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Buzz Bits: Dow, Nasdaq Creep Ahead

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Curve Watchers Anonymous Is Wondering About Fannie's Hedgebook: Mike Mish Shedlock - 3:28 PM

Curve Watchers Anonymous (CWA) is noticing the yield on the 3 year Treasury note is now under 3% and the 10 year note yield is an astonishing 4.05%. Wasn't it just a short time ago that Treasury bears thought yields would be heading to 6-7%?


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CWA has this question for Professor Succo: What if anything is this action doing to Aunt Fannie's (FNM) and Uncle Fred's (FRE) dynamic hedgebook? One might expect that in normal conditions, refinancing risk would increase as yields drop and Fannie and Fred would have to take that into consideration. But these are obviously not normal conditions.

Clearly Bernanke wants to make it easier for people to refinance, but the market is not cooperating as 15 year mortgages are within four basis points of where they were a year ago, and both 1 year ARMs and 30 year fixed are 14-16 basis points higher. Now we see both Fannie and Freddie might be capital impaired. Is this mess making things harder or easier for the GSEs to hedge?


Turkey Lists - Jeff Macke - 1:48 PM

Hello from rainy NYC, where I'm just about ready to start moving on to the "Long Weekend" portion of my holiday-shortened week. In order to make room for the Fed and Turkey we've got some news digesting to do; let's have a crack at it:
  • Target (TGT) missed and, let's be honest here, there wasn't a whole lot of surprise to it. Why the horrid stock of late, when we more or less knew the EPS was going to be tepid? How about: the reality of even good companies missing; Target's reliance on credit; the less-likely event of Target spinning off that credit or the fact that the tape is simply lousy in general and brutal to consumer companies in particular? Any of those would work.

  • Dicks Sporting Goods (DKS) is simply awesome. Still, hunting rifle to head, I'd be a seller rather than a buyer here. Why? Because strength of any sort seems like a screaming sell until the tape proves otherwise.

  • Another study in selling any strength? Check the intraday price action of GameStop (GME), moving in 6-pt chunks today. Or Echostar (DISH), pulling back on the fact that there weren't several thousand instances of leaking material inside information ahead of a rumored AT&T (T) merger this week. Or the XLF spelunking to new lows. Or... let's just reiterate that strength seems like an invitation to sell these days.



Gold Getting Some Separation - Lance Lewis - 1:17 PM

Note gold and silver are moving to new highs for the day even as stocks have reversed and given up all their gains. Time was when gold was just a "widget" and basically traded with stocks more or less as a simple function of the ebb and flow of the excess dollar liquidity that was sloshing around the globe.

By looking at the Dow/gold ratio and the HUI/SPX ratio we can see that gold and gold shares have already been outperforming the stock market for some time.

In the stagflationary environment of the 1970s, gold and its shares eventually completely separated from the equity market altogether. Will history repeat in today's stagflationary environment? So far the answer appears to increasingly be "yes".


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Position in Gold and Gold Shares


Which Way to Go? - Quint Tatro - 12:54 PM

We have given back early gains and traders seem to be on hold waiting on the FOMC minutes to be released after 2:00pm. It is tough to know if there are any legs left in this move. Sellers stepped in pretty quick to unload stocks or grab some new shorts and we have almost slowed to a crawl.

The magnitude of bad news out there continues to mount and in all honesty, I am surprised that we aren't down more than we are. The picture sure does look dire, however, we continue to hold gains for the year and unless we see another woosh down, will finish in the green for 2007.

From a technical standpoint, there are really two scenarios we seem to be setting up for. Unfortunately, we won't know which comes to fruition until it is behind us, so once again, I encourage patience, cash and sitting on the sidelines. There is no reason to rush in and do anything and if you find yourself getting antsy, start researching new side dishes to cook to impress the in-laws.

S&P Possible Double Bottom

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S&P Possible Bearish Wedge

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