Buzz Bits: Dow Goes Under, Nasdaq Gains
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Pork Chops and Apple Sauce. Swell. - Todd Harrison - 3:56 PM
The Monday chop chews to the close as the bulls quietly chant "can't get 'em down." That mantra and mojo will set the stage for Turnaround Tuesday and, through Hoofy's rose colored glasses, could last through month end.
I've never "gamed" month ends (quarter-ends are more 'reliable') so I'm content to play alpha bits (vs. market hedges) and trade with a tight risk profile. I am leaning a bit short, so you know, but nothing that warrants the metaphorical fur. S&P 1445-1450 is a zone I'm leaning against, for those watching at home.
Meanwhile, just as I've started to look healthier, I've got the one ear clogged thing going on. That's a recipe for chicken soup and taking it easy so, with that, I'm off like a prom dress and eyeing a relaxing Monday night.
Fare ye well, Minyans--I'll see YOU in a few, short hours.
Randoms - Fil Zucchi - 12:17 PM
- An interesting observation from Miller Tabak's Tony Crescenzi regarding the increase in new home prices:
"Oddly, the average price of a new home sale was a record $331k, up 7.5% from January. The increase could well reflect problems in the sub-prime and alt-A sectors, which have forced borrowers in these categories to consider lower priced homes. It may also indicate that increased foreclosure rates are putting downward pressure on lower priced homes. Both of these factors would push up the average price. The median price fell only 0.3%, which suggests that sales activity at the lowest end of the borrowing spectrum has been affected and that pricing near the median has not changed much and higher priced homes may have increased as a result of bonuses and the like."
Please note that despite this observation, Tony C. is not terribly bearish on housing and he's actually bullish on the economy.
- Since February 1, both Akamai (AKAM) and F5 Networks (FFIV), my bellweathers for risk appetite and the health of technology are meaningfully underperforming both the S&P 500 (SPX) and the Naz 100 (NDX).
- Today's "rumor mill" includes renewed chatter of Exxon Mobil (XOM) being interested in Devon Energy (DVN) - the latter being one of my favorite energy names.
- HOYA HOYA SAXA!!!
- Gastar Exploration (GST), my energy "lottery ticket" (search the archives for past Buzzes on this one), has been creeping higher on the back of exceptional drilling results from an Encana (ECA), located in close proximity to GST's properties.
- I am looking at the 85 level on the Yen futures (JY) for a long side trade.
Positions in GST, DVN, SPX
Bulls Up to Bat? - Jess Thompson - 12:10 PM
Last Thursday I explained here why the 1450 handle was a candidate for a "price too high" for the S&P Jun futures and by proxy for the broader S&P 500 cash index.
Despite being enamored with last week's 1450 price level in terms of an attractive price (meaning a target for for bulls to take partial profits and for bears to look for tactical shorts) my firm follows a discipline of requiring price levels to be validated by price action because extended markets can easily get more extended -- especially in stock indices.
I view today's price action as only the first Stage of a two or three Stage process of validating the 1450 level as a possible important swing top.
In Stages 2-3, my firm wants to assess whether or not price is resilient. Does the selling dry up after the first half today? Or does it remain as a well-offered trend day down, closing weak? After the selling dries up is price able to recover 1444-45 quickly, or not at all? Can buyers defend the 1430-32 handle?
All of these items are not knowable in advance, only observable as part of the larger mosaic of price action. So while today's early selling is certainly a shot across the bullish bow, my firm expects bulls to step back into Monday or Tuesday -- and then we can see how much buying power they can muster and the character of the next rally effort may be more of a tell than today's early decline.
More details on validating entries and my firm's trade management process is available at our website.
I don't like Monday. - Jeff Macke - 11:56 AM
Greetings from New Jersey where I'm calling a loud "Shenanigans" on the idea that this selling has really been catalyzed by weak new home sales. We knew new home sales were weak going into today. Not even the bulls were forecasting strong new home sales. Indeed, the actual CEOs of the new home builders have been uniformly, plaintively, negative on their sector.
From where I'm sitting, UNC's hideous collapse yesterday had as much to do with the selling as anything we heard from the government.
- Tiffany (TIF) is trading okay after offering nothing much to get excited about this morning. The company met guidance but noted a shift to lower-margin, high-end diamonds (high-end diamonds have less mark-up) and guided the year EPS slightly below expectations.
- Beckman Coulter (BEC) makes a HUGE bearhug of a bid for Biosite (BSTE), filling out BEC's heart-diagnostic line-up. Alas, there is no test to track the bitterness in my heart, having been long BSTE in the past but not today, when the stock is up over 50%.
- Finally, speaking of bitter, congrats to the University of North Dakota who are making their way to the Frozen Four after defeating my Minnesota Gophers in overtime last night. I am officially "O for 2007" on my college brackets.
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