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Buzz Bits: Dow, Nasdaq Dip Into Red

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Your daily Buzz highlights...

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Editor's Note: This is a small sample of the content available on the Buzz and Banter.



Bell Buzz - Todd Harrison - 3:51 PM

  • Sorry for the laggage, my friends, but I've been juggling melds on this Freaky Friday afternoon. The good news? The "extraneous, behind the scenes" stuff that's been monopolizing my "free" time will soon abate.

  • Over in Tape Town, the Minx, which jumped into '07, is limping into the first weekend of the new year. The obvious themes this (three day) week were the commodity meltage, dollar traction and submerging markets. They are, clearly, inextricably linked together.

  • Old School Minyans know I dig the fade trade, meaning I like to buy dips and sell blips. In that vein, I used the energy smack down to add some Weatherford upside calls. I didn't chase this fave into the high $40's, waiting instead for the break below that level. I'm there and, so you know, I haven't peeled out of any of those pups into today's 3% bounce.

  • I also added some Herbie the love bug puts (H&R Block). I think that space has some smoke and, as I also expect vols to uptick (in general), I figure there are two ways to win. This is, of course, not advice--I couldn't possibly do that without knowing your time horizon and risk profile.

  • Please take some time to read Professor Tom Alexander's latest Buzz, there's some 'there' there as we reminisce about the May fray.

  • I see dead people! And I hear closing bells! Fare ye well into that bell, Minyans, and enjoy the weekend pigskin spin. Go Jints, Go Jets and Go Home!

    R.P.


Position in wft, hrb, metals



Today's breadth readings... - Tom Alexander - 2:56 PM

Todd and Kevin made references earlier today that the present situation feels like last May, the last time the U.S. stock indices experienced something resembling a correction. Well, maybe, maybe not. Last May is the last time breadth got this oversold and did not produce a low within just a few days trading. Since the July low, every time breadth has registered negative readings near those we are seeing today it has marked a pivot low and buying opportunity.

Also, Nasdaq Comp breadth has been crushed while the Naz 100 remains well above Wednesday's low. See the chart here.

When a correction begins it will likely kick-off on a day with very negative readings such as those we are seeing today and will not look back, price-wise. This is what happened in May. However, until the pattern that has been in effect since the July low fails I have to give a bullish resolution to the present decline the benefit of the doubt.

If the present rally is still intact and the equity indices are close to another low prior to the next run to new highs, whatever low is put in today may be exceeded in the next day or two, but it should not be exceeded by much and it should be accompanied by divergences at the low by relatively stronger breadth readings than we are seeing today.


Break Time - Kevin Depew - 2:42 PM
  • Just back from a conversation with our friends at WallStrip.com about ETFs, in the market it appears nothing has changed.
  • New PnF sell signals still leading buy signals, now by a 24 to 4 margin.
  • Among breaks of interest:
    - ProLogis (PLD), double bottom break at 59
    - China Life Insurance (LFC), double bottom break at 49
    - Under Armour (UA), double bottom break at 48
    - Occidental Petroleum (OXY), triple bottom break at 45
    - Motorola (MOT), double bottom break at 18, trendline support from the 2003 lows at 17.5.
    - Genentech (DNA), triple top buy signal at 85.
  • I like Biotech. I know there are marketwide problems with equities as an asset class, but this sector is showing very positive action in the face of overall weak Nasdaq-100 action and on a sector relative strength basis.
  • The Biotech HLDRs (BBH) have broken through very important DeMark TD-Line resistance on the daily charts.
  • The iShares Biotech ETF (IBB), however, has more work left to do; 72.32 on a weekly basis is a significant support level.



Mirror mirror on the wall, what is the largest bear flag of them all? - Bennet Sedacca - 9:34 AM

See it here. It is a 40-year chart of the dollar index - DXY.

I've previously mentioned the possibility of a higher dollar in the first half of 2007. My reasons include:
  • Hedge funds massively short.
  • Hedgers long.
  • Positive seasonals.
  • DXY tends to do well in 3rd year of Presidential terms until mid-year.
  • EVERYONE I know hates it.


That said, that is a cyclical view within the context of a gigantic secular bear trend.

There are two 'easy' trades in my book. First, buy stocks making new all-time highs. Why? Because there is no resistance. Second, short things making all-time lows.

Imagine if we take out the 78-80 area in DXY. You have 40 years of losers and no support.

This is one of the most important data points for late 2007 and beyond.



What you need to know... - Jon Doctor J Najarian - 8:19 AM

Crude Slide Continues – The question yesterday was how would Crude oil traders respond to the biggest selloff in over a year. Now we know the answer, they hit the exits! Crude fell to a 19-month low of $55.59 and has only managed a $0.04 rally this morning in electronic trade.

December Employment Numbers – I expect us to be just above consensus of 115,000 and unemployment rate to hold at 4.5%. As always with these statistics, it isn't the actual number, but the revisions to previous months that will really matter. Report comes at us at 8:30 am ET.

Motorola (MOT) Lowers Guidance, Will Miss Profits - Tough times for the number two cellphone maker, as their margins shrunk dramatically in 4Q. I blame the delay of getting the Moto Q to market as it left the door open wide for Nokia (NOK) and Samsung and that Samsung Blackjack will continue to pressure MOT.

General Motors (GM): More Job Cuts – With the Detroit auto show just a week away, GM boss Rick Wagoner said more job cuts were definitely a possibility in 2007. However, Mr. Wagoner said, "I think it'll be a lot more through attrition than buyouts, but I wouldn't rule it out (job cuts)."

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