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Buzz Bits: Dow Eclipses 11,000


An evening recap of the daily buzz.


Earnings Report - MV News - 4:16 PM

  • Abercrombie & Fitch (ANF) reported Q4 EPS of $1.80 vs $1.78 cons on revs of $961.4 mln vs $940.1 mln cons.

Intraday Update From Rod David - MV Trading - 2:52 PM

New session highs tested SPX 1278.25 (ESh 1280'75) where a pullback is now testing the prior high back to SPX 1275.50 (ESh 1278'25). The premium between S&P futures and underlying cash has widened again. A retest of the high before the top of the hour - preferably to the bias-up signal's SPX 1279 (ESh 1281'50) target or very near to it - would be vulnerable to reversing down sharply into the close. But currently a break under SPX 1272.25 (ESh 1275'00) is the minimum requirement to signaling that momentum had reversed down.

I know something you don't know.... - Sanjay Somaney - 2:14 PM

Videsh Sanchar Nigam
(VSL) is looking at disposing of land worth $1.13 billion that has been part of the company's prime land holdings in Delhi, Calcutta and Pune. If the sale does go through, that is a bonanza of almost $8/share based on the 142.4 million sharea outstanding.

In addition, the company has closed it teleglobe acquisition yesterday. They put out a press release yesterday talking about how this acqusition gives them international mobile, data and voice network capabilities in 240 countries across the globe, blah, blah, blah.

What the company DID NOT say here in the U.S. (we can all thank Reg FD for that) but DID say in India, is the fact that for the fiscal year ending March 2007, revenues could almost double from the current run rate of about $866 million.

Position in VSL

Flashback! - Bill Meehan - 2:00 PM

This day in market history...

  • Closing levels 4 years ago found
    • DJIA: 10,001.99
    • S&P 500: 1116.48
    • Naz: 1,843.37
    • Crude: 21.19
    • Gold: 299.20

This day in Minyanville history...

In other news...

  • In 1899, voting machines for use in federal elections were approved by the U.S. Congress. Some of those originals are still in use in FL today.

Can I buy it yet? - Tom Peterson - 1:41 PM

Natural Gas continues to stay under pressure. We've been looking for several weeks for Nat gas to make a good tested low but each time the tests have failed and lower prices have been seen, so there has not been a good interim buy signal yet.

Nat gas reacted off the overbought position and overbought condition seen in late 2005. Now it is down at the blue trendline drawn off the 2002 and 2004 lows. This is a pretty key area to hold. The CCI(8) is still still stuck below -100. It will take a move back above the -100 threshold to confirm the seasonal low and the ability to rally into an early spring high. See the chart here. TRP

OIH approaching a near term bottom? - Phil Erlanger - 1:27 PM

The put activity in the names in the OIH is getting pretty excessive on the put side. 9 stocks have excess put activity to 1 stock with excess call activity judged by the Erlanger Options Rank. We note that such an outlier number is the stat needed to put in a near term bottom. However, none of our short term technical indicators confirm this yet.

Say What? - Kevin Depew - 12:50 PM

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

  • Christopher Gibson-Smith writes in today's Financial Times that "history tells us that savers should look to equities as an essential asset class if they wish to secure their long-term financial future." But is savings the same as investment? It is at the tail end of a bull market.
  • The future of a 2,600 km pipeline to transport natural gas to India through Pakistan (which is actively opposed by Washington) is in jeopardy, according to the Asia Times.

Natural Gas - Scott Reamer - 11:47 AM

I want to reiterate how important the 54% decline in Natural Gas is to the deflation theme. I am expecting a 40-70% mutli-week bounce over the next several weeks that is entirely mean reverting, but with Nat Gas down 54% in just 63 days that speaks volumes about the fact that it isn't supply and demand governing commodities, but rather liquidity and speculation.

Oil Can Avoid? - Adam Warner - 11:36 AM

Last week it was the Homies, today it is OIH breaking through the 50-day MA thanks to the Transocean (RIG) meltdown. Volatility has spiked to another 52-week high in the low 40's.

The options should stay pricey shorter term in as we struggle to find a new range. Further out, volatility could really plunge as the battleground aspect in the group peters out.

Position in OIH

Mini-Minyan Mailbag - Kevin Depew - 11:27 AM

Prof. Kevin -

The daily chart of General Motors (GM) has a support trendline right here. What does the PNF look like?

Minyan Rick "Shaw"

Dear Minyan Rick "Shaw" -

When I think of GM, that is exactly what I think of : a rickshaw. I believe that one day in the not-so-distant future, the unwanted steel carcasses of GM four-wheel drive sport utility rickshaws will be converted into stackable low-income housing units. Some things just make too much sense. Meanwhile, GM (and Ford too) is insistent on pursuing its strategy of focusing on large SUVs. Never mind the fact that customers are increasingly desiring something else (and for Socionomic reasons that have little to do with the cost of gasoline).

If the conversion of GM's sport utility rickshaws into low-cost stackable housing units requires the stock to be at 19.50, then the technicals support this. The stock will give a new sell signal (basis .25x3 and .5x3 charts) if it prints 21.50.

Dig it? - Fil Zucchi - 1:17 AM

In looking through a bunch of Raymond James research on canadian energy trust companies, I have come across Petrofund Energy Trust (PTF). IMHO this one looks good enough to step in front of Boo's "energy 18-wheeler." Its dividend payout ratio is meaningfully below its peers; it comfortably earns its dividend; the dividends are taxed at 15% (unlike REIT's); and RJ expected them to increase the payout. The current yield is approximately 11.5%, of which only about 10% comprises return of capital. This is not a trade for me and I am still scaling in. Just my eyes and never advice.

Position in PTF

Well, since my baby left me,
I found a new place to dwell - Todd Harrison - 10:31 AM

It's down at the end of Broad and Wall, the Minyan Hotel....

Hoofy just pranced by my office with a hotel key in one hand and some buy tickets in the other. He's got a late day rendevous with some silk milk and is intent on making his dairy diva proud.

His prospects thus far are dicey, not dour, as he eyes pink houses, slightly negative breadth, heavy energy and, as he's quick to note, stubbornly sticky financials.

He's also eyeing those lower highs in the S's and N's. The quickest way to shift psychology, he knows, is to remove the technical validation that so many traders have come to rely on.

That might work in the short-term, if and when, but the big picture introduces a lot more (non-linear) variables into the mix.

As always, I hope this finds your day sweet and your profits sweeter.


Bank shot! - Vitaliy Katsenelson - 9:15 AM

Bank stocks look very cheap: they trade at a very low teens P/E, offer double the dividend of the market and despite a flat, or nearly flat yield curve, they are growing earnings in high single digits.

We have some exposure to that sector as we own shares of Lloyds TSB (LYG), US Bank Corp (USB) and Bank of America (BAC). In our opinion the bank sector is one of the few cases of value in the market.

I feel comfortable with LYG and USB, however BAC still requires more research. We received BAC when it bought MBNA awhile back. As of right now I can only see the negatives of the BIG bank business, but I could be wrong.

In the following article I explore why banks usually trade at low P/Es.

Positions in LYG, USB, BAC

Top Down - John Succo - 9:11 AM

The convertible bond market has "healed" itself from last year's sell-off. Remember bonds on the margin became cheap as volatility picked up last January (in spite of a belief that increased volatility is "good" for convertible bonds, it often has the opposite effect due to a decline in liquidity) causing under-performance and subsequent redemptions (which caused more selling).

As redemptions slowed and liquidity went back up, the basis (prices) began to improve. This attracted new money to the strategy and the basis continued to improve as a result.

Isn't it funny how markets work?

The second shoe drops in housing...... - Bennet Sedacca - 8:06 AM

The Wall Street Journal reported this morning that KB Homes (KBH) mentioned in their annual report that cancellations were increasing. This follows two consecutive poor quarters from Toll Brothers (TOL) which is already lower by 50% from the high. One company with souring fundamentals does not make a trend-but two companies does in my book.

Please see my Buzz from yesterday highlighting the HGX and the long-term uptrend line being challenged. This may be the news that breaks it, effectively ending the bubble in housing shares.

Two other items of note. KBH said their earnings would not be affected as they will accelerate their share buyback. Give me a break, guys. Share buybacks to boost earnings while you hide the news in your annual report? This is the kind of hocus-pocus earnings that I have spoken of often. Why not preserve cash if fundamentals are slowing? If I were a shareholder, that is what I would want. Lastly, I highly doubt that this will be the only other company to say things are slowing in housing and I also doubt that it will be KBH's only warning. Not meant as advice, but most definitely newsworthy.

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