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Buzz Bits: Wednesday Nov 2, 2005

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An evening taste of the daily Buzz.

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Evening earnings snack-pak

  • Prudential (PRU) reported Q3 EPS of $1.46 vs $1.16 cons on revs of $5.9 bln vs $5.63 bln cons.

    The company guided '05 EPS to $4.85-4.95 vs $4.66 cons.

  • Activision (ATVI) reported Q2 EPS of ($0.05) vs ($0.07) cons on revs of $222.5 mln vs $203.9 mln cons.

    The company guided Q3 EPS to $0.52 vs $0.53 cons on revs of $790 mln vs $799.8 mln cons, Q4 EPS to $0.05 on revs of $226 mln and '05 EPS to $0.52 vs $0.54 cons on revs of $1.48 bln vs $1.49 bln cons.

    ATVI is trading lower by approximately (3.2%) after hours.

  • American Eagle Outfitters (AEOS) reported Oct comps of +17.3% vs +10.5% cons. Total sales for Oct were $157 mln.

    The company guided Q3 EPS to $0.45-0.46 vs $0.44 cons.

  • Qualcomm (QCOM) reported Q4 EPS of $0.32 vs $0.33 cons on revs of $1.56 bln vs $1.54 bln cons.

    The company guided Q1 pro forma EPS to $0.36-0.38 vs $0.35 cons and revs to $1.67-1.77 bln vs $1.66 bln cons.

Futurama - Jason Roney 4:02 PM

Only 3 times before have bond futures closed on a 20 day low and SP futures closed on a 20 day high on the day after an FOMC announcement: Mar '03, Dec '98 and May '93.

There are only 3 instances, so it's inconclusive, but SP was higher 10 days later every time. It's certainly a rare occurrence nonetheless.

Symbol Technologies - Jon Najarian 3:30 PM

It was tough to find a bigger loser than Refco (RFX), after all, falling from $28 to $1 is a very noteworthy accomplishment and as dismal as SBL's performance has been the bar has been set pretty high, or low depending on your outlook!

Anyway, with SBL trading $.07 above its fresh 52-week low we finally see some speculators willing to test the waters. Specifically, I show buyers of the January 7.50 calls , where only 13 of the 3,300 calls have traded on the bid! That my friends is bullish accumulation! They are also actively trading the Nov 7.50 calls, where 4,000 trade and January 10s, where 5,100 change hands.

My bro Pete will be on Bloomberg TV at 2:45 pm CT if you'd like more info on what we're seeing at insideoptions.com. Trade 'em if you got 'em!

(Position in SBL)

Answers I'd really like to know... - Todd Harrison 3:06 PM

  • Is this the year-end rally that we've been waiting for?
  • How do you shoot the trannies and brokers in the back?
  • What if you miss?
  • What is the path of maximum frustration from here?
  • To roll, or not to roll?
  • When is the last time that you smiled so hard that your face hurt?
  • Does your time horizon match your risk profile?
  • If you donated to the RP foundation September Relief effort, are you taking advantage of the generous offer from Hamzei Analytics?
  • Are you as excited as I am for the new professors to arrive?
  • Are all Cinci Minyans joining Succo and I for the town hall meeting on Monday?
  • Are we there yet?

More semantics - Kevin Depew 2:47 PM

Taking a look at Symantec (SYMC) on a technical basis after seeing Vitaliy's earlier post, I see that the stock today has given a sell signal with the move below 20. Support is at 18.5, resistance now 20, then 24.

Future sport - John Succo 2:03 PM

Peculiar action in stocks versus the market.

Ticks have hit +1000 at least five times today and an incredible 1200 twice.

We trade about 200 different stocks. Every time we put out an offer, even small, to hedge our delta the stock falls off. After a while we eventually get taken.

This means to me that everything is being futures led. When we offer stock, those trading stock only respond by lowering bids. It is not until arbs that sell the rich futures that someone is bidding for come in to "take" stock on the offer that we sell the stock.

