Buzz Bits: Dow and Nasdaq End Weaker
Your daily Buzz & Banter highlights.
Of REITs and other carnage - Fil Zucchi - 3:08 PM
As my Buzz bug lit up with the posting by Prof. Sedacca on REITs, I was (and this is no lie) playing with this chart of the iShares REITs (IYR), which I am short of, and I own puts on. The IYR currently yields 5.5%, better than before, but not quite good enough for me. Furthermore, one would think that dividend growth (if any) will be somewhat constrained and asset values will likely fall quite a bit, though I think few if any REIT's will fess up to that by taking write-downs. I'll be inclined to cover in the $55 range and/or sell puts at that strike.
However, with today's action in the financials, and consistent with the type of anxiety seen when things are getting really bad, I am seriously considering the possibility that there may be a "nuclear size" cockroach about to go off somewhere, and/or whether we are reaching levels where we will see forced liquidations, conditions which in the context of highly leveraged financial institutions, can ultimately take on a life of their own.
Bottom line, as I said this morning, I think the frog is indeed boiled: whether it can pull a Houdini and escape for now, or it kicks the bucket, I think we are on the cusp of a very violent move, which will overshadow the fundamentals of any company or group.
Curb! - Quint Tatro - 2:56 PM
One of the hardest things for a trader to curb is the temptation to jump back in and call a bottom. There is a hero within us all but the mighty attempts to wade into the fire and slay the market beast should be held back and any such desire should be taken out on the golf course or in the batting cages.
Today's selling is intense and I suspect it may get worse as we head into the bell, considering I don't know many who want to take anything home over the weekend much less wade in to try new names.
I pared back my inventory earlier and have done nothing other than watch the carnage today. I have passed on quite a few short opportunities because it feels awful forced and I am much more interested in using cash as my hedge than reaching for some pennies on the dark side.
An ironic bright spot in the portfolio today is FCstone Group (FCSX) which I started yesterday and is advancing over 1.5%. The stock is not immune so I am not getting too excited nor have I added any shares however the relative strength in such a lousy tape is worth noting.
By day's end I will have taken my lumps but protected my capital in order to live and fight another day. I will go home with a tremendous amount of dry powder and be ready to hit it hard again next week.
Hang in there, Minyans. The market game is never easy, however the good thing about a sell off like this is it eventually does lead to some exceptional bargains. Our job is to simply sit patient and let them develop.
Dusting off the technical toolbox - Bennet Sedacca - 12:50
It seems like we are heading from denial to recognition and I suspect, fear, when it comes to financials.
I have dusted off the technical toolbox and see a breakaway gap down in the XLF.
A close below 28 indicates much lower targets and the capitulation that comes with it.
See it below.
Click to enlarge
Between the Ticks - Jeff Cooper - 9:23 AM
- It will be interesting to see the behavior when the S&P gets into the window of the gap up from Nov. 28, which was around 1433. This level should be hit in the opening rotation and give a first bounce.
- If the first bounce is meager and the index holds below the first hour low then we could get continuation and a gonzo Friday down towards the 1400 level.
- However, despite the negative look of the dailies and weeklies, the monthly chart shows what could be a very constructive pattern - a double down inside bar as long as the November lows hold.
- Additionally, there is an important turn due between Jan 11 to 15. This period coincides with 180 degrees in time from the July peak and 90 degrees in time from the October peak, giving a possible high to high to low pattern.
- Be that as it may the vultures are picking at Goldilocks with no growth, hiring at a standstill and the cost of gas at the pump and other necessities pressuring the consumer and his ATM Home card on the restricted list.
- The conventional wisdom is that the Fed is behind the curve and/or that it is a paper tiger.
- So, now we get the risk aversion that the backdrop was begging for in the second half but the Street kept stepping up to buy the 10% declines? Go figure.
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