Buzz Bits: Dow Slides, Nasdaq Holds
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The Fed, Gold and Highs - Lance Lewis - 3:40 PM
Note that the equal-weighted CRB is hitting another new all-time high today, and did I mention that the Fed has eased 100 bps over the past three months?
Don't worry, though: The Fed will continue to "monitor inflation developments carefully." I am "monitoring" them too, while commodity prices blow through the tops of all my charts.
Also note that gold is now breaking out of its triangle on the charts to the upside in euros. Again, gold's rally is not just a weak dollar phenomenon, just as general commodity inflation is not.
Anyone want to bet that gold in dollars will soon be following with its own upside breakout from its triangle on the charts?
As for the gold shares, the stretching rubber band between the plunge in the gold shares and the continued inching higher by the price of gold has now been stretched back to levels that we saw last August, per the XAU/Gold ratio falling below 0.20 yesterday.
And despite another intraday plunge in the euro this morning to a new low for the move since its recent peak, gold still refuses to crack. Just imagine what the metal is now going to do if the dollar actually rolls over again against the euro (which is pretty likely in my opinion)?
It should be an interesting experiment in "upside volatility" in the gold shares when the rubber band between them and the metal inevitably snaps back the other way as the market finally becomes convinced that gold isn't going to correct with the equity market like they thought it would.
With Friday being an option expiration, my guess is that we could see that rubber band between the shares and the metal begin to snap back rather sharply sometime over the next three trading days.
Position in gold and gold shares.
Momentum! - Quint Tatro - 2:52 PM
The market is perking as we head down the stretch. It is very tough because despite a brief pop in the averages intra-day, some of the higher momentum names are lacking conviction and while they are set to really burst, they aren't yet doing it.
If these names manage a break out and close at highs, I would expect us to be able to seek out some higher momentum opportunities, but if they fade this will be another day to sit, watch and wait. Here are a few I am watching: FuelCell Energy (FCEL), ShengdaTech (SDTH), and MEMC Electronic Materials (WFR).
Position in FCEL, SDTH and WFR.
QQQQ Pullback and Up Trend - Ryan Krueger - 1:24 PM
The Nasdaq 100 (QQQQ) may be offering the most compelling combination of a major pullback inside of one of the strongest up-trends among domestic groups I follow.
These are table-pounding buys for some folks, but not for me. It is simply an objectively measured set-up that may offer disproportionately good odds for a win that you can set against very tightly defined risk for loss (I'd use tight stops). That doesn't mean it will work, just that it may be a risk more than worth taking.
And instead of buying or believing any group is good – certainly a strategy that works for plenty – I'd rather use a setup like that as a hunting blind, not a magic bullet.
To share a simple version of one of the first traps we'd set inside that group. Consider that if you only set your sights on stocks inside the QQQQ that exceeded the group's average revenue and earnings growth, exceed the group's profit margins and whose own margins are expanding, and required that any qualifying stock's price action has held together better on good and bad days over a three and six month basis you'd be left with only three of 100 in that trap I just ran: Google (GOOG), Baidu.com (BIDU) and Research in Motion (RIMM).
To give you an idea just how fertile that field is where that trap was set, the group overall has grown its revenues and earnings over the past four quarters +27% and +30% versus +7% and +6% for the S&P1500. There also exists better than average risk, but there are times the balance between the two is tilted enough to provide an opportunity.
Position in GOOG, RIMM and BIDU.
Gate Sniffage! - Todd Harrison - 9:45 AM
- Great, now I can't get the image of Ruprecht out of my head every time I look at Mother Morgan. Still, as the reaction to news is more important than the news itself, all eyes on you, Mama, which will extend to your friends and the broader tape.
- Mr. Glutton for Punishment, who's good friends with Mr. Trading Counter-intuitive to his Big Picture Bent, continues to play this complex from the long side with defined risk measures in place. I've been In-n-Out like a double double with cheese but you can do anything as long as you're disciplined.
- I continue to tetherball between "Dude, you're trying to pick up dimes in front of a bull dozer" and "Make 'em to take 'em, baby, the bottom line doesn't care how you made 'em."
- THE level, of course, is S&P 1490. See it, feel it, touch it, be it.
- Keep your eyes peeled for the results of the TAF (Term Auction Facility) auction. Chatter is that the $20 billion was five times oversubscribed. We'll know soon enough!
- What else am I looking at? Market breadth (3:2 negative but I don't "read" this until 10:00 EST), beta (more swings than a Hedonism vacation), the homies (trading punk out of the gate), the dollar (slightly higher), my weight (marginally lower), the clock (moving backwards) and the lunch menu (the highlight of my day).
- Seriously, how many languages do you think Rosetta Stone knows for real? My over under is... six.
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