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Buzz Bits: Markets Close Mixed


Your daily Buzz highlights...


Earnings Report - MV News

Oracle (ORCL) reported Q3 EPS of $0.19 vs $0.18 cons on revs of $3.47 bln vs $3.53 bln cons. License revs were $1.1 bln vs $1.08 bln exp.

Flashback! - Bill Meehan - 3:14 PM

This day in market history...
  • Closing levels 3 years ago
    • DJIA: 8,286.60
    • Naz: 1402.77
    • S&P 500: 875.67
    • Crude: 28.62
    • Gold: 332.40

This day in Minyanville history...

  • In '03, Toddo penned Young Guns as the conflict in Iraq officially got underway

In other news...

  • In 1969, John Lennon married Yoko Ono at the Rock of Gibraltar

Dirty Dollar Bill - Kevin Depew - 2:30 PM

Minyan Sean asked about any ETFs or mutual funds that are related to the U.S. dollar. Rydex does sponsor a Euro Currency ETF (FXE), but it is a play directly on the euro, and indirectly on the trade-weighted U.S. dollar index, though of course the largest weighting in the index is the euro.

Otherwise, there are a number of direct dollar plays available via mutual funds. Rydex has the strengthening dollar fund (RYSBX) and the weakening dollar fund (RYWBX, and Profunds has a rising dollar fund (RDPIX) and a falling dollar fund (FDPIX)

SPY vs. SPY - Adam Warner - 1:04 PM

Just as a point of reference the next time you have the urge to put the 800,000th contract on the tape in an option series with an open interest under 5% of that figure.

Over 4 million SPY deep calls traded on Thursday chasing a total open interest of roughly 500,000 calls outstanding. Only 400 total went unexercised, meaning your chances of "getting away" with any of that free cheese was under .001%.

Yes, maybe it made sense early in the day to game it, but once the volume exploded, the odds of the trade became so minimal that it's hard to imagine doing anything but running up some commissions.

Position in SPY

Biotech Notes - David Miller - 12:40 PM

  • Cowen is out with a note this morning on ImClone (IMCL), saying the company should sell itself before people realize this emperor has no clothes. I dunno where the stock trades from here, but I tend to agree with Cowen - fundamentally this one is overvalued. The problem with the acquisition scenario, which I believe is providing the bid under the stock, is everyone in the business side of the biotech business knows they are overvalued. Hard to see where a bid comes from until after the stock gets clobbered -- even in this hot takeout environment.
  • After Todd's talk Saturday, students were overheard talking about the stock market at the post-function dinners. General refrain? Man, I have to learn more about THAT.
  • I am on a panel at lunchtime for biotech company IR/PR people. The title of my talk? "The Care and Feeding of Wall Street." Good IR is a subject I'm passionate about and I'm looking forward to the talk (well, except for the fact I came down last night with the same cold Todd has), but it was tough to leave Cannon Beach. Most people were leaving today and they were setting up for a bonfire on the beach last night after dinner. I gave up Smores. Luckily, I brought some Smores cereal back with me...
  • So after we get the March Madness stuff out of the way, anyone up for a reprise of the Great Minyan Weight Debate? I'd certainly rather be more svelte going into MIM-3. All that Fat Tire is going directly to my spare tire...

A follow up on Katie Townshend's comments on 10's from earlier... - Bennet Sedacca - 12:19 PM

We mentioned here a few weeks ago that traders should likely take profits in short bets against 10's. Corrections usually take form in either time (consolidation) or price (bounce). Personally, I think this correction has been a little of both.

The cycle low of 3/15 was on the mark and we are now (courtesy of a good friend of mine who I REALLY wish I could mention but can't) is calling for a 3/24 cycle high. The seasonality (negative seasonality) takes over and the worst time of year is ushered in. The 50-day is just above us and should act as resistance if the bear trend is still intact.

Several flies in the ointment? Specs are record long 10's while hedgers are record long 30's. Now THAT is strange. We stick to our call of lower than bogey duration but not stubbornly so. We also have Boom Boom making a speech - will he endorse an inverted curve? I have no idea as he is so new to his post.

