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Buzz Bits



VIX in 06 - Adam Warner - 3:21 PM

So let me get this straight. We will soon have VIX options to consider?

Let's see, the VIX itself is a calculated measure, a snapshot, that estimates the volatility of the S&P 500 over the next 30 days. A VIX option measures what? How volatile that estimate will be? My head is spinning thinking about this one.

I have more interest in watching Skating With Celebrities than I do trading VIX options.

Hump? What Hump? - Todd Harrison - 2:48 PM

We're officially on the back nine of the weekly freak and I, for one, am fairly jacked about that. With a three day respite waiting in the wings--and snazzy new digs in the hopper--we're long red rubber noses and big floppy feat in the city of critters. Where's Tommy DeVito when we need him most?

Through balanced eyes, the tone and tenor of the tape trades constructive. The financials, despite the potential non-confirmation by the piggies, remain stubbornly sticky. The chips, powered by Broadcom and Applied Materials, are chuggin' right along. And the ability to absorb supply (and a spate of earnings misses) is food for thought.

My risk profile resembles a big "V" (gamma, not Vanessa) as we edge along the '06 song. The slow grind isn't helping my P&L today but I'm positioned consistent with my view and with defined risk. Now, all I need is some volatility so I can take these corks off my forks.

As always, I hope this finds you with a smile on your puss and some jingle in yo' jeans.


Bondage - Kevin Depew - 2:32 PM

Bennet and I were talking earlier this week about Treasuries and Munis and the possibility that the recent run for bonds since November has at least temporarily reached an end. T-Notes March contract (TY/H6) has broken a double bottom on a point & figure basis, the first sell signal for the TY/ futures since November.

Meanwhile, taking a look at the yield indices, the 10-Year Yield Index (TNX) has "broken out" on the .25x3 chart, as has the Five-Year Yield Index (FVX). The 30-Year Yield Index (TYX) generated a "buy signal" yesterday and added to gains today (basis .175x3 chart). Yields move inversely to price, so these "breaks" suggest a change in the recent supply/demand dynamic that has helped support Treasury prices since November.

See the TNX here.

See the FVX here.

Flashback! - Bill Meehan - 1:59 PM

This day in market history...

  • Closing levels 13 years ago found
    o DJIA: 3262.75
    o S&P 500: 430.95
    o Naz: 682.40
    o Crude: 18.78
    o Gold: 328.40

This day in Minyanville history...

  • Last year, Toddo penned Wonder Away! as the earnings parade began.

In other news...

  • In 1964, U.S. Surgeon General Luther Terry released a report that said that smoking cigarettes was a definite health hazard.

A negative divergence in the major indices developing????? - Bennet Sedacca - 12:45 PM

As the SPX and NDX make new highs, I can't help but notice that there is a potential negative divergence developing now. We use the 9 day RSI to determine just how overbought a market is short-term. A negative divergence develops when the market reaches higher levels but less overbought. We do respect that bull markets tend to stay overbought and bear markets tend to stay oversold for long periods.

The data goes like this. The 11/25 high in the SPX at 1265 had a 9 day RSI reading of 84. Today the index stands at 1292 and the RSI reading is lower at 73. For the NDX, the 11/25 high of 1705 had a 9 day RSI of 84 while today's new high of 1755's RSI is just 77.

Not advice, not trying to call a top - that is a dangerous way to make a living - but certainly worthwhile information as we try to gauge risk/reward. The market may just be losing some momentum...

Checking into the Indian numbers - Sanjay Somaney - 11:44 AM

Good numbers from Infosys (INFY), but not good enough for today is what I came away with. That was the single most important reason for my move yesterday to completely hedge all the Indian IT positions. I am gingerly unwinding those hedges and putting the proceeds back to the long side.

INFY has a fantastic future and a lot of positive momentum building. They are seeing stable pricing, increasing demand, an abundant supply of employees (the company had over 6 million applications for employment in CY 2005 and ended up hiring about 21k employees) and increased business opportunities all over the world. They are making the right investments now to build for future growth.

