Buzz Bits: Dow, Nasdaq Head Lower
Your daily Buzz highlights...
"Invention, my dear friends, is 93% perspiration, 6% electricity, 4% evaporation, and 2% butterscotch ripple." Willy Wonka - Todd Harrison - 2:56 PM
And so it is, another FOMC script is on the cutting room floor as traders are left to fend for themselves. No shocker that the text was "as is" as nobody--and I mean nobody--wants to upset the candy apple cart.
Snapper is trying to make a cameo, as evidenced by the sticky green theme in the piggies. Despite lethargy in Citi and his brokerage brethren, the BKX continues to poke and prod all-time highs. Again, you don't have to agree with it but you should most certainly respect it. If this sector sports acne, it'll bode well for the broader tape.
Alas, that's likely not today's business as the great qualifier--breadth--is stuck in the mud at 2:1 negative. And while today's tape hasn't been "heavy all day," it's been slinky enough to give Boo the benefit of the end-of-day doubt. And the closer we get to S&P 1400, the more magnetic the expiration draw becomes.
Now if you'll excuse me, I've got a snozzberry with my name on it.
Position in financials
Market Factotum - Kevin Depew - 1:57 PM
As the day progresses new PnF sell signals have accelerated and have now easily overtaken new buy signals by a 16 to 5 margin.
Overall sell signals are now leading 21 to 15.
Among breaks of interest:
- Equifax (EFX) triple top break at 40, new high, and perhaps the single most appropriate stock to be doing well today given their position as a provider of massive amounts of consumer and commercial credit information.
- Pacific Ethanol (PEIX), triple bottom break at 17, and note primary trend is already negative.
- Federated Department Stores (FD), double bottom break at 39.
- Best Buy (BBY), double bottom break at 51, testing trendline support, see the chart at Stockcharts.com.
Why is the market moving so much? - John Succo - 12:53 PM
People are asking me "why is the market moving so much."
My answer is that it is not. With the S&P 500 down 55 basis points that equates to a little more than a 7% volatility. If you go back in history that is an average volatility for bonds much less stocks.
The reason it seems like a big move is that markets have been conditioned to such a low volatility. This is due to several factors: immense liquidity through borrowing dampens volatility, high amounts of risk taking creates liquidity and dampens volatility, and government intervention in many forms encourages both of the above.
What causes volatility to snap back? Markets become compressed as options become too cheap (high gamma acts like high leverage) and people take too much risk grabbing for returns. Volatility just mean reverts as a few participants want to reduce risk and it feeds on itself.
If this move in the market "scares" you are you can't take the pain that it inflicts you need to reduce your risk. You must size your risk based not on current volatility, but a natural level of volatility.
Dear Mr. Foreign Central Banker - Bennet Sedacca - 9:32 AM
Please get out of my way. What do I mean?
I had some bonds called yesterday and went out to try to buy some callable agency bonds of short duration. I looked for one time calls, continuous calls, etc.
I asked 10 dealers and was shown about 50 offerings. I looked at all of 'em.
You know how many I bought? Zero. Zilch. Nada
The OAS (option adjusted spreads) or AOAS (agency option adjusted spreads) have collapsed to ridiculous levels. What will I buy? 6 month bills.
The elephants in the room, the Central Banks, don't care what they pay, which makes prudent money managers job difficult. I pride myself in my ability to execute trades well and to find inefficiencies in the market.
The liquidity sloshing around has made both of the above as difficult as at any time in my career. Yep, that is a tough way to manage money. But I refuse to chase bonds just as I don't chase stocks. Buy when you can, not when you have to. Even in bonds.
What you need to know... - Jon Doctor J Najarian - 8:10 AM
Nasdaq Goes Hostile For LSE – If the Nasdaq were smart, it'd just go away rather than going hostile for the London Stock Exchange. And if the Naz thinks it will sway enough of the LSE shareholders to sell at a $5.3 billion valuation with the NYMEX trading at $11 billion, I'd like some of what they are smokin'!
PE Group To Raise Bid for Harrah's (HET) - Apollo Management & Texas Pacific Group are expected to raise their bid for Harrah's Entertainment to $87 a share.
Citigroup (C) Taps Robert Druskin For CFO – Despite all the rumors of splitting the company up, and or Mr. Charles Prince being pushed aside, it all came down to investment banker Robert Druskin taking the job as CFO.
JPM Ups Texas (TXN), Cuts Micron (MU) – Despite the fact that TXN cut its 4Q forecast, JP Morgan said take them to overweight and reduce your exposure to Micron. JP Morgan said last night's results were the "blow-up" it was waiting for and that now is the time to buy.
Positions in TXN
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