Buzz Bits: Dow Closes at Record High, Nasdaq Finishes Higher
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Bling! - Todd Harrison - 3:49 PM
Somebody call Ned Ryerson! The DJIA is grinding to another high, Fed heads are on the tape with inflation concerns and the weak knees (nets and money centers) are again ushering in a rolling rotation rather than an outright migration. Yeah, we've seen this flick before. Friday. Thursday. Wednesday...
In this version of Groundhog Day, everyone's banking coin into the inevitable year-end ramp. Or are they? I've spoken to a slew of fund managers today who've only recently begun buying the averages for fear of being left behind. Indeed, in the hedge fund universe, it's "alright" to lose money if everyone else is losing more. But not making cake when others are baking? Blasphemous!|
I just got off the horn with a reporter who asked me if DJIA 12,000 "mattered." Not technically, I told him, but it'll serve to reinforce the "long squeeze" we're currently seeing. I'll tell you the truth, I was looking to fade 'em (read: sell) this morning but my tea leaves were too strong. As such, I simply made further sales on longs rather than build upon my shorts.
Know this Minyans--we've got a heckuva big pipe this week. Make sure the portfolio you're going home with allows you to think clearly and act objectively. The main course is about to be served.
May peace be with you.
Retail & Time Frames - Jeff Macke - 3:26 PM
Goldman Sachs (GS) was out this morning saying it remains cautious on the specialty retailers. The firm took Gap (GPS), Maidenform (MFB) and Jones Apparel (JNY) to sell, saying it expects more possible weakness from Gap, in particular.
I don't disagree. What's more, I fully hear what Bennet and others are saying about the macro bearish case. Yet I'm still overwhelmingly long, largely in retail.
Why? Because stock-specific newsflow trumps macro concerns. CostCo (COST) and Mattel (MAT) are telling me the consumer looks strong for the holidays. Not (just) by their stock action; the companies are literally saying the consumer remains strong. What's more, the sector has two giants, in the form of Wal-Mart (WMT) and Sears (SHLD) giving away share with flat to negative comps and a hugely robust M&A climate.
The Mattel CEO may be a lousy economist but he knows his business. I'd love a dip in the retailers, particularly among the leaders. The group may or may not have a rocky 2007 but the numbers for 4Q are still going to go higher. With that set-up, I'll bet on the stocks every time.
Randoms - Fil Zucchi - 1:57 PM
- Prof. Gula pointed me to an interesting article on Debka.com regarding pending U.S. Naval operations in the Mediterrenean. Just below that article, there's another noting Iran's Supreme Ayatollah giving speeches while holding an automatic weapon. And oil and oils services names are hopping. Just coincidences probably...or not.
- The stock of WiMax company Alvarion (ALVR) is finally moving. I've been of the opinion that WiMax will ultimately find a profitable niche in the broadband space though so far it's had more head-fakes than MJ in his prime. The obvious risk is that the ongoing buying tidal wave is beginning to lift everything on its path, merit notwithstanding.
- The March calls on Citrix Systems (CTXS) are relatively cheap, and $2 for the 40's seems pretty skimpy premium for a name that can move 10 handles in a blink. It has replaced competitor F5 Networks (FFIV) on my sheets.
- Except for their charts, I've yet to hear even a remotely cogent argument as to why the bottom is in for the homies. For today's reality check I offer you this interesting bit from Minyan Scott.
- I was in New Orleans for 3 days. The city is dying a slow, lonely death. Sad and shameful.
Position in CTXS, ALVR, energy names
Rewind - Kevin Depew - 11:13 AM
- In the early going overall buy signals continue to swamp sell signals... no real surprise there. That's been the m.o. for this market since September.
- I understand some out there are seeing 1365 as a significant area of contention, but I don't find much there in my analysis.
- On a PnF basis 1370 is the top of the 10-week trading band - so we are extended. 1395 remains the 5x3 chart price objective but it would be "more bullish" in the big picture to step back first (see 50-day indicator below), rewind things a bit to the 1348-1352 range, possibly even 1332, and then move forward.
- Interesting article here from Minyan Mike Shedlock, "Kool Aid & Krispy Kremes." He sees both sides of a potential recession - one where there is "limited impact," another where there is "a rolling cascade of layoofs."
- Dr. Brett looks at the "is a rising market "due" for a fall" phenomenon" with one of my favorite indicators - the percent of SPX stocks above their 50-day moving average. "This tends to peak ahead of price peaks--and in recent years, it has had to reach at least 80% to make a peak."
- Where is the indicator now? 83%. See it here, courtesy StockCharts.com.
Banking on Corn - Ryan Krueger - 10:14 AM
So I got a call from a terrific partner of my firm who has been an excellent "tell" on a segment of the economy. And no, he wasn't complaining about "The Un-bankable" I posted this weekend. He wanted to tell me he'd be out of pocket for a few weeks as he's going home to help his dad harvest corn in Nebraska, which is noteworthy because he runs the sub-prime lending department and hasn't been able to take a coffee break over the past few years, now he's taking off more than a week.
I'll let others opine about the sub-prime (I gotta give bankers a break for a day or so). I'd rather get my overalls on and follow my "tell" once again. I wrote about corn just last week. Ags as the next oil has been my strong opinion. The USDA is now out saying by this time next year before the corn harvest, global reserves will be the lowest since 1984. Of course there will be speculative premium in these markets to be traded around carefully, but ultimately this will be a tight supply story in my view. In case anybody thinks price spikes are simply bubbles soon to revert I thought it would be helpful to provide a little context in the attached long-term chart. My hunch is that our banker-turned-Cornhusker will not need to tell the farmers about ARM's, they got plenty of "bank."
COT update for 10's and SPU's - Bennet Sedacca - 9:03 AM
See the chart here. Hedgers covered about 15% of their outstanding bets against 10's according to data released Friday by the CFTC. They covered about 70,000 contracts.
Keep in mind they are still short nearly 400,000 contracts and that the data is as of Tuesday and we won't know if they covered more into the weakness at the end of the week. We will have to wait until next week for that data.
While my firm does own some 10's and is admittedly going against their position, our position size, for now, is modest and long term in nature. Not a trade as we have stated before.
Their positions in SPU' s and the long bond were basically unchanged. They are short around 55,000 S&P contracts when you combine the big contract and e-minis. My guess is they increased their bet as we headed towards 1365 in the cash. My firm will have to wait for next week on that data point as well.
Position in Treasuries
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