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Buzz Bits: Dow, Nasdaq Green Again

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



Earnings Report - MV News

Solectron
(SLR) reports 4Q EPS of $0.06 vs. $0.05 cons on revs of $2.90 bln vs. $2.71 bln cons.


Bell Buzz - Todd Harrison - 3:55 PM

  • Man, Minyanville articles from 2002. We've been at this critter thang for a while, eh?

  • Positive breadth, held levels (S&P 1240, BKX 114), rolling rotations (as opposed to outright migration). Hands over eyes, the eyes have it.

  • As far as the metals, Hoofy (and Stella) won't get his groove back until the XAU pokes through 130. Ditto the drillers into OSX 186.

  • I'm still on hedge fund watch. While the Dow wows, alotta managers have some 'splainin' to do, Lucy.

  • What would O-Dog do in a tape like this?

  • I just spoke to a fund manager who's up mid-teens for the year. I said "Book 'em, Dano," to which he replied, "I can't--if the market keeps rallying, I need to add exposure." That, my friends, is the performance anxiety that Boo must fight.

  • That post by the birthday boy Blue Steel Bennet Sedacca is Buzz manifest. Noice work, Mon Frere.

  • I'm gonna remove my red rubber nose and big floppy feet for the first of my tri-fecta post-close melds. I sincerely hope this finds you well and I'll see you bright eyed and bush tailed for our Breakfast with Beeks.

  • May peace be with you.

    R.P.


Position in metals, energy



T'anks for nuttin', Noonan - Jeff Macke - 2:34 PM

I should known better than to mention the name but TiVO (TIVO) is meekly trying to come back after the stock's most recent beat down. In this case, the hammering came from a ruling allowing Echostar (DISH) to keep selling DVRs which have been ruled to violate TiVO patents. Dish had been facing an injunction prior to the most recent ruling which came last Tuesday after the close.

One way or the other, Dish is going to have to pay TiVO. The questions are when and how much. Echostar pooh-bah Charlie Ergen is known as a pugnacious sort; the lifting of the injunction on Dish suggests Charlie will now pay TiVO "later" and "as little as possible"... hence the selling in TiVO's shares.

In the meantime I'm just hanging out, waiting for my TV to boot up so I can try to find the Yankee game in hi-def (with intermittent freezing) on my Cablevision (CVC)-provided TiVO knock-off set-top box. There may be a philosophical lesson in all of that, somewhere, but right now all I know is that the forecast is for a "fair to mostly-surly" Macke on tonight's Fast Money (8pm Eastern ("Mets?"))

Position in TIVO


That glass is twice as big as it needs to be. - Rod David - 1:48 PM

NDX rallied along with S&Ps and the Dow from June's low. But unlike S&Ps and the Dow, the NDX remains well under the year's highs. Is that a glass half-full, or half-empty?

The performance gap suggests there is potential for NDX to play "catch-up". But rotation into Nasdaq laggards could depress S&Ps and the Dow to the extent that they are used as the source for cash.

That's probably what this morning's price action was about - S&Ps and the Dow struggling to hold positive territory, while NDX prints higher highs. Wider breadth among buyers is healthy, but this is approaching cannibalization, and can't last long without S&Ps resuming their rally.


Is that 1600 S&P or Pennsylvania Ave.? - Kevin Depew - 11:56 PM

Kev,

Your Goldman Sachs (GS) chart got me thinking so I plugged in the S&P 500 and it has a preliminary price objective of 1600. Yikes! Is that realistic given some of the negative divergences we've seen in the market?

Minyan Rhino

MR -

Looking at a couple of different PnF scales of the S&P 500:

10x3
5x3

I see price counts on a PnF basis ranging from 1395 on the 5x3 to the 1600 you mention on the 10x3.

The answer to the question, "Can we see this kind of price action given the divergences being seen in the market?" is: Absolutely. In fact, this is virtually identical to what happened in 1998-2000 time period running up to the all time highs in the market indices. A bear market began in individual stocks as they simply stopped participating in the capitalization-weighted and price-weighted index movement. That is why the time period was so grim if you ran money for clients during that period, which I remember quite well because I did.

Between September and October 1999, the SPX (not the flashy, high-flying Nasdaq-100 (NDX) mind you, but the good, "old-fashioned" SPX) gained 80 points. In November 1999 it tacked on another 26 points and in December it surged still another near 90 points.


Small Change - Adam Warner - 11:47 AM

Small has had a mini-comeback in the past couple of days, but what I find interesting is that volatility in the Russell STILL outperforms the S&P. While anything and everything Big meanders near multi-year volatility lows, the IWM continues to hover between 20 and 23. That's considerably higher than the range of 15-20 that held from last November to this past May.

Basically, volatility popped this spring, as was well documented. SPY and IWM options both soared about 50% within a month (albeit off very low levels). The SPY gave back the entire lift by the end of July. The IWM has stubbornly held onto about a third of the pop though, even now, 3 months of plodding market later.

You would THINK it implies the move into Big may be running it's course, in that Russell options remain RELATIVELY over bid.

Position in IWM, SPY


The greatest negative divergence of them all? - Bennet Sedacca - 9:50 AM

Again, this is just what I see, not advice. I see the DJIA making new highs, yet I feel the broad market lagging. Why do I feel it lagging? Well, duh, because it is!

Take a look at this multi-year chart that plots the DJIA versus net new highs on the NYSE (new highs minus new lows for 52 weeks).

The net new highs are declining rather obviously and the DJIA makes new highs into the top of the channel I mentioned earlier.

Minyan Michael Santoli wrote a great piece on it yesterday and I too recall similar action in '99-'00. It is certainly a period of frustration for active managers. I would guess that from an asset allocation perspective, it now makes sense to sell mutual funds and buy index funds.

By the way, these are late stage tendencies as this bull is long in the tooth and running on fumes (hence the poor breadth). So it's not a market call, more of an asset allocation call. One that my firm will adjust to for portfolios. There are times when it is just tough to beat the index. This is likely one them.

My firm will remain underweight at this time as the risk/reward feels skewed to risk, but that is a decision I make as a risk manager, not for any other reason. The shorts are running for cover and I respect that the trend could go higher, but it will have to do so with me under-performing for a time. My methodology has stood the test of time and this is one of the toughest tests it will have to take. But one thing I have learned is that preservation of capital and steady returns, from my chair, are more important than being the most popular guy at a party.

Position in DJIA

No positions in stocks mentioned.

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