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Buzz Bits



Earnings Report - MV News - 4:35 PM

  • eBay (EBAY) reported Q4 EPS of $0.24 vs $0.22 cons on revs of $1.33 bln vs $1.30 bln cons. Gross margin was 81.9% vs 81.5% exp, while listings were 546.4 mln vs 528.3 mln exp.
  • Apple (AAPL) reported Q1 EPS of $0.65 (in-line) on revs of $5.75 bln vs $5.77 bln cons.
  • Advanced Micro Devices (AMD) reported Q4 EPS of $0.45 vs $0.26 cons on revs of $1.84 bln vs $1.65 bln cons. Gross margin was 46.4% vs 42.9% exp.

Ah sloppy Sue and big bones Billie
They'll be comin' up for air - Todd Harrison - 3:11 PM

Contra-hour comes to a close with Hoofy hanging by his toes. While the damage is high profile, it's also been relatively isolated. As Pepe (or Pepe's orb--we're not sure) pointed out, Intel (INTC), Yahoo! (YHOO), Google (-23), energy issues (XOI -2.25%) and the metals (XAU -3%) are feeling the brunt of the hunt. But, even still (and even flow), S&P 1275 and NDX 1705--technical support---are still underhoof.

We've spoken of conditioned complacency and it's my sense that it's still in place. Not a shocker of a statement with a pre-teen VXO, I know, but this is simply the second dip. If these levels fail--coupled with some technical hair in Citigroup (C) and GE--the dip shtick will get shaken and stirred.

One step at a time, my friends, as there's a ton of overnight catalysts coming our way. Important close? I'd say so--but it's better than the quiet riot we've endured during Sammy's longstanding slither. Just stay disciplined and the rest will fall into place.

Fare ye well into the bell.


Flashback! - Bill Meehan - 2:34 PM

This day in market history...

  • Closing levels 6 years ago found
    • DJIA: 11,560.72
    • S&P 500: 1455.14
    • Naz: 4130.81
    • Crude: 28.98
    • Gold: 288.10

This day in Minyanville history...

In other news...

  • Happy 45th Birthday to THE Captain, Mark Messier! Last week's ceremony was the most memorable sporting event I've been to thus far. I'm very much looking forward to Cal's MLB induction next year.

Dee-no-me-tay! - David Miller - 2:02 PM

As we enter the contra hour, Boo's got Hoofy in a chokehold trying to prevent him from taggin' out above 1275. In Snapper's home turf of biotech, breadth is 65 up, 3 flat, and 92 down. Not good, but better than yesterday.

The NBI violated the 819 support, though in this index support/resistance lines are fungible items. A couple of you noted support is closer to 816 or 815. I can't disagree. It is towards the top of its range right this moment though, and comfrotably above the support line.

Most funds I spoke with at the JP Morgan conference had free cash to invest and needed good names. My desk looks like a disaster area as part of the effort to try and deliver some new ideas this quarter.

Most funds I spoke with were amazed (and unaware of) at the growth in short interest in the sector during the year. Not a single person I spoke with then (or since) knows where the big spike in October came from.

Speaking of sharp objects . . . - Fil Zucchi - 1:57 PM

With the SPX now churning under 1275, we know that the odds that a weak market will get weaker into the close increase. So while I am sharing in Boo's SPX 1275 celebration, I am also keeping an eye out for opportunities. One such is Kurita Water Industries (Bloomberg 6370 JP). It's one of the water plays I mentioned several months ago. Another good Tokyo spanking in sympathy with Wall Street's performance, and I just may get my wish for a 2000 Yen price, for an introductory buy.

Another name from the water play list which I am revisiting is Zenon Environmental (ZEN CN, Bloomberg). It's a Canadian company with very interesting products, but which I described as an "operational train wreck." The stock has been a mess as well, down 30% from when first mentioned. The question is whether the drubbing has now taken a lot of the risk out the name. This also ties into Prof. Fleckenstein's theme of a potentially stronger Canadian dollar.

If I make up my mind on this one, you will be the first to know.

Position in SPX

Raise the roof - Sanjay Somaney - 1:22 PM

Indian IT giant Wipro (WIT) announced surprisingly strong results overnight in India.

The company reported revs of $617 mln, +33% y/y and net income of $0.08/share, +23% y/y. Global IT revs were $472 mln, +33% y/y and earnings from that segment were $115 mln, +26% y/y. The division added 61 new clients in the quarter, the highest ever quarter add. The India, Middle East and Asia Pac business unit grew 45% in EBIT and 19% in revs y/y. WIT is guiding next quarter Global IT revs up 10% q/q. Not shabby at all.

This bodes very well for Cognizant Technology Solutions (CTSH) and Satyam Computer Services (SAY). SAY will report on Friday morning.

Position in wit, ctsh, say

Mini Minyan Mailbag - John Succo - 12:11 PM


Having seen strange things before, any chance the collapse in Japan is contagious? Seems to me I remember this sort of thing starting there once before about 17 or 18 years ago.

Minyan Bully


It is all about credit expansion; in that sense, it is all tied together.

Japan has internalized its debt and lent abroad to drive their currency down. This is consistent with almost every country, except of course the U.S.

