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Buzz Bits: Merrill Talks BlackRock


A taste of the Buzz...


In like a lamb, out like a lamb - Todd Harrison - 4:00 PM

Another session is in the books as Snapper crawed his way back to the flat line. All in all, it wasn't that bad of a showing (save the continued carnage in the metal space and slippage in the semis).

Hoofy is quick to point to the low volume while Boo will note the nosty internals. And, as the truth typically lies somewhere in the middle, they would both be correct.

We'll likely toggle our trading through Wednesday when all eyes will be on Boom Boom, sorta like Henry Hill looking over his shoulder for helicopters (get it?). In between, we'll chew through turnaround Tuesday and, alas, the 2006 version of Valentine's Day.

I hope you all had a mindful day and that your evening puts it to shame.


Flashback! - Bill Meehan - 2:38 PM

This day in market history...

  • Closing levels 8 years ago found
    • DJIA: 8370.10
    • S&P 500: 1020.09
    • Naz: 1710.42
    • Crude: 16.03
    • Gold: 299.15

This day in Minyanville history...

In other news...

  • In 1988, Michael Jackson purchased Neverland Ranch.

Fear and Greed - Kevin Depew - 1:27 PM

Interesting chart here courtesy John Mauldin's latest piece, "Greed by Four Lengths." The chart, courtesy DrKW MAcro Research - see it here - shows what they call their Fear and Greed Index. (Barry Ritholtz first noted the chart on his Big Picture blog.)

Sure, we've come a long way since 2002 when this index last bottomed.

2002 - Present
SPX +10.4%
DJIA + 8.9%
NDX + 15.9%

What I find fascinating, however, is that the DrKW Index is at higher levels now than January 2000 - and that is given this set of performance figures over that time.

2000 - Present
SPX - 13.7%
DJIA - 5%
NDX - 44.1 %

Why is that so interesting?

Well, between prior peaks the SPX performance was considerably different. Between 1987 and 1996 the SPX was up 206%. Between the peaks from 1996 to 1998 the SPX was up 57.6%. And between 1998 and 2000 peaks the SPX was up 51.4%.

Position in SPX equivalents

Intraday Update From Rod David - MV Trading - 12:40 PM

This morning's no-bias signal held S&Ps within the open's range. The range's upper-end has attracted most of the price action (optimistic), while not actually filling the gap back to Friday's cash session close (pessimistic). When we flipped a coin to determine which side would win this argument, the coin landed on its edge - and it was a two-tailed coin!

As the coin rolled off the table, its pattern very much resembled the S&Ps past 2-1/2 hours of narrow ranging between SPX 1264.75-1266 (ESh 1267'00-1268'25). Extended narrow ranges tend initially to break falsely in one direction and then reverse sharply in the opposite direction - unless the initial break is during a relevant timing window. So a break higher during the noon hour would be likely to reverse down upon S&P cash turning slightly positive, or reverse up from a test of this morning's lows.

Maintaining a break beyond either of these extremes for 15-20 minutes past the noon hour's end (or preferably waiting until the noon hour's end to test either extreme) probably wouldn't be a false break, and would be more likely to trend in that direction through the afternoon.

Say What? - Kevin Depew - 12:32 PM

A look at analysis, opinion and commentary from around the world:

  • Stephen Roach says Japan's turnaround is nothing short of stunning, but don't count on Japan to fix the world's imbalances.
  • In today's Wall Street Journal, Russia's ambassador to the U.S. says "Don't Blame Russia" for politicizing access to the world's energy.

When the snowing gets tough your local power company goes AWOL - Fil Zucchi - 11:57 AM

As the Zucchi household approaches the 48th hour of darkness (not a big deal in the scheme of world events but annoying nonetheless) my plans for a couple of meaty N&V mailbags have been postponed. In short however:

  • The precious ones are now back to the bottom Bollinger Band and the 50DMA. My downside trades (as opposed to my long side investments) have been reduced to a bunch of cheapie puts.

  • As I weigh the possibility of widespread deflation (vs. what I view as the probability of accelerating, currency-devaluation-induced inflation) I am thinking energy over basic materials.

  • If you did not read the Barron's piece on the state of the residential mortgage market, it's here and it's free: just do it. Hoofy does not think that's funny.

  • Some of Jeff Saut's names from a few weeks back are starting to catch my attention.

Position in XAU

Subdivisions - Adam Warner - 10:58 AM

So with the HGX breaking below $260 and every moving average known to man, you would think we would see something resembling an uptick in volatility. Hardly.

Toll Brothers (TOL) options saw a lift to a 52-week high volatility in the low 50's on last week's implosion, but has already given up that ghost and returned to the mid 40's. And as Bob, Jermaine and Marlon Toll could all tell you, this is the ugliest stock and priciest option of all biggies.

At some point, these instant volatility crushes as stocks stabilize will get punished. Until that happens though, we are stuck in this Complacency cycle.

What would Brian Boitano do? - Jeff Macke - 10:27 AM

Greetings Minyans from still-darkened No. Cal where I'm up to my knees in lycra, lace and sequins, trying to get ready for my trip to the east coast tomorrow. I'm not expecting to get the call, I'm just noting the ice-dancers are dropping like Google (GOOG) and I want to be ready in case Emily Hughes can't make it to Turin ("He's not much of a dancer but the Italian audience is falling in love with his coquettish interpretation of the Sound of Music").

During breaks in my training and sewing I'm keeping an eye on Hewlett Packard (HPQ) and Dell (DELL) this week, as both companies report earnings. HPQ has gotten their groove back in a huge way in the 12 months since the ouster of Carly and they've done so by taking both market share and market capitalization back from Dell. After staying short HPQ for most of its ride down I missed the "Long HPQ/ Short Dell" counter-move trade of the last year and that fact makes me as sensitive as Michelle Kwan's groin.

Is it time to get long Dell and short HP (again) or simply limp away from the entire low-margin group? That's what we'll be trying to figure out later this week, Minyans, assuming I can keep my case of Olympic Fever in check.

Bio-Dome - David Miller - 10:11 AM

Look for continued weakness in Genentech (DNA) today after partner Roche suspended enrollment in an Avastin clinical trial (AVANT) due to sudden deaths in some younger colorectal cancer patients.

The AVANT trial was a three-arm, label-expansion study run in Europe where Avastin was given in combination with the XELOX chemotherapy regimen (capecitabine + oxaliplatin) to patients who had recent surgery to remove their colorectal tumor. The trial had three arms: FOLFOX-4 (a cocktail of chemotherapy), FOLFOX-4 + Avastin, and XELOX + Avastin. The death rate in the first arm was 0.6%, in the second arm was 0.4%, and the death rate in the third arm was 1.0%. After a couple of months of investigation, it is expected at least the first two arms will be reopened for recruitment.

We have been focusing on the 10 year note but have you seen the 5 year contract?

Yeesh. It has already broken down - see the chart here - and seems to have downside to around 103-24, or 5% or so. With the outside day down that we mentioned on Friday in 10's, the odds are building for 10's to break critical support of 107-16. The 'old' 10 year note is already trading at the critical 4.64%, according to my Bloomberg. The new on-the-run 10 year note is right around 4.6%.

So we continue to think 10's break support, particularly as Boom Boom talks, probably like a hawk, on Wednesday before Congress. Also of note, recent CFTC data shows hedgers covering about 1/3 of their long position in long bonds and are slightly long 10's, but not in any great size.

Positions in various Treasury securities

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