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Buzz Bits: Nasdaq, DOW Close Lower

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Earnings Report - MV News

Nike (NKE) reported Q3 EPS of $1.24 vs $1.10 cons on revs of $3.61 bln vs $3.53 bln cons. Worldwide future order growth was 5.4%, ex-currency, vs 7-8% exp.



Flashback! - Bill Meehan - 3:23 PM

This day in market history...

  • Closing levels 6 years ago
    • DJIA: 10,907.34
    • Naz: 4711.68
    • S&P 500: 1493.87
    • Crude: 28.01
    • Gold: 288.80


This day in Minyanville history...


In other news...

  • In 1963, Alcatraz Island was officially closed.




This is very unusual and very telling of market psychology... - John Succo - 3:09 PM

The options of both NKE and FDX have become cheaper today (from an already fairly cheap level) before they report earnings tonight.

Normally the options of a company will be relatively bid up as the market prepares for earnings, statistically the most volatile window for companies.

This illustrates clearly that the market believes that no matter what these stocks will not get hurt, price-wise, even if they report disappointing earnings.

The market may be right, but it illustrates a very rare level of complacency.



Hmmm... - Jason Goepfert - 12:32 PM

My quote vendor shows that the TRIN on the Nasdaq just dipped under 0.30. This is the lowest intraday reading, other than the noise in the opening 1/2 hour, since June 23, 2005.

Interestingly enough, that is also the day the NDX broke out of the consolidation phase it had been in before failing almost immediately and taking a rather severe haircut the next few days.

I'm not sure this one is comparable, but it's standing out big-time and I thought I'd bring it to your attention.



Look at you, with Theraflu, wonderin' whatcha gonna do... - Todd Harrison - 11:56 AM

As I posted the last Buzz, with an ear to the ground listening for chants of "Can't get 'em down!", Snapper arrived in style and ripped the tape higher. His vibe is N's over S's, as discussed, as the semis, telecom, software (see Oracle), and the nets (sans Google) take the baton. Interesting action, considering that the trigger for many quick fingered traders was Hoofy's ability to hold S&P 1300.

What am I doing? I added some metals this morning into the muck (and CRB 320) as I figure any reflation theme will include the jitterbugs. I'm also on the lookout for energy issues although, admittedly, I've never been good at buying stocks that have doubled in the last 52 weeks. Still, and consistent with the vibes shared in Ojai, I think both these puppies have better prospects than tech and financials (although others would beg to differ).

Speaking of which--or speaking of both--the financials continue to lag (please read the Buzz from this morning) as we ready to announce the much anticipated venue for MIM3. Coincidence? No such thing, Minyans. It's sorta like the tape rallying when Dubya speaks, only we hope to offer a bit more clarity with our message in the mountains.

As always, I hope this finds you well.

R.P.



Risk Aversion - Kevin Depew - 11:50 AM

The Russell 2000 (RUT), as if on cue, is underperforming the SPX. Jason Roney earlier noted the strength in General Electric (GE). As well, the AMEX Consumer Staples SPDR (XLK) is up .nearly 1% today. I believe this is all part of a larger transition toward a more defensive equities posture, though it will probably be spun by many as simply a play on a weaker dollar. While these companies, many of which see a significant portion of their sales come from overseas, could benefit from a weaker dollar, the larger point is that they are also low-beta, liquid stocks.

There are many, many funds and portfolio managers that must maintain a constant exposure to equities... even if these types of investors and funds firmly believe risk for all equities is high, they have no choice but to maintain exposure. Therefore, if they are becoming risk averse, they reallocate capital to more liquid stocks and bellwether types of companies they won't be embarrassed to have on their books.

As additional evidence of this, note the breakout on the long-term chart of the iShares Dow Jones U.S. Consumer Goods ETF (IYK). On a PnF basis, the IYK broke a sextuple top recently. The largest weighted companies in the IYK are precisely the types of companies most sought during periods of risk aversion. The top five weightings are Procter & Gamble (PG), Altria (MO), Pepsico (PEP), Coca-Cola (KO) and Anheuser-Busch (BUD). This is a transition to low beta stocks.