There is a scenario where globalization is reversed and Asia becomes centric. This is the doomsday scenario for the U.S. while Asian equity markets may float along. But predicting equity prices is like predicting psychology, valuation being absent.

Valuation occurs at bottoms, not tops.

All along the watchtower... - Kevin Depew - 9:54 AM

Out of the gate there are a number of items to watch today:

  • Internet HOLDRs Trust (HHH) will violate the trendline from the October 2002 lows with a move below 63. If/When.
  • The PHLX Semiconductor Index (SOX) will give a high-pole warning sell signal on a 5x3 Pnf basis with a move to 505. This index, as noted yesterday, has already registered TD-Sequential daily sell signals.
  • Note the dollar and gold futures both declining today?
  • Homies don't play that? The PHLX Housing Sector Index (HGX) is actually up a buck so far. Not advice, but I see that as a last gasp and am right now looking for opportunity to sell what they are buying in that area.
  • See the outperformance today in the Healthcare and Consumer Staples, XLV and XLP ETFs, versus the Tech and Consumer Discretionary ETFs, XLK and XLY. Comparing a ratio of XLK vs. XLP one notes the lower peaks since January 2004 (coincident with lower peaks in overall market participation), and therefore consider the very real possibility that the tech outperformance highlighted in October has run its course.
  • Since October 24, the date of the article above, the XLK (Tech) was up 7.2%, compared to just 1.4% for the XLP (Consumer Staples).

"Welcome to the Jungle... it's gonna bring you down" - Axl Rose - Jeff Macke - 9:33 AM

Thoughts on the first sell-off of '06:

  • Yahoo (YHOO) and Intel (INTC) stunk but are more Maguffins for a sell-off catalyst than fundamental causes of panic. Google (GOOG) and Advanced Micro (AMD) have obviously been taking share from someone.
  • Speaking of Google, I'm approaching stop-loss levels. I don't have many actual feelings about that fact, which is sort of the point of those things.
  • If we sell-off hard we'll be back to flattish for the year, which fits in pretty well with my "trading range until long after we're all dead" thesis.
  • Trading is supposed to be hard. If it wasn't, everyone would be doing it. Just like in 1999.


A Warm Front Blowing in from Canada - William Fleckenstein - 9:23 AM

On the subject of the currencies, I would just like to note that I consider the Canadian dollar an extremely viable alternative to the U.S. dollar. And, if Stephen Harper, the frontrunner for Canadian Prime Minister, wins, that will only add to the reason to own the Canadian dollar, especially if his proposal to eliminate the capital-gains tax on Canadian shares carries the day. It appears that what Harper wants is to allow you to not pay the tax if you reinvest your money.

The mere thought of that makes me want to do more research on Canadian companies, particularly those whose businesses (for instance, an asset-management firm) would be impacted by the elimination of the capital-gains tax on shares, which would also boost the multiple down the road. Obviously, this is not a law yet, but I plan to be on the lookout for such ideas, assuming they are priced right.

Ok, now what? - Jason Roney - 9:11 AM

As I write this the SP futures are currently -.8%. With the low VIX readings we've seen over the past few years, gaps of this magnitude have been rare. But at MIM1, we looked at historical performance surrounding -.75% or worse gaps in the SP futures.

1. At some point today, we should see at least a .3% retracement.
2. 75% of the time, the SP closes in the direction of the gap and more than 50% of the time the SP remains negative throughout the day. But it's the behavior of the markets AFTER the first hour that tells us most.

1. If the SP makes a new intraday low after the first hour, the odds of a down close increase to 97% and the odds of a close below the open (using SP pit open price) increase to 75%. In other words, reversals from large gaps tend to occur in the first hour.
2. And if the SP makes a new intraday high after the first hour and half, the probabilities for afternoon weakness are minimized.

How big is big? - Jason Goepfert - 9:06 AM

How big is this gap down (if it holds where it is)? BIG.

Gaps down of 1.5% or more in QQQ(Q) have not been all that unusual - we've seen 103 of them since 1999. The difference is volatility. A 1.5% move in 1999 is something entirely different than a 1.5% was in 2005.

A much better way to estimate the impact of this gap is using Average True Range (ATR), a function that allows us to compare current moves to past ones, adjusting for the changing regimes in volatility.

This morning's gap down is around 1.5 times the ATR of the past 14 days (the standard lookback period). The only other time we've seen a similar move in the history of QQQQ was 09/17/01. 'Nuff said.

OK, Big Ben, Here comes the REAL conundrum..... - Bennet Sedacca - 8:03 AM

13 days and counting until the end of Greenie's term and boy oh boy, do we have a conundrum coming. If the Fed raises rates to 4.5% as is widely expected, not only will 2's to 10's be inverted, so will EVERY other part of the curve. Including 2's to LONG BONDS, currently trading at 4.49%.

Then we will see if it really is 'different' this time and there is no recession following. My call is and has been that Big Ben will be greeted by some sort of financial event that will have them easing by 2007 or before. Housing seems too easy so I vote for some international disruption or derivatives mess. But that, truly, is just a guess.

At that point, as we have said here before, we will then see a parallel shift down in rates, and a blowing out of corporate spreads. So, as we have recently sold some long munis at sizeable profits, we continue to concentrate on quality, quality, quality....

Positions in municipal bonds, funds, U.S. Agencies and treasuries.

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