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Buzz Bits: Dow, Nasdaq Close Lower

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


A Howl and a Whine I'm After You - Jeff Macke - 2:28 PM


Wolf lover Adam Warner just posted: "There's nothing wrong with waiting until something happens... rather than sitting with the positions and waiting for better days."

I'm inclined to feel the same way about the rally in general and the gains in consumer stocks in particular. I hear the case the Bears are making. I understand the idea of the consumer rolling over and taking the tape with it. What's more, I think the easy pickings are over in the consumer names. As I buzzed this AM, I see Wal-Mart (WMT) rallying on news which is, at best, mixed as a sign that fund managers are out of good ideas and getting down the dregs of the barrel.

All of that said, it's been much easier to make money long than short in '06. Just because you didn't "deserve" to make gains on the Hoofy side of the ledger doesn't mean you have to give all the cash back.

Where does that leave me? Tightening up trailing stops and staying long. Take it from a guy who spent most of 2003 and 2004 short GM and Ford (F) only to see the stocks remain reasonably strong until after I'd closed my fund and covered: stocks can stay "irrational" an agonizingly long time regardless of what they "should" do.


Ground Level - Adam Warner - 1:22 PM

Just to revisit yesterday's thoughts. I am not *bearish* on volatility. I simply wanted to highlight the costs associated with sitting with a bad volatility long. Even if you catch the absolute bottom tick in the VIX, you could still come out a loser.

Why? Pesky little thing called time decay. Going back to the SPY for a sec, this is actually one of the largest divergences you ever see between the implied volatility and the historical volatility. Meaning that even if you own gamma at these multi-millenium lows, the options have *theoretically* been a net loser. I say *theoretically* because a strategy of buying straddles a month ago and never hedging with stock has indeed worked.

So while I do think volatility in general is a buy here (how could I not?), I would caution that timing is everything. There is nothing wrong with waiting until something happens (and missing that bottom VIX tick) rather than sitting with the positions and wait for better days.

And one final disclaimer. I am referring to *volatility plays* and not *directional plays* which have more to do with actual market timing.

Position in SPY


According to the seasonals, if ya ain't long, you're wrong... - Jason Roney - 11:32 AM

Many are aware of the 10/27 to 11/1 seasonal SP futures pattern. It's one of strongest seasonals going back to 1982, based on the work of Jake Bernstein. What it says is that you would be basically buying SP futures on the close of 10/27 and selling on the close of 11/1 (if holidays intervene then go to next business day). This has been profitable all but 1 year with profit to loss ratio of 226:1.

BUT, what if the market was running up into the seasonal? For example, what if SP futures closed above the close five days ago high for four consecutive days? That is, what if it is showing a fairly steady 5-day uptrend?

This happened in 1985, 1987, and 2005. The average gain was 18.3 SP points - so it was still strong). To fit that profile today we would have to see a close above 1380.70, basis Dec. SP futures.



Inversion worsens..... - Bennet Sedacca - 10:18 AM

Like I have said, the Fed talks HAWKISH but ACTS dovish. The MZM was up huge last week. And the potential for margin requirement cuts. That is dovish, stimulative stuff.

With the economy sagging and OVERALL inflation sagging with it, I still look for cuts next year by Boom Boom. Fiscal and monetary policy in 3rd years of presidential terms are notoriously stimulative. Maybe throw in self-directed Social Security accounts?

At any rate, see the chart here. It measures the 6 month bill minus 10 year yields. What do we have? A new high of inversion. Indicative of a sluggish economy.

Position in 6 month bills and 10 year notes


What you need to know... - Jon Doctor J Najarian - 8:15 AM

Another Record Close for The DOW - Exxon Mobil (XOM), Home Depot (HD), Disney (DIS) were strong enough to overcome the downward pull from General Motors (GM) and Boeing (BA) and the result was yet another closing high for the DJIA.

Microsoft (MSFT) Beats Estimates – MSFT posted an 11% rise in quarterly net profit, relying heavily on their database division which must drive Larry Ellison stark raving mad! Revenue rose to $10.8 billion, beating the consensus estimate of $10.7 billion.

Exxon Profits Top $10.5 Billion – XOM easily blasted through estimates for 3Q, posting a $1.77 per share profit against an estimate of $1.59. I read this profit was larger than the quarterly revenues of any of the smallest 10 companies in the Dow.

Affymetrix (AFFX) 3Q Beats Street – The genetic testing tech company said 3Q revenue was $84.7 million, which helped them best consensus estimates by $0.02 per share.

Positions in XOM, AFFX

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