What we are NOT being is stubborn and a couple of holes, truthfully, have been poked in my bearish argument (going back to like 4.25%). But all I see so far is a relief of an oversold condition (price, not yield). The curve would have to get REALLY UBER (DOUBLE UBER) inverted for the rally to go much further. So while not advice, this is close to where one would put shorts back on. A simple stop? The 50-day. Again, not advice, but our sense is that the bounce in 10's is about over. 30's is a part of the curve we rarely play and I don't have much of an opinion there.

Position in various securities

"Sweet 16" Randoms - Fil Zucchi - 12:11 PM

  • Please don't remind me how long it has been since my Hoyas looked like a basketball team. I prefer it this way.
  • Finisar (FNSR) registers 34M shares for a selling shareholder, right after MRV Communication (MRVC) stink-bomb secondary. Optical pattern?
  • Italians are growing increasingly negative about Berlusconi's chances for re-election. Like him or not, Prodi, his socialist opponent, makes Dennis Koszlowski look like the type of guy you wanna entrust with your retirement savings. A couple of fiduciary offices in Lugano, Switzerland have fielded several calls from Italians looking to get assets out before the "bad old times" are back. If European Minyans have more color on this please do share.
  • IMHO, the offer by management to take William Lyon Homes (WLS) private is not likely to spur merger mania among the homies, except for those trading at discounts to conservative book-values. NVR Inc. (NVR) is another closely-held company that could hurt shorts. While on the subject of homies, this Saturday's Washington Post real estate section featured some very aggressive advertising by Toll Bros (TOL), NVR, and M/I Homes (MHO), the latter offering $60,000 off if you settle by March 31.
  • Energy boutique Pritchard Capital sees a lot of value in Halliburton (HAL) given the pending spin-off of its KBR division and the announced share buy-back.

Position in TOL

State of The Markets: Bullish Bias - Phil Erlanger - 8:43 AM

The NASDAQ 100, S&P 100 and the Dow Jones Industrial Average moved higher last week. The daily NASDAQ 100 Squeezeometer moved from sell/sell short to cash/speculative buy on March 17. The S&P 100 Index remains at buy. The S&P 100 Index moved to uptrend on a weekly basis as of March 17.

Our 14-day choppiness index for the NASDAQ 100 Index moved from 57 to 56. This index ranges from 0 to 100, and the lower it goes the more a trend is evolving. The S&P 100 choppiness index moved from 70 to 50. The trend that had been emerging is now to the upside. Both the NASDAQ 100 Index and S&P 100 moved above their respective DMA channels.

Mini-Minyan Mailbag - John Succo - 8:31 AM

Prof. Succo,

I've been a long time reader of your posts. I understand the bearish case. However, I would like to ask you about the following:

My trader friends tell me that -

On Thursday there were 3.2 million index call options purchased. This is the highest volume on record. (Sorry but I do not have enough knowledge and tools to verify if this is true or not. If it's true then you must have noticed this as well).

So it seems like the smart money is betting on a blow off top. I am not sure if that is the case. One of them commented that this is similar to 2001 when smart money was loading on puts in the declining market before Sept 11. I'd like to know if you observed this as well and if it makes any sense.


Minyan Suhas


This is a great example of partial information and of coming to a conclusion with it. As an aside, this is a favorite tool of bureaucrats and politicians.

Friday expirations bring a special event: all dividends accrued over time on the SPY, probably the highest volume ETF, are paid. It is a relatively large dividend. The very high call volume is the result of riskless spreads initiated by traders in a low probability, high pay-off bet. They are betting that someone will "forget" to exercise in the money calls in the SPY as they should. They would benefit greatly from this mistake. If the mistake is not made, they will not lose anything.

Adam described this trade in the buzz on Thursday. The call volume is "artificial" in the sense that it did not indicate any directional bet.

There is always a reason for something. Always ask the question "why" before making a conclusion.

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