Buzz Bits: Dow Inches Ahead, Nasdaq Slips Under
Your daily Buzz & Banter highlights...
Cape Complacency - Adam Warner - 12:53 PM
Why's Boo chuckling? A couple of Volatility Indications are pointing his way.
The VXN is at 20 day lows, and clearly low in general, indicating subnormal short term performance, as per the Dr. Brett Steenbarger piece I referred to yesterday.
We are also going to close right at the lower B-Band on both the daily and weekly charts, not good according to Price Headly (via VIX and More).
My personal opinion is that volatility gives decent shorter term signals, when you relate it to itself as these two methods do. The "10% Above (Below) the 10 Day SMA" contrary indicator. The VXN is about 9% below incidentally, so its a smidge away from oversold, and bearish for the Nazz.
These all require grains of salt, as volatility in general is a much better indicator when it is overbought, (fear) and not oversold (complacency)...
And I just wanted to add these are just short term VIX thoughts. Longer term, I totally agree that we see one of the two scenarios Prof. Schaeffer laid out earlier.
A Little Tidbit from Minyan Michael Santoli of Barron's - MV Respect - 10:44 AM
Happy Friday. I just picked this up courtesy of the folks at SunTrust Robbie Humphrey, it might be a good little talking point in the category of "interesting perspective."
Who do you figure said this?
"Now this is a real economic slowdown. And I might say, it's disastrous news for American workers and businesses and even worse news for low and moderate income Americans who have been squeezed by lower wages...in this administration."
-Barney Frank on the House floor this week?
-Bill Clinton in a New Hampshire diner in early '92?
-Paul Krugman in the Times any time in the past five years?
Actually, it was Bob Dole, while running for President in '96.
I have no profound take-away - these are different times in so many ways - except that it's damn tough to handicap when a slowdown becomes even slower. Also, never get your economic forecasts from a politician running from behind.
Thoughts for Macke and Greenberg on Coca Cola and the soft drink group... - Phil Erlanger - 10:09 AM
Last night I watched Fast Money for one of the first times and was impressed with Jeff Macke's presence much more so than when he is on a golf course. All kidding aside, I thought I would weigh in on Coca Cola (KO) after watching the show. Jeff noted that he was not a fan of the stock due to its anemic 6-8% growth rate. My firm buys that logic 150%. However, there could be something more at work here. It should be noted that Herb Greenberg, another professor, was on the long side of Coca Cola against Macke last night.
The shorts have been slowly adding to their positions in Coca Cola over the past three months and now the short intensity is 86%. Short intensity tracks the range of the short ratio over the past five years. I note that the short ratio itself is not incredibly high at 2.68 but this is enough to push the stock higher.
In terms of the soft drink group, which Coca Cola falls into, my firm likes the improvement we are seeing week over week as it has moved from 104 to 32. A rank of 1 is the best and 146 the worst.There is another name in this group that my firm likes much better than Coca Cola and that name is Cott Corporation (COT). Note that the short intensity is 95% with a short ratio of 11.08. My firm's technical rank is just starting to move to the upside, now at 50%. We rank stocks from 10% to 100% in 10% increments. Moreover, our Erlanger Trend Direction Indicator is in uptrend status.
It is not enough to buy a stock because it is a potential short squeeze. Rather you need to look and see if the shorts have made incorrect bet. In the case of Cott, that looks to be the case. Earnings look to grow from 0.46 cents to 0.64 cents for a nice growth rate of 39%. Meanwhile the P/E for 2007 is 23.
Are we there, yet? - Rod David - 8:28 AM
S&Ps probed yesterday's lows overnight, but have largely recovered. That's not to say the probe was rejected - S&Ps ranged narrowly under yesterday's lows for several hours before bouncing. And the bounce still trades at a deficit from yesterday's close.
Did the dip reflect pessimism ahead of two high-profile economic reports due at 8:30am ET? Another report comes 30 minutes after the open, and post-open reports tend either to reverse or accelerate any trending underway.
The ideal short-entry is would be a new high that reverses back under prior highs soon after 10:00am ET. Long-entries at this stage of the pattern are more about the exit than the entry, and can only keep stops tight.
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