Long term thesis is completely in tact. I think of the remaining names, Cognizant Technology Solutions (CTSH) and Satyam Computer Services (SAY) will be good and Wipro Ltd (WIT) will be okay.

Position in all stocks mentioned

Mini-Minyan Mailbag - Kevin Depew - 10:21 AM

Kevin -

What do you make of iShares Dow Jones U.S. Real Estate Index (IYR) -- reverse dandruff or potential double top? Anything insightful on the P&F charts?

Be well,
Minyan JP


The IYR gave a new buy signal this morning with the move to 69 on a 1x3 PnF chart. The potential conditions for a double top remain in place on a bar chart, volume has deminished significantly since the first price peak, and the correction from the first peak was greater than 10%, but the overall conditions grow weaker as this move continues.

In terms of risk/reward, most technicians recommend waiting for a support violation before taking action on this pattern. Sometimes, what appears to be a double top is just a pause in an uptrend.

For now, the point and figure chart suggests the context is positive and improving.

If it ain't Roque... - MV Respect - 9:35 AM

The width of the DJIA's 11-month base is 800 points. The breakout, which is occurring here, counts to a technical target of 11800; a new all-time high.

If you're looking for more evidence as to how the market's behaving here check this out -

1. Last Friday, January 6, the Russell 2000 broke out of a 5-month base.
2. On Monday, January 9, the Merrill Lynch Nanotech Index broke out of a more than 9-month base.
3. Last Friday, January 6, the Russell Microcap Index broke out of a 6-month base.
4. The above three items show small caps are ahead of big caps (S&P 600 +5.3% ytd vs S&P 500 +3.32%).
5. The Nasdaq Biotech Index is close to moving above the April 2004 high and completing a 30-month base!
6. The Morgan Stanley Cyclical Index just broke out of a 12-month base.

Could this action represent the highs for the year? Shoot, anything can happen. But these patterns are not often associated with market failures.

John Roque of Natexis Bleichroeder

Say What? - Kevin Depew - 8:51 AM

A look at commentary, opinion and analysis from around the world:

  • What, exactly, is behind the Dow's "meteoric" (heh heh, just kidding) rise back to 11,000? As this chart from the New York Times shows, not a lot.
  • Apparently, there's more to the economics of Starbucks than meets the eye. No, wait, there's more to the economics of Starbucks that doesn't meet the eye, such as the invisible short cappuccino.
  • Eastman Kodak (EK) has scrapped the stylish, cool, and charmingly retro corporate logo it has used for most of the past century in favor of a new design determined to resemble every other logo.

Capital Idea - John Succo - 8:27 AM

Martin Feldstein, a conservative economist, writes in the FT about the truly amazing circle of excess central bank printing disingenuously labeled as "excess savings" by Big Ben.

He comes to three main conclusions, two of which we have been talking about here.

First, capital inflows into the U.S. that finance our trade deficit are significantly over-stated by government data, which show that they are more than sufficient. It turns out that they are exactly sufficient so far. If they were higher than necessary, the U.S. would be accumulating foreign currrency reserves, which we are not.

Secondly, and disturbingly, overwhelmingly those inflows are from foreign central banks not private sources. It is not that foreign private sources find the U.S. a good place to invest, it is that foreign central banks are re-cycling their dollars. I cannot overstate how different this is than has ever occurred in history.

Thirdly, the real trade-weighted value of the dollar must fall by at least 30% to shrink the trade deficit to a sustainable level of 3% of GDP.

The UK trade deficit in "Goods" hit a NEW ALL-TIME RECORD HIGH ... - Greg Weldon - 7:46 AM

... amid a steep erosion in export growth and widening deficits with EU and Non-EU countries ...

... while the Petroleum Balance posted its FIFTH consecutive monthly DEFICIT.

Then we note that Gold in GBP is making its own multi-decade high this morning, and is within less than 20 sterling of hitting its RECORD ALL-TIME MONTHLY CLOSING HIGH of 326.80 set in January of 1983 ... Coincidence ??? We think NOT.

GEE, and the Bank of England is contemplating another rate cut ????

The secular-spectrum-stretch intensifies, more and more, everyday.

Position in gold

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