One note of caution, a transition to these stocks is often made without the expectation of absolute performance, but relative performance. If the SPX goes down 20%, but a fund manager only loses 19%, he has successfully beaten the benchmark.



You gotta have something, if you wanna dance with me. - Jeff Macke - 11:03 AM

Microsoft
(MSFT) has announced plans to start distributing "2 to 3x" the number of Xbox360's to the retail channel weekly, starting this week. This acceleration will help drive Microsoft toward Steve Ballmer's goal of being the first of the new-cycle platforms to sell 10 million units.

Now... according to our proprietary Channel Checks, Xbox360 shipments have ranged from 0 (zero, nil, zip, bupkiss) to "one at a time." Our new run-rate thus becomes between zero and 3 Xbox360's going out to the retail stores per week.

Suffice it to say I think Sony (SNE) has ample time to get into the platform race. By extension, I'd lend more credence to Gamespot's (GME) guidedown on the current quarter than I would give their estimate boost for the full year (which relies on both Sony and Microsoft having their acts together).


Just Do It - Phil Erlanger - 9:50 AM

Yesterday, we saw a Forbes note that Goldman Sachs was positive on Nike's (NKE) upcoming earnings release. Goldman's price target is $110. We note none of the market intelligence services picked up on this call yesterday. On Monday call activity was heavy in front of today's earnings release after the close. 6,937 calls traded against an average of 2,308 over the past ten days. Put activity was not excessive on Monday.

We also note in our work that a put squeeze has formed. A high Erlanger Options rank (94) and positive price action with the Displaced Moving Average. The Erlanger Options Rank reviews open interest, premiums, money flow and volume. Our core technical rank is average at 50% with low short selling. Last, our friends at Option Research & Technology note that Nike normally moves in a range of $1.03 but with earnings should move in a range of $2.54. Hoofy likes this setup to the long side.



Curious George wants to know.... - Bennet Sedacca - 8:38 AM

OK. So we have a housing boom, bubble, expansion, whatever. Call it what you want. Let me tell you what I KNOW. And this is the part that scares me longer-term. Before the housing boom started, homeowners had 57% equity stakes in their homes. Well, home prices have skyrocketed - in most places anyway. One would think that equity as a percentage of values would rise right?

After all these enormous gains, guess what the equity stakes of homeowners are nationwide. Anyone? Drum roll please...57%. What that means is that every dollar of gains has been extracted for consumption. So if prices stop rising, what will consumers spend with? One of two possibilities in my book.

1. The savings rate goes up and consumption falls.

2. People keep using their homes as ATM's and equity stakes fall - but that just puts off the savings rate increase for a later day -'the whistling past the graveyard trade.'

In any event, it really is like a margin account in stocks. Sooner or later, the margin clerk won't lend you any more money for you to 'support your position.' What on Earth would happen if prices actually fell? Margin call. Global margin call. Not a prediction, but I can add.



R+R = Me - Laurie McGuirk - 8:05 AM

Just a heads up, I sold about 25% of my personal precious metals equity holdings in the last couple of sessions. I am quite worried that the total equity market is gonna take a few hard shots to the chin in the coming weeks/month and I think metal stocks aren't gonna be immune - (no matter what gold price is).

We saw similar in the 2002/03 cleanouts as well. Happy to be wrong and am not touching my retirement portfolio, which has a significantly different time horizon and investment outlook. Just sharing the vibe.

Meanwhile, check out this article when you get a chance. Hardly a tough questioning or examination of the deals and results, but I expect more of this as other countries start doing the math – Australia, Netherlands, Canada etc. Wait till the questions start on gold leasing!

Also, as an FYI, I am headed to New Zealand Thursday for a couple of days R+R (Fly fishing on the South Island with a few mates).

Position in gold



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