Buzz Bits: Tuesday Nov. 8, 2005
Boo's crew ends the trading day.
Get ready for a surprise! - Scott Reamer 4:01 PM
~65% of the S&P 500 companies have reported positive surprises in this earnings season but 23% of SPX companies have reported negative surprises, this is the highest proportion of negative surprises in 7 years. Our work continues (with the Money AMS figures factoring prominently) to suggest a looming and substantial slowdown in economic activity in 2006.
Demoted General - John succo 2:21 PM
There is huge activity in GM puts today.
Those long out of the money 2007 puts are rolling those puts to 2008.
There are straight buyers of 2008 out of the money puts (strikes of 10 thru 5).
The largest buyers of these puts are hedge funds long the bonds of the company. They are rolling for two reasons: 1) to better match the maturity of the bonds they are long 2) I think they are getting the sense that 2007 may not matter as much as 2008 as far as bankruptcy is concerned.
(Position in GM)
Mini-Minyan Mailbag: 3rd and long - Todd Harrison 12:37 PM
Toddo, I called Dick Vermiel and he says the NDX looks like a bearish wedge and he'd pass not run here with Boo, at least until the gap between 1600 and 1610 is filled.
Thanks for bringing me back to a place of pain. If the Raiders held the goal with :02 left, they're 4-4 with some mo'mo and mojo. Alas, it was not to be and the season is pretty much a punt from here. The lone bright spot? Tickets for the November 27th Dolphin game should be a lay-up should Macke and I choose to swing by the hole (Winnie beware!).
As far as the wedge in the NDX, I see it (along with a handful of other flashing red lights) but will remind you, Boo, myself and other interested Minyans that psychology is likely sitting atop the metric totem pole. In other words, if performance anxiety festers, it'll take more than a Viagra to raise the spirits in Red Dye.
Something I am wrestling with... - William Fleckenstein 12:32 PM
Whether or not the market can hold together for the rest of this year -- leaving the serious business of "the next time down" an issue for 2006.
The combination of the no-news period and the "calendar" has the bulls feeling pretty bulletproof. Though I still find it hard to believe that all the people who've made that bet are going to get paid this year, the weight of their sentiment may suffice to keep serious downside action at bay until next year. If so, we might just see a giant flop-and-chop for the rest of the year (with the averages finishing plus or minus a couple percent).
Of course, even if something like that scenario did play out, it doesn't mean there wouldn't be a handful of stocks that might go up a bunch, and a handful that might go down a bunch. Again, this is only a near-term scenario, as I continue to be completely convinced that the next move of any consequence will be lower. However, when you're speculating on the short side, as I do, getting the timing right is crucial.
Editor's note: For more of Prof. Fleck's excellent insight, check out his Daily Rap.
Rope-a-dope... - David Miller 12:11 PM
Biotech has managed to stay green most of the day. A friend commented on the red in the major averages and I opined that if biotech can stay green, the major averages are likely to follow by day's end. Dunno if they'll be able to help the DJIA, but I'm with Toddo in that I think tech is the primary driver at this point.
The big biotech short interest bubble blown by the bears last month was between 800 and 732 on the NBI. Hard to tell where in that range the majority was taken down, but it is worth noting we've recovered more than half that range. How much covering we've already seen and where the point of max pain is for the remaining positions could affect the biotech tape.
Da-ta or Day-ta? - Greg Collins 12:09 PM
Automatic Data Processing (ADP) is authorizing an additional 50mm share repurchase on top of 7.5 mln shares already authorized. The company is also raising its quarterly dividend to $0.185 from $0.155.
Notice the chart - consolidating (bullish flag?) after a big volume breakout.
And did you know. . . - Fil Zucchi 10:36 AM
That since May 31, 2005, according to Bloomberg, Toll's (TOL) insiders net transactions show a sale of 3,302,000 shares at an average price of $51.72 for a cool $170,786,478. Nice!!!!
(Position in TOL)
Triple H - Kevin Depew 10:33 AM
Note too the steller outperformance this morning in the Internet HOLDRs (HHH), which as we pointed out last week, is among the select Tech outperforming the broad market and which recently broke a quadruple top with the move above 63.
Mini-Minyan Mailbag: Stop biting your tongue - Todd Harrison 10:13 AM
Toddo, I've been biting my tongue while listening to all the gold commentary on MV and elsewhere during this recent sell off. In my way of thinking, the market is merely undergoing some profit taking after reaching a yearly objective of 483. It hasn't broken down at all.
