Buzz Bits: Markets Head Higher
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Google "retest" and see what comes up... - Snapper the Turtle - 3:10 PM
I spied the Google gappage earlier (when the stock flipped into Matador City). The internet giant is now testing both the 200-day and the February lows.
As Toddo said earlier, the stochastics are just now giving a buy signal. If this puppy can get through this zone, it could trigger a spate of buy stops.
Just so ya know...
Number 9 - Kevin Depew - 2:34 PM
Minyan RC notes the TD-Combo setups occurring right now on the 30 minute chart of the Dow Jones Industrial Average. The 9 setups frequently identify trend pauses, if not outright reversals. They do (in some vehicles) have a rather uncanny history of pinpointing intra-day turns. For what it is worth, on daily charts I do not trade the "9 setup" since that is just the first step before a price completion "13" can occur.
Here is a 30-minute chart of of the Dow with TD-Combo and TD-Sequential overlaid, courtesy Thomson Financial. We have 9s now on the intra-day Dow chart - check out the history of 9s over the past few weeks. Wild.
Behind the Scenes - John Succo - 2:24 PM
We have spent today buying options. Option premiums have dropped to "extreme complacency levels."
You have heard this story before. A Minyan asked me last week if I thought option premiums would continue to pick up. I said yes. That was the kiss of death.
Every pick up in volatility is met with a quicker slump to even lower levels. Clearly the market has given up on any value to options at all.
But behind the scenes I sense the real reason. With the Fed and other central banks targeting asset prices (a nice way to say that they want, and more importantly, NEED higher and higher prices of financial assets to keep the debt train rolling), any rise in volatility or any sell-off in stocks is met by increased liquidity (and if you push me I will admit that I think they are buying risky assets with printed money, or monetizing, as well).
This is a serious battle. On one side we have insider selling, market forces (risk premiums), and just plain gravity and on the other a hubristic Fed.
I have no doubt that markets will win out, we just don't know when.
Mini-Minyan Mailbag - Scott Reamer - 11:30 AM
As another datapoint in the possible blow-off top in credit, consider www.prosper.com, "the online marketplace for people-to-people lending," where people are willing to lend complete strangers money for rates as low as 6%. The CEO was one of the co-founders of e-loan, and the Omidyar Network is one of the investors (Pierre Omidyar founded eBay), but I have to wonder how much of a "need" person to person lending is, and imagine the risk premiums lenders are accepting are way too low. But hey, a lot of people thought eBay would never work, so maybe they'll be wrong about this as well.
In purely libertarian terms, it's a wonderful thing and with all the intended impacts: decreasing the costs of borrowing and making capital more available which, if coming from individuals making personal time preference assessments, is a natural and entirely beneficial market response to a need.
Having said that, it is of course dwarfed massively by the fiat, moral-hazard driven credit bubble engendered by the Fed and levered by the rent-seeking industries that benefit from the cheap credit (from the theft of savers). Perhaps even more heartening is that such a network could become the foundation for a person to person trading platform based on a real commodity money like gold. I would be a buyer of such a technology/company AFTER the credit bust...
Mini-Minyan Mailbag - Jason Goepfert - 11:13 AM
"Hey Jason, there was a huge asset move out of the Rydex Bond fund on Friday, and now we're seeing bonds jumping today. Is this a good contrary indicator?" Minyan Pete
In a word, no. I'm convinced that there is a bond trading system at work in the Rydex funds that reduces its exposure on Fridays and re-institutes it on Mondays. Of the 10 largest outflows from the Rydex Bond fund so far this year, 7 of them have been on a Friday.
The average asset move on Fridays has been -23%, regardless of how bonds performed that day. Even over the past year, the average asset flow has been around -10%, and only a third of Fridays have shown positive inflows. By comparison, every Monday this year (except one) has seen a net inflow, and by an average of +28%.
I would be wary of reading much (or anything) into these Friday asset moves in that fund...I don't think they're an accurate representation of a broad base of investors. So Friday's drainage of assets and today's jump in prices is likely nothing more than pure coincidence.
In for a dime, in for a doughnut - Todd Harrison - 10:15 AM
File this under "nothing ventured, nothing gained" but as I watch the laggy market internals, the flattish internals (thanks Boo) and lagginess in Google and the Generals (Motors and Electric)--coupled with distinctly defined risk--I'm gonna slip two legs in my metaphorical bear costume (50% conviction on the short side).
My stop? Slightly above the oft-discussed multiyear highs in the S&P.
Let the March Madness begin!
Methinks thou doth protest too much... - David Miller - 9:35 AM
How worried is Pfizer (PFE) about its Lipitor franchise? I think they actually issued more press releases about Schering's (SGP) Vytorin data than Schering did! The data hit particularly close to home for Pfizer since it used the same docs and same procedures (IVUS ultrasound) for determining reductions in arterial lipid deposits as in the torcetrapib trials.
I continue to believe Vytorin is the sleeper drug in the statin space. Lipitor will be hurt by generic Zocor far worse than people expect. Docs and patients like the dual action of Vytorin, which combines Zocor with the cholesterol absorption inhibitor Zetia. Pfizer's nightmare scenario is if formularies specify generic zocor as front-line therapy, Vytorin as second line, and Lipitor as third line. It will be interesting to see whether Schering and partner Merck (MRK) make any move to price Vytorin to make it more financially attractive than Lipitor.
OK. So we are once again 'oversold at support' in terms of price in 10's. - Bennet Sedacca - 8:25 AM
A couple of things come to mind. First, the cycle low we referred to occurs in the next day or so. So it would make sense to have a small bounce (already occurring today) or consolidation before yields again increase. See chart here, that shows REALLY long-term support going back to 1994 at 5.25% or so. Hmmmmmmmm. Could that be the terminal spot once we have a slight correction? That is how we are betting but don't encourage anyone else to.
The other wild card - see this chart here - commercials are MEGA, UBER long 30 year bonds, a record. As they are short SPX futures all the time, they sense either this cycle low OR a deflationary scare. Not privy to know, but it is odd as they are flat 10's despite near record open interest in 10's, but they are flat!
Summary: We are still cautious, but the seasonality clock is ticking fast.
P.S. Please pass the 'white light.' Thanks.
Position in treasuries
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