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Buzz Bits: Friday, November 18, 2005

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TGIF Minyans

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Finishing Touches - Todd Harrison - 3:56 PM

  • While I distinctly remember someone talking about Google pinning $400, it would take a braver man than I to short that straddle.
  • NYSE breadth is 3:2 positive and the tape feels firmer than a college cheerleader as we edge towards a close at...anyone? Anyone? Yep, S&P 1250.
  • Is this last pop expiration related? I don't think so (index options went out this morning).
  • Raise your hand if you're planning on attending the Jets-Raiders affair at the Meadowlands on December 11th.
  • I don't know about you but I'm fried like an egg.
  • Peace Frog~

    R.P.

You walk over
But you limpin' back... - Todd Harrison - 3:34 PM

The Minx slinks to the closing bell as traders trade and critters dwell. This week was a strong showing by the Matador Crowd considering the non-participation by the banks. We flagged this complex over a week ago and they've been spinning their wheels since.

Hoofy is quick to note that a "rolling rotation" took the place of an outright migration and it's tough to argue against that point. The caveat for the bulls is the looming resistance in the context of an overbought tape, a dynamic that we're all too familiar with. That may not matter to the performance chasers but it has traditionally produced headwinds.

I don't know how "deep" the (expected) pullback will be but I gotta think that Boo puts up a fight in here. I may be wrong--it wouldn't be the first time--but that's how I'm hangin' as I ready for the Friday night faceplant. And after the week that was, my pillow can't smack my puss soon enough!

Fare ye well into the bell, Minyans, and please make smart choices into the bell.

R.P.

Mini-Minyan Mailbag - John Succo - 1:55 PM

John,

This morning SPX was high as 1249.58, but the settlement value, SET was 1254.85. Can you explain how they come up with the SET value ?

Thanks,
Minyan Jerry

MJ -

It has to do with when stocks open. The SET settlement value is determined by taking all of the opening prices of all stocks regardless of when they open, but the high of the SPX is determined only when all stocks are open.

Let's take an example: 499 of the SPX stocks open right at 9:30 and only one stock opens at 9:35. It so happens that the 9:30 print is the high of the day for the SPX without the last stock opening; right after all 499 of the other stocks trade down. When the last stock opens at 9:35 it opens higher and the SET is computed with that price and all the other opening prices of the other 499 stocks. But when the stock opens the other stocks are lower, so the SPX high for the day does not change. In that case the high of the day will be lower than the SET.

Flashback! - Bill Meehan - 1:42 PM

This day in market history...

  • Closing levels 2 years ago today found:
    • DJIA: 9624.35
    • S&P 500: 1034.15
    • Naz: 1881.75
    • Crude: $33.16
    • Gold: $396.70
    • WFMI: $63.39 (128% lower)

This day in Minyanville history...

In other news...

  • In '85 on MNF, Lawrence Taylor ended Joe Theismann's career when he broke his leg on a sack. Anyone else now visualizing the gruesome break? Shiver!

Getting fat on biotech - David Miller - 1:15 PM

Biotech is enjoying another green day on the heels of a nice performance and strong breadth yesterday. Breadth today is 101 up, 3 flat, 47 down.

The NASDAQ Biotech Index (NBI) is threatening to break through a double top. The players who initiated the big bet against biotech last month are now almost certainly completely under water. While the index is overbought, a glance at the chart shows it often does some of its best work above the 50 and 80 lines.

This is a critical time in the stock market. Bears thought they had it all wrapped up in October, as they often do. At least in biotech, a strong blow through previous highs may start to alleviate the outsized short pressure on the sector. Yeah, I've said that before so take it with the appropriately large-sized grain of salt. "Will it be different this time?" is the question everyone is asking.

Friday fun fact - Jason Roney - 1:14 PM

I'm officially outta here for the weekend, but here's a Friday fun fact:

Toddo pointed out in the randoms that for SPX we have seen 10 higher Friday closes - today would be 11. So I checked it out. File this in the useless fun fact column, but this is only the 9th time we've had 10 consecutive higher closes on Friday (the last was 1985) and only twice before have had 11 (1951 and 1971). The longest streak was 12 in 1971.

Dibs! - Adam Warner - 1:06 PM

The Volatility Sisters are shining green today, noteworthy behavior on a Friday. But watch for Boo to revisit the VIX and company next week.

The herd traditionally wades in post-expiration and sells every option in sight to replace all the "income" they generated in the last cycle. Add slow Thanksgiving trading to the mix, and it's time to make sure you buy everything at Employee Discount pricing.

Here is an example of nonsense - John Succo - 11:56 AM

H&R Block (HRB) reported poor earnings and guided down. We tore these earnings apart and there is nothing good.

Most people think HRB makes their money from tax returns. But a real business of theirs is risky sub-prime lending: 25% of revenues and 50% of pre-tax profits are from this business.

The stock is up $2. Seems to me holders are defending stock given little reason to buy more.

Position in HRB

Pulse of the Planet - Jonathan Schwartz - 11:55 AM

News, laughs and ideas beyond borders...

Middle East

Asia

Europe

Americas

Still hanging - Kevin Depew - 11:20 AM

The SPX is thiiiiis close to the 1250 level, which would be a triple top break. Meanwhile, Dec. Gold has registered a TD-Sequential 13 on the daily chart, while the XAU yesterday broke a triple top with support just below 114 near-term. To add to the cross-currents the DX/Y has also reached some important exhaustion points.

Overall, the context remains negative for stocks, and each day the short-term indicators move further into overbought territory while the primary supply/demand indicators, the bullish percents only move higher begrudgingly, and slowly.

Position in gold

Cisco Kid, he was a friend of mine - Sanjay Somaney - 10:25 AM

Cisco's (CSCO) acquisition of Scientific Atlanta (SFA), the mega set-top box maker, makes very little sense from where I sit. CSCO will claim that it's part of the effort to find new technologies and businesses to goose revenue growth and thus boost its shares.

However, CSCO says that the deal would be neutral to earnings in 2006 and slightly accretive in 2007. I say, it will have a negative impact to earnings in 2006, and maybe even have a negative impact in 2007.

At best, the good guys can hope that by 2007, they will have assimilated the acquisition and maybe SFA will add slightly to earnings.

The main issue is the fact that GM's OM's at SFA are significantly lower than that of the Kid's, which could mean a drag on earnings for a while. The Kid might be able to bring margins up but it definitely won't happen overnight.

The Rubber and the Road - Todd Harrison - 10:01 AM

The critters just filed into my office to join me at my trading turret. What piqued their interest? S&P 1250, of course, as that seems to be the topic of choice all over the Street. I see it too, of course, and I'm chewing through possible scenarios as we speak.

Hoofy is quick to note the traction in the semis (+2%), the snazzy breadth (2:1) and the potential that fresh shorts are being laid out (that will need to be covered). Boo, for his part, is looking at this juncture as defined risk in the context of an overbought tape with a spate of underlying issues.

They're both right--there are two sides to every trade--but I told my metaphorical friends that I'm inclined to err to the side of caution until we mount this technical hump. The mechanics of the swing (aka defined risk and discipline) always serve us in good stead and the onus is on Hoofy to prove this point moot.

Is this a death knell for the year-end rally? No, it's simply a step on the journey as we find our way. And as we've learned, we've gotta take our trip one step at a time.

As always, I hope this finds you well.

R.P.

Gate Sniffage - Todd Harrison - 9:44 AM

  • Hello sparkness my old friend! S&P 1250 is thisfaraway. While uber-early morning breadth is 2:1 positive, I gotta believe that Boo will unleash some hounds. It remains to be seen whether their bark will be worse than their bite.
  • Global indices and commodities are all coming off their earlier highs. A precursor to the stateside equity action?
  • My tells today include JP Morgan (JPM)(in the face of the downgrade), Google (GOOG)(if it can stay above $400), breadth (always) and our major, massive level that we've been discussing for weeks.
  • I told Boo that he can lean against (read: sell into) S&P 1250 with a tight stop on the other side of the ride.

    R.P.

Decreasing time preferences - Scott Reamer - 8:52 AM

Money AMS fell by $46B last week, one of the largest one-week drops I have seen in a long time. We remain of the view that collapsing real liquidity increases the probability of a fat tail collapse in stock prices and a significant contraction in economic activity next year. It is also consistent with a deflationary, decreasing time preferences secular trend.

Say what? - Kevin Depew - 8:05 AM

A look at commentary, opinion and analysis from around the world:

  • Gary Kasparov writes in the Wall Street Journal about "The Wild, Wild West," the apathy of the West as Russia backslides from democracy.
  • Bloomberg columnist Mark Gilbert says the derivatives market is turning out to be a "safer place" than most think. But what about GM? He scoffs. Delphi? He scoffs. CDO swings? He scoffs again. Scoff three times on the ceiling if you're sanguine.
  • As the US debates building a wall along the Southwest between our border and Mexico, and taking on a more active, protectionist stance, the World Bank's Chief Economist, Francois Bourgiuignon, says migration can deliver welfare gains and reduce poverty.
  • According to Asha Bangalore at Northern Trust, a pass through of high energy prices to core CPI is not yet visible.
  • A fascinating essay by Murray Rothbard, worth a look for anyone interested in the framework of economic investigation. "Methodological individualism" must underlie the study of human action, of which economics is a part. "Such concepts as groups, nations, and states do not actually exist or act; they are only metaphorical constructs for describing the similar or concerted actions of individuals," Rothbard writes. Understand and implement this thought and the Keys to the Kingdom are yours.
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