with the date of the last major low on November 16th.

Those of you familiar with the Square of 9 Wheel know that time can point to price and price can point to time. Mr. Time & Mr. Price often meet at the Turning Point Café.

Last Friday, was a Friday in a bull and the market closed at its high only to be followed by a stab down the following Monday.

It will be interesting to see if we get a change of character and we see a first hour opening spike todays and a reversal of sorts from this 1516 level or whether we close at/near session highs again in this 1516 zone and get another hard down Monday.

Twitter: @Minyanville

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