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Buzz Bits: Chipotle Debuts, Microsoft Reports


An evening taste of the daily buzz...


Earnings Report - MV News

  • SanDisk (SNDK) reported Q4 EPS of $0.68 vs $0.63 on revs of $751.0 mln vs $732.0 mln cons.
  • Microsoft (MSFT) reported Q2 EPS of $0.34 vs $0.33 cons on revs of $11.84 bln vs $11.95 bln cons. The company reported deferred revs of $8.838 bln, +$34 mln sequentially. MSFT guided Q3 EPS to $0.32-0.33 vs $0.33 cons on revs of $10.9-11.2 bln vs $11.0 bln cons and '06 EPS to $1.28-1.32 vs $1.32 on revs of $44.0-44.5 bln vs $44.19 bln cons.

Why? Certainly!

  • Sometimes it helps to get multiple views of a chart. Here is a PnF view of the TLT, which has given a new sell signal. And here's another view of the TLT from Prof. Sedacca.
  • Minyan S. asked about CAT. The stock is up 4.6% following earnings this morning, and the announcement of a "major stock buyback" program in 2006. On a technical basis, the PnF chart is obviously going to look positive. The price objective based on the vertical count from the June 2005 breakout is 70. Nearly there.
  • Minyan JD asked about AMGN. The stock is right at trendline support on a PnfFbasis. I looked at it here on Wednesday and little has changed.
  • Is the housing market cooling down? Certainly.
  • GOOG has now ticked into the green. As I mentioned earlier, the last time it closed lower on a day when the NDX closed higher was last Thursday. Sort of a foreshadowing? As a result, Hoofy is watching the stock with interest here, hoping to hang on to his MOgoogJO.
  • Bennet just passed along this chart of the Russell 2000 (RUT): If you are long, isn't this right about where you take the trade?
  • RUT +1.6% today, doubling the performance of the NDX and SPX, while the DOW uses CAT, HON and AA to help add 1%.
  • Remember MSFT at the bell, and tomorrow brings GDP and New Home Sales. Have a good evening and a very pleasant tomorrow.

Flashback! - Bill Meehan - 3:08 PM

This day in market history...

  • Closing levels 1 year ago today
    • DJIA: 10,498.5
    • S&P 500: 1174.0
    • Naz: 2046.0
    • Crude: 48.80
    • Gold: 426.80

This day in Minyanville history...

In other news...

  • In 1986, Da Bears beat down the Patriots in Super Bowl XX, giving me another excuse to link to the Super Bowl Shuffle.

Much at stake... - Tom Peterson - 2:53 PM

MSFT reports after the bell of course. How the market receives this report may end up having a significant impact on the ability of the S&P to punch through important resistance in the SPH 1282 - 1293 zone and try for new highs into the FOMC/State of the Union address next Tuesday.

We have mixed readings on the tape, where divergences abound on the main indexes, yet the Russell 2000 keeps plowing higher. The S&P futures got into an hourly-basis 'spring' position yesterday and sure enough the bears could not keep the pressure on. One can't help but notice that the effort from the bulls to recoup losses from last Friday have not been a robust success either. This adds up to what we have - a market staying within the trading range for a while longer, as it works off some new oversold readings. Traders, which sometimes dominate short-term action, will therefore keep trading the low and high pivots until a directional move gets underway.

A key factor in MSFT's next move may be that it is already #5 on the Nasdaq short list (the largest number of shorts are the QQQQ as usual, followed by SIRI, LVLT, and then YHOO). I am positively disposed toward MSFT's long-term plans to shift its business model, but in the near-term execution is a real question mark. This is also apparent in the trading of the stock, where money flow is basically neutral. Bulls will likely prefer that MSFT stays above the $26 pivot, where a load of stops are likely positioned.

Position in MSFT

Mini-Minyan Mailbag - John Succo - 1:17 PM

Professor Succo,

Housing market slowing, interest rates rising (yield curve...ya da da) and Fannie Mae (FNM) up over 3 1/2 standard deviations - a company with no 'financial statements.' Got any insight?

Net short FNM via butterflies

Minyan Ron


With no news imminent on FNM and Congress now unlikely to severely penalize the company, the bulls have free reign to force it up. There is high short covering going on that could last for a while.

This doesn't change the fact that the company does not make money and is a long term short. We all know now how the "market" works in the short run. Mutual funds are just as dastardly as supposedly hedge funds are.

Position in FNM

Say What? - Kevin Depew - 12:45 PM

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

  • Andrew Grove, former chairman of Intel (INTC) asks us to "Keep America, America" in the Wall Street Journal today. Clearly, he too has now become another "hysterical anti-security nut." Welcome to the club!
  • David Hale, writing in the Financial Times, says "Bernanke's challenge is to break the housing boom." The good news? "Mr Bernanke will probably have to rekindle an equity market bubble in order to compensate for the loss of wealth creation in the housing market." Yee ha!