The future buyers are not asset allocators; they should be selling stock here. The futures buyers are not price sensitive. The futures buyers will most likely continue through the day once they get going.

If it ain't Roque... - Uber-Minyan John Roque of Natexis Bleichroeder 1:53 PM

"The Dow TRANS-ports are breaking out of an 11-month base in which the index has traded between 3400 and 3900 and been able to skillfully avoid any concerns for it with respect to high energy prices.

Furthermore, the relative ratio at the bottom shows the TRANS- ports are close to breaking out of its 11-month relative base. The breakout implies a TRANS-portation Average target 13% above current levels."

Looking ahead to Friday - Jason Roney 1:51 PM

On Friday, we'll get the payroll data. The November release is historically the weakest for the bond. Over the last 25 years, bond futures finished negative 20 of 25 (80%) by an average -.36% on November payroll Friday. Even the 5 exceptions saw lower prices at some point with an average intraday low -.59%. The results for the SP were mixed.

Mini-Minyan Mailbag - John Succo 12:55 PM

Professor what do you make of this?

Has the derivatives or futures market become too large for the primary markets? It seems the treasury wants to somehow synthetically create specific dated securities to meet excess demand to keep failures from happening.

The alternative seems to be a "force majeure" situation that allows for cash settlement, but if so what exactly is wrong with that?

The following seems preposterous to me: "The Treasury would be issuing securities not because it needs money, but because market participants need securities."

What am I missing, if anything, and what are your thoughts on this mess?

Minyan Mish


MM-

This is simply allowing the Treasury to sell more long term debt, however it is spun.

Mini-Minyan Mailbag: The Bull costume - Todd Harrison 12:25 PM

Toddo--Nice rally call, particularly for a Boo worshipper. How far do you think it goes?

Minyan Mark.

MM,

Not "sure"--I've been debating my stylistic approach on the bull costume (continue to roll stops up and redefine my risk or leave 'em be under S&P 1200). As per my opening vibe, I'm admittedly nervous on the state of the union. But, my eyes-trannies and brokers at all-time highs-coupled with potential for performance anxiety into year-end, are encouraging to Hoofy.

This is a big level for the S's-the 50-day moving average, the previous September breakdown point, the autumn downtrend and the pre-Dell fail level. If they can push 'em through-and the internals stay snazzy-they could make a run for the '05 highs.

I'm approaching the Minx as a function of time and price and have been rotating some exposure as an "in between." And lest there is any confusion, this is a pure trade in the context of much bigger concerns. The question is one of degree and discipline.

R.P.

Déjà vu all over again? - Adam Warner 12:16 PM

Everything I mentioned about Electronic Arts (ERTS) yesterday, just substitute "Qualcomm (QCOM)" today. Quick summary

Earnings on, implied volatility at a seemingly low level, yet it's at a 52 week high.

Of course, just because Hoofy put down his Madden 2006 and plowed into ERTS after the number, doesn't at all mean QCOM follows suit. ERTS big reaction did probably add a click or two to the QCOM volatility however.

Classically, you would think an excess volatility lift ahead of a Number is bullish, but in practice, I'm not convinced it's predictive.

Mini-Minyan Mailbag: QCOM - Kevin Depew 11:55 AM

Kevin,

With QCOM reporting tonight, is there anything of note on a Point & Go Figure basis? Its recent pummeling has been stopped today and it seems to have support at 38.60-39.00 on a 1 year daily chart.

Thanks,
Minyan TB


MTB -

QCOM gave a sell signal recently with the move below 42, but is in an overall uptrend based on the conventional point and figure trendline from the 2003 lows (around 31). Nearer support is at 38 and 42 should be resistance.

I'm not an earnings guesser or presser, and I would consider the QCOM chart neutral at best without much of an edge either way; in sharp contrast to the MERQE chart posted this morning, which was decidedly negative.

