Buzz Bits: Dow, Nasdaq Drop
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Earnings Report - MV News
- Gymboree (GYMB) reports 4Q EPS of $0.75 vs. $0.73 on revs of $241.0 mln vs. $244.14 mln cons.
Looking for an "oops" - Jason Goepfert - 3:53 PM
If we continue to see weakness into the close, we should see volume on the NYSE be skewed by about 14-to-1 to the downside.
This would mark the third day with down volume trumping up volume by at least a 10-to-1 ratio in the past three weeks, something we haven't seen since December 1987. I can find nine other instances in the past 50 years, and while the very short-term and the intermediate-term results going forward were mixed, the sweet spot seemed to be three trading days.
Three trading days later, the S&P 500 was positive seven of the nine times (the two losses were marginal), but most interesting is that the average maximum gain was four times larger than the average maximum loss (on a closing basis) over the next three sessions. Only once did the S&P lose more than 1% (and that was just barely) from the day of the third 10-to-1 volume day, over the next three sessions.
Given that tendency, and the proximity to last week's low, if we see a little more weakness tomorrow and those lows hold, I'll be looking for at least a short-term relief bounce. I'll be really interested in a long if we see a Larry Williams type of "oops" trade, where we gap down below the previous low then start to rally above it.
Auntee Em, Auntee Em! - Todd Harrison - 3:33 PM
I know we've got four witches awaiting at the end of the week but Jeez, Louise, I can swear I just heard someone say "I'm meeeeeeelting!" Woof, woof Toto--this market is not in Kansas anymore.
Consistent with what I wrote earlier, I'm trailing the last leg of my bear costume and will likely go home naked. No, I'm not streaking (bad visual!), I'm just trading. And despite my big picture trepidation, I'm grateful to take some well timed gains and jog out to the mound fresh and spry tomorrow.
Yes, I still think the dip shtick is good and thick and the conditional elements for a downside dislocation remain in place. Betting on tails is a dicey proposition, however, so I'm keeping my right hand up (both ways) as we collectively chew through the dew.
Let's call the trailer S&P 1386 and/or the closing bell. And someone please get me some Calgon!
Stephanie Pomboy of MacroMavens Presents: Ouch! - MV Respect - 2:58 PM
It's bad form to kick someone when they're down but since we're on the topic… here are some back-of-the-envelope figures on the potential hit to S&P eps from the unfolding subprime (and other) mortgage woes. Based on the share of ARMs that are presently in some level of negative equity, (e.g., borrowers owe more than the home is worth) mortgage lenders are looking at $210-350 bln in losses. That's just what's already in the pipeline. Never mind the potential for home price declines (and further foreclosures) from here.
To put that in perspective, total financial sector profits are $500 bln (of $1.5 trln total). Hmmm… maybe rather than debating whether S&P eps will be high, mid or low-single digit this year, we should be focusing on what the sign to the left of the number will be!
What I don't understand... - Bennet Sedacca - 9:29 AM
...is why folks are so surprised by the blow up in 'sub-prime.' Rhetorically speaking, why do we call it 'sub prime?' Because they are low quality loans for the most part. Folks that were sold loans by predatory lenders and couldn't afford their loans in the first place...at bloated real estate prices.
So I can't imagine being surprised by this. It is like saying in 1999, "let me give you a margin account with no money down and a 10% interest rate and sell you JDSU at 130 a share." Of course there will be a margin call.
But here is the key. Will it spread or not? In 1999-2000, a post-bubble recession followed. I think this year we may be OK, but I am worried about 2008. All of these folks will be effectively removed from retail spending, not to mention those working in the homebuilding and lending industries.
Truly, I feel bad about these folks. I really do. I think the lending practices were horrific. But from a market perspective, I think it will be a buying opportunity for a little while followed by a wonderful selling opportunity later in the year.
It seems to me that all of the news in sub-prime I know is out of the bag. The repercussions, eventually are, well, you don't wanna know what I think...
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