Catching Up - David Miller - 12:23 PM

The general consensus inside the industry is Amgen (AMGN) has to do more than simply acquire Abgenix (ABGX) if it is to "catch up" with Genentech's (DNA) recent performance. In 2005, biotech executives remarked how aggressive biopharmaceutical biz dev people were during partnership negotiations. We've seen some nice early-stage deals, don't get me wrong. But people are looking for more near-term pipeline expansion, particularly from Amgen.

Nervous? First Time? - Adam Warner - 11:32 AM

I'm picking up tons of earnings apprehension out there this week. Problem is that it is all in one stock, Google (GOOG).

KLA-Tencor (KLAC) stock creeps up pre-number, but volatility remains a mediocre 35. High relative to the past year, and the volatility of the stock itself, but low relative to any modicum of fear in a name that once had Bellweather written all over it.

Worries in Microsoft (MSFT) Electric and Gas? Yeah, right. Big lift to a 17 volatility.

GOOG, in contrast, trades at a 60 volatility or so with a full week left before the big report. Volume is huge as well.

Position in GOOG

Try to see what's goin' down
Try to read between the lines. - Todd Harrison - 11:05 AM

I wouldn't blame Bertha if she didn't come around here anymore--this Minx turns more tricks than Kit Deluca! After three days of muddled action, the tape finally slinked towards our much discussed resistance. The recipe for a pure fade, right? Check again--breadth remains snazzy (9:5) and the financials are sticky green and above BKX 103. Fun, eh?

I've been jugglin' the struggle as I augment my risk profile and listen to our fearless leader on the small screen. I've gotta lotta thoughts on what he is saying but this isn't the time nor place to have that discussion. What I will say is that, from a pure financial perspective, I remain of the view that a large disconnect exists between perception (VXO) and reality (which is a bit scary).

For my part, and while I'm respectful of the BKX/XBD duopoly, I used the early strength to lighten up on some upside exposure and nibble on a bit more downsides. A push through S&P 1275, Citi $48 or a host of other resistance levels would toss the ball back to Hoofy but I know two things. One, I wanna stay long gamma (I think vols will continue to trend higher) and two, the compression continues to build under the surface.

As always, I hope this finds you hummin'.


position in financials

Sswwiiing batta batta, sswwiiiing!! - Fil Zucchi - 10:30 AM

I have been patiently waiting for Juniper Networks (JNPR) to throw me a pitch I could swing at and this morning it is finally obliging. A weakish quarter and poor guidance are doing a number on this bubble baby today. The fact remains though that for mid-layers network hardware there exists a duopoly: the Cisco-kid (CSCO) and JNPR. Software improvements can maximize existing networks only to a point after which the hardware pipes need upgrading. With the avalanche of rich media about to hit the web just around the corner, I am betting that network upgrades will ultimately be inevitable.

This is not today's story, but it is usually very tough to find good entry points in names like JNPR when the going is good. I am leaving plenty of dry powder for this one, but I am also going to swing at it.

Position in JNPR

Comments from Katie Townshend, CMT, chief market technician for MKM Partners: - MV Respect - 9:32 AM

"Near-term underperformance in the NDX relative to the SPX may be a bearish indication for the market. High beta stocks tend to underperform during market declines, and the NDX has greater exposure to technology stocks than the SPX. The relative strength comparative of the NDX versus the SPX is testing its uptrend line (again); a breakdown would indicate continued downside leadership by the NDX. The nearest support for the NDX also is based on former resistance at the August high in the NDX 1628-1629 area. We believe a breach of initial support would increase downside risk of a return to the October lows."

Bond yields continue to rise.... - Bennet Sedacca - 9:10 AM

Well this is where it gets interesting. The 10 year note is now above the 2 year note yields by a whopping 3.36 basis points (now that's a steep curve!), and at 4.52% is 2 basis points above where Fed funds will likely be with Elmer's last rate rise next week. Now Big Ben won't have the inversion we talked about.

It gets interesting because of the following. Yesterday, we noted the double top in 10's at 4.62% and as Toddo likes to say, those sorts of levels usually are so obvious they attract the market there. In addition, we have $50,000,000,000 of new Treasury supply coming soon, so higher yields make 'em easier to sell, only to have yields fall afterwards, making the dealer community profits. Plus the last two auctions have been met with tepid demand.

We mentioned yesterday that a falling bond market can feed on itself due to mortgage originator selling. I just wanted to explain briefly. Basically, when rates rise, prepayments on mortgages slow, increasing the duration of mortgage backed securities. Originators then have to sell treasuries to get their duration back in line. It is what exacerbates the moves in the market-if only for a brief time. That move would really only occur through 4.62%, as rates really have not moved that much yet.

Positions in various Treasury securities.

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