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Buzz Bits: Dow, Nasdaq Edge Lower


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Editor's Note: This is a small sample of the content available on the Buzz and Banter.

Foreign Inflows of Capital - John Succo - 2:20 PM

I just got off the phone with Bennet. Our conversation revolved around his last post and foreign inflows of capital.

We both agree that foreign central banks are now buying more risky assets with their continuous stream of dollars from trade. They are now buying corporates, mortgages, and yes, even stocks. Forget how disgusted we are at the long term implications of that. Here is one key point.

One reason why they are now deviating from buying U.S. Treasuries is that they are reaching a threshold: foreign central banks own almost 50% of the float of U.S. treasury debt. I have heard from several sources inside bond land that this may be an "unofficial" limit as set by the U.S. Note how rates are slowly creeping up on the long end. Less demand from foreign central banks will do that.

We said long ago that the U.S. is hooked on low rates and any rise would prick many bubbles.

The elephant is still in the room... - Bennet Sedacca - 1:16 AM

Note the almost 50% buyers of the 5-year note auction by indirect bidders.

Also of note, I just received some excellent data from Lehman of foreign central banks and other international banks purchases of governments and agencies.

Over the past year they have only increased their Treasury positions by $50 billion or so, but added $170 billion in agencies. This goes along with the $500 billion in corporates.

Basically, they are 'crowding out' value buyers like me and forcing spreads to be tight.

As long as there is global savings and we have a big trade deficit, I imagine they will stay in the room. It makes people overpay for assets.

Where would yields and spreads be if they weren't buying? Higher. Possibly a lot higher.

Level Watch - Kevin Depew - 9:08 AM

These are the technical support and resistance levels for the major indices based on DeMark TD-Lines supply/demand lines.

  • DJIA:
    Support: 12,492/12,428
    Resistance: 12,530
  • SPX:
    Support: 1426/1420
    Resistance: 1427
  • NDX:
    Support: 1753/1730
    Resistance: 1769
  • Russell 2000:
    Support: 788
    Resistance: 804

What are TD-Lines?

TD-Lines are mechanically and objectively constructed. They are drawn by connecting TD Points. What are TD Points? A TD Point high is formed once a high is immediately preceded and succeeded by bars with lower highs. This is called a "level one" high since it is the simplest mechanical TD Line requiring the fewest number of surrounding price bars. A level one high requires only three bars to make this determination.

TD Point highs vary in "magnitude" based on the number of immediately preceding and succeeding bars that have lower highs. For example, level two has two bars preceding, two bars succeeding, and so on through level nine. Just reverse the procedure for TD Point lows.

What you need to know... - Jon Doctor J Najarian - 8:07 AM

Apple (AAPL): Rotten To The Core? My firm's Depth Charge software shows AAPL back on the hot seat this morning, following a report that CEO Steve Jobs was handed 7.5 million stock options in 2001 without the required authorization from the company's board. A series of falsified documents presented to Federal officials purported to show a full board meeting had taken place to authorize the options were later falsified. Shares are down 3% in heavy turnover in the pre.

IBM (IBM) & Siemens (SI) Win 10 year 9.3 billion Contract – The German Federal Armed Forces need modernization and they turned to International Business Machines and Siemens to modernize non-military information and communications technology. Up to 2,950 German Federal Armed Forces IT employees will also work on the project.

United Health (UNH) Investigation Widens – The SEC has issued a formal order of investigation into UNH's stock option practices, according to an SEC filing. Former CEO McGuire was forced out after an independent probe found in October that many large options grants made were likely backdated.

Employers See Wages +3.5% in '07 – A compensation survey found that employees should see their paychecks grow by an average of 3.5% in 2007. Additionally, premiums for employer-sponsored health coverage rose 7.7% in 2006, which is the slowest premium rate increase since 2000.

Positions in AAPL, IBM

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