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Friday thoughts, head spinningly busy edition... - David Miller - 3:30 PM

  • It is unbelievably busy here. Wall Street has apparently "discovered" small cap biotech. That's a good thing for the sector and for us, but whew!
  • I expect the noise on the "Japanese carry trade" to gain volume over the next month or so. I believed the dire warnings of the American version and missed a great move. I'm smarter now for that experience, and will be looking hard for someone to tell me why it will be different this time. Not ignoring it, mind you, just not assigning it as high a possibility this time until data tells me it's different this time.
  • I gave my opinion a couple months ago that the real estate "bubble" causing the theoretical bubble there would shift elsewhere once investors saw a top. Instead of being terrible for equities, I opined that it might be good. Update: Several brokers I spoke with recently said accounts that mostly abandoned them over the last few years in favor of doing real estate deals are eagerly taking their calls and searching for equity ideas. Completely anecdotal...
  • Hey Toddo... Remember those fun times when things were so quiet you commented about mice and cotton? Please put an order in for some of those next week. Thank you.

Flashback! - Bill Meehan - 2:43 PM

This day in market history...

  • Closing levels 8 years ago
    • DJIA: 8584.83
    • Naz: 1757.14
    • S&P 500: 1052.02
    • Crude: 15.28
    • Gold: 297.00


This day in Minyanville history...

  • In '03, Toddo stepped back into the fray after the weekend charity event and wrote about it in Minyan Bowl. The annual event for Jacob's Cure is where I look forward to spending my Sunday. Hope to see you there!


In other news...

  • In 1945, Superman encountered Batman & Robin for the first time on the Mutual Broadcasting System. Good thing Chuck Norris wasn't there, or he might've roundhouse kicked them all to the face and children everywhere would've never experienced their favorite pajamas.


Have a great weekend!


Ok Mom told me NEVER to brag - always brings bad luck........ - Bennet Sedacca - 2:05 PM

She also told me to be careful to put things in print which I have said many a time. But see here, 10 year notes HAVE broken. IMHO, a straight shot to 4.88-4.90% land in old 10's - they are already pushing 4.75%. Are those yields HIGH? Well, it depends on your perspective.

When will they bounce? Don't know - I hate to say. All I am sure of is that support has now become resistance and there are a LOT of trapped people in this trade. Not to mention 8,000 hedgies. Commercials are NOT short so they can't cover. I can promise you I don't own 'em.

What to do now? I hate to say it, though I AM proud of seeing this in advance, but all we can do is wait. Wait until seasonality turns. Wait until cycles turn positive. Wait until sentiment gives us the big barf. Wait until the convexity sellers (as a result of MBS extending every moment). Just WAIT. The hardest part of being right is to know when to 'go for the juguler.' I have no clue when it comes, you just have to wait til you see the signs, which I hope to share with you.

The thing that bugs me? This can not be good for financials or stocks generally, yet they go up anyway. Something, eventually, will have to give. My guess? Stocks around April 1st........Stay tuned, same Bat Channel.

Position in Treasuries


Mini-Minyan Mailbag - Todd Harrison - 1:46 PM

"Toddo, Let's see, we have shaken off the higher rate jittters, an Intel dissappointment, Iran jitters , Iraq jitters , bad retail sales, a housing slowdown, inverted yield curves, Dubya's lousy approval ratings and anything else that Boo can throw his way. Not sure why but it seems like folks just want to own equities. Minyan D."

MD,

Pure eyes, it's hard to argue with this train of thought. We often say that the reaction to news--rather than the news itself--is the best tell for a tape (the market is a leading indicator). With that said, I'll remind you to respect---not defer to--the price action. If we simply followed the ticks, we would, by definition, buy up and sell down.

With that said, a bovine ability to scoot through these levels (and alleviate the tech dandruff) would give Hoofy the benefit of the doubt heading into next week--particuarly if the piggies can close above BKX 106. Important close? Aren't they all these days?

R.P.



Warning - Adam Warner - 1:09 PM


Minyan Alex notes that the 50 day MA in the VXN has "crossed up" through the 200 Day MA. Of course it is an accurate observation, I just would caution against relying too much on standard chart patterns as they pertain to these imperfectly calculated statistics.

Mainly, they are just that, statistics. They have floors in them that, unlike stocks, are not zero. And we are very close to those floors in all of them after 5 years of steady declines.

So while I would totally agree with the conclusion that volatility has found a bottom, and it may in fact trend up, it is more because they simply can't get any lower than any other reason. Volatility "bubbled" in the late 90's, same as the market, and we likely get nowhere near those levels on anything other than a very short-term, event-related basis.



Sun-Rise - Tom Peterson - 12:47 PM

Sun Microsystems
(SUNW) got down to the lower edge of the $4.14 - 4.24 'shelf' but did not decisively break it. The other day we wrote, "Bulls need it to show demand at that shelf shown by the green line and to have money flow turn back positive." Well demand sure has appeared today, but not the money flow - yet (although today should change that).

The drop to $4.14 was as a result of the Google (GOOG) scare the other day, and actually that event shows that GOOG really needs to venture into the kind of partnership with Sun Micro that Minyan Kevin Wassong envisions. Perhaps today's comments by GOOG CEO Eric Schmidt are helping it. In any event the trading desks have been pushing it as a 'must buy' into next week. That type of spec buying is very short-term, and it opens the door for possible disappointment if there isn't any news of course.

However, we still think SUNW looks great long-term. We will be watching for possible analyst upgrades soon because, of course, there are no serious buy rankings on it, though we continue to see 'smart money ' buying from the likes of Dodge and Cox. There is still some remote short-term risk down to $3.60 because money flow has not turned positive yet, but we'd say this 'spring' low of $4.14 really should be inviolate now if this is as good a turn as it appears to be.

See the chart here.

Position in SUNW


Oh, Oh, Oh, Mr. Kotter!!! - Vitaliy Katsenelson - 12:05 PM

I was teaching a class yesterday and explaining to students about corporate profit margins hitting all time highs. And it hit me; I was not completely right when I said that oil did not inflate corporate profit margins. Here is why: the swollen profitability of oil companies was in fact at the expense of corporate America. So I was right about that. However, it was also paid for by the US consumer at the expense of the consumer discretionary income. High costs due to high oil prices have showed up as an expense on corporate income statements, but reduced consumer discretionary income has not showed up there - at least not yet, as consumer spending so far was not impacted by higher hitting costs and gasoline prices.


Ready, aim... - Jason Goepfert - 11:31 AM

If the S&P 500 cash index closes where it is, or close to it, it'll be the third "inside day" in a row, where today's high is lower than yesterday's high and today's low is higher than yesterday's low.

How rare is this? Well, it's never happened before.