To date, it has merely come back to test the monthly breakout level at 455-456. The first test was obviously successful. As long as this level holds, December should be another strong month. Meanwhile, silver acts incredibly well. All, of course, in IMHO. :-)
First things first, stop biting your tongue--it makes eating and speaking extremely difficult. Second, while I won't argue against the consolidation thesis (I'm not selling, I'm simply keeping powder dry to buy lower), the fact is that gold did, in fact, "break down" on a technical basis.
I view technical analysis as one of four primary metrics (fundies, structural, psychology) and, as such, will never defer to the charts. I simply view this metric as a framework with which to trade and, at times, to quantify risk (stop levels).
The dollar breakout is a headwind. The gold chart is a headwind. But there are alotta structural, psychological and fundamental reasons to keep some metal exposure.
And so I am.
Our lips are sealed - Scott Reamer 10:13 AM
Interesting to note how few comments I read from the sell-side on the strength of the USD. Perhaps it is the cognitive dissonance created by the fact that our current account deficit continues to grow and the general macro imbalances behind the CAD that have arguably gotten worse that causes the silence. After all, if you can't explain something why talk about it?
Perhaps more important, I have yet to hear from strategists that remain excessively worried about inflation ("CRB at 15 year high", "Gold at new highs", "PPI at 12 year peaks", etc.) how they reconcile the strength of the USD (proxy DXY now up 14.5% in 10+ months). After all, if inflation and inflation expectations were really a concern, the USD would be going down, no?
Our real liquidity indicators (Money AMS - provided by the excellent Frank Shostak) continue to erode, and have been for more than - voila! - 9 straight months. We remain bullish the USD here but our models suggest we could - could - be nearing the end of this bounce from December of last year. Our inflation indicators too suggest that price deflation is about to turn and deflate meaningfully over the next few quarters.
Stylin', profilin', while in the sun... - Todd Harrison 10:00 AM
While you were sleeping, Citigroup (C) has edged above its 200-day moving average. This puppy has been a dog--relative to its brethren--but the current chart looks conspicuously like some reverse dandruff.
Keep in mind that the sector has been en fuego during this latest market liftage and the stochastics are lofty. See both sides of the trade, Mon Frere, and factor it into the broader mix.
Keepin' it real - Kevin Depew 9:45 AM
For the Morgan Stanley REIT Index (.RMZ) keep an eye on 788 support; a move below 784 would break a triple bottom.
Meanwhile, the iShares Real Estate ETF (IYR), already in a negative trend and context, will give a new sell signal with a move below 60.50.
Not since July... - David Miller 9:37 AM
The last time we had four positive breadth days in the NASDAQ Biotech Index (NBI) we were all basking in the July sunshine. From the close of that first day through the next ten trading sessions, the NBI gained 12%. From the close of the first of this recent series of four days, we are up 3%.
Do we have nine more points to go on this cycle? In July, the index was very overbought the entire run. We're just reaching overbought this time. The July rally featured a breakout through the 200-day MA. This rally started when the 200-day proved to be support on two consecutive trading sessions (early October). We have 46M more short shares bet against NBI companies this time than last and biotech short interest is a half a percentage point greater as a percentage of NASDAQ overall short interest.
The mechanics are there for an even greater rise this time, but I believe real fuel will need to come from partnership/acquisition news as we run into year's end.
Say what? - Kevin Depew 8:06 AM
A look at commentary, opinion and analysis from around the world:
- In the Wall Street Journal, Joel Kotkin looks at why "they" riot in Paris but not in America? Surprisingly, to me, it's not strictly because of pasteurization.
- Also in the Wall Street Journal, Robert Shapiro injects some historical perspective into the growing clamor for an excise tax on the "windfall profits" of American oil companies - the one industry where making a profit should be illegal.
- Daniel Pipes, Director of the Middle East forum, writes in FrontPageMagazine.com that the rioting in France may be a turning point in European history.
- The Denver Post features a brief overview on peak oil: Running on empty? Nothing new here, but an intro level course on the issue, also a cute graphic featuring a car engine check oil indicator lamp.
- According to Elizabeth Becker in the International Herald Tribune, a US trade deal hinges on farmers.
- Over on Bloomberg, Michael Lewis tells us how to buy a Lamborghini like a Wall Street guy.
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