Surprised at Symantec - Sanjay Somaney 11:40 AM

Looks like Symantec's (SYMC) acquisition of Veritas is causing a lot of short term pain at the consolidating company. Wall Street has looked askance at SYMC ever since the merger was announced.

To make matters worse, SYMC lowered their outlook for the December quarter and FY06 ending March 2006 as well, adding to the pain the longs are already feeling. I think John Thompson, the CEO has lost a lot of credibility and it will be a while before folks "trust" him again.

On the flip side, the company is valued very attractively if demand for its storage products (through the Veritas acquisition) and security solutions picks up. Factor in the almost $3/share in net cash (company has no debt on sheets) and the company is trading a bit over 15x revised forecasts of $0.99/share for FY06 and about 13x per share estimates for FY2007.

With the sellsider hordes now universally negative on the stock (close to its 52 week low), I wonder if it might not be a bad idea to start testing the SYMC waters after the hue and cry is over in a few days? (Just wondering, not advice).

"Two coins in a fountain" - Kevin Depew 11:35 AM

Minyans have asked to look at a couple of charts.

The first is a chart of Sears Holdings Corporation (SHLD) following unconfirmed rumors that the company may be taken private. See the chart here.

The second chart is of Chicago Mercantile Exchange (CME), which remains on a buy signal in a strong uptrend. See the chart here.

Both charts courtesy Dorsey Wright.

Oil Can Boyd - MV News 10:32 AM

DOE reported crude oil inventories of +2.73 mln brls vs +2.5 mln brls exp; gasoline inventories of +1.03 mln brls vs +700k brls exp; distillate inventories of (159k) brls vs (1.0 mln) brls exp.

API reported crude oil inventories (2.4 mln) brls; gasoline inventories +3.96 mln brls; distillate inventories +2.08 mln brls.

Utility belt - Kevin Depew 9:49 AM

The Dow Utilities Index (.UTIL) is a relative laggard out of the gate but so far has been able to hold support here in the 390 area. A move below 388 is a sell signal.

For the IDU ETF a move to 74 would register a sell signal while 77 would break a quadruple top.

Improvement Seen in 50-day moving average on a sector level - Phil Erlanger 8:50 AM

It is worth paying attention to the percentage of issues above their 50 day moving average and the one week change. Transportation rocks again this week as we have seen a one week improvement of 13% and now 57% of the issues in this sector are above their 50 day moving average. Other week over week improvement was seen by Retail Trade, Process Industries and Finance. Say what? - Kevin Depew 8:27 AM

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

  • Bloomberg columnist Caroline Baum says, regarding Fed policy, "It all depends on the meaning of accommodative."
  • Working out what is happening to UK house prices is a taller order than it may sound, according to Ashley Seager in The Guardian.
  • Noted Bloomberg Fed-watcher John Berry says the Fed may be on the road to neutral monetary policy.
  • Oil executives are being asked to share the wealth, the Seattle Times reports, making energy perhaps the only industry where it's more tempting to disguise profits than losses.
  • New World Order? Nah, How about a Fair World Order?, asks Chinese President Hu Jintao.
  • Rapper 50 Cent, the star of the forthcoming movie "Get Rich or Die Tryin,'" takes the "high road" against the "Bush is racist" comments of Kanye West, according to contactmusic.com.
  • Meanwhile, back to weightier matters which are not measured in bling per pound, Francis Fukuyama writes about the failed transportation of the American "melting pot" to European soil in today's Wall Street Journal.
  • And just to keep you busy all day, Robert Gordon asks "What caused the decline in US business cycle volatility?" in an interesting, but very long, paper prepared for this past summer's Reserve Bank of Australia 2005 Conference on the Changing Nature of the Business Cycle. You were just wondering, is Alan Greenspan a modern day Arthur Burns, right? Read this paper and find out!

Be prepared for Thursday. Read Trading Radar.

No positions in stocks mentioned.
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