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Buzz Bits: Dow and Nasdaq End Higher

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Yikes R' Us! - Todd Harrison - 3:36 PM

I'm all for volatility--trust me, it's a better environment from a trading perspective--but the recent price action, and I'm talking about the manner in which prices are moving more than the movement itself, warrants attention.

I alluded to this earlier when I wrote about "the volatility of volatility." It's not healthy for large, institutionally held stocks to gap dollars at a time either way. In my experience, that typically precedes watershed moves.

Whether or not that happens is a function of numerous variables that remain to be seen. One thing is for certain, however, and it's the need to trade smaller when there is more movement. That's my modus operandi and it's directionally independent.

Part of the "trap" when the VXO hovered near single digits for years is that it sucked in volatility sellers and income funds scrambling for incremental performance. When vols upticked, they were caught leaning the wrong way. Many of them still are, adding to the underlying compression in the marketplace.

I'm not smart enough to know which way the next few percent will blow. I'm seasoned enough to pull back my risk reins, however, play to win in the context of capital preservation. It should never take something bad to make us realize we've got it good. In business, or in life.

Fare ye well into the bell.

R.P.



Some thoughts on the long bond auction... - Bennet Sedacca - 3:15 PM

Having traveled to Chapel Hill only to see the Heels lose to Duke, I suppose it is only fitting to walk back in and see a good old fashioned bond market selloff. A whopping 4/32 in 2's to a whopping 1.99% yield and a 2 1/2 point drop in the long bond to a whopping 4.48% (note sarcasm).

The reasons? Well the dollar is strong. Why? As Michael Santoli asked me a long time ago at a Minyanville fund raiser, 'Is the US the best house in a bad neighborhood'? Quite possible, quite possible. Europe's financial system isn't a heck of a lot better than the US'... and I will be addressing this in more detail in a piece I started on the way home (despite a 8 week old screaming in my ear).

The bid to cover was only 1.8 and indirects (outside of US) accounted for only 10% of bids. So dealers get stuck with inventory--just what they need now with balance sheet constraints.

Long Treasuries, at these yield levels, have long durations so volatility can be rather pronounced like today. Compared to a 6.6% year-over-tear PPI and a 4% CPI, I wonder why anyone would buy 10's at a 3.72%. I do think however, that the preferred market will now come under very heavy selling as they have what amounts to infinite duration.


Euros and Gold - Lance Lewis - 2:19 PM

While the dollar's sharp rally against the euro and other G7 currencies today is somewhat puzzling to me since what I have read of the ECB's Trichet seems to show no willingness to ease while inflationary pressures remain. Nevertheless, the market seems to be reading it the opposite way based on what various press reports are saying and the obvious decline in the euro.

With that said, i think it's important to note that April gold has now traded up to a new closing high for the week despite this rally in the dollar, and as a result April gold in euros has closed at new record closing high.

If the ECB is indeed going to join the Fed in "printing money" soon, that's even more bullish for gold.

Position in GLD and gold shares.


Brazil Set to Begin Secondary Climb - Michael Paulenoff - 1:04 PM

While this week's decline in the SPY has given back about 60% of the Jan-Feb advance, let's notice that the decline in the iShares MSCI Brazil ETF (EWZ) gave back "only" about 40% of the prior advance. In addition, the form of the decline off of the November high at 87.67 into the 1/23 low at 64.00 has the look of a completed corrective leg.

Although all of the action off of the January low could represent the start of a new bull phase, my sense and experience warn me that it probably represents something much less bullish - as in an intervening upleg that separates two bear phases. What that means in English is that the EWZ is about to being a secondary climb towards last Friday's high at 78.33, which should be hurdled on the way to 81.00/30.

Only a break of this morning's low at 72.11 will invalidate that scenario and point the EWZ towards 69.00 for a test of its rising 200 DMA prior to the anticipated secondary recovery upleg. From a big picture perspective, after the secondary upleg runs its course, I expect the EWZ to complete its intermediate-term bear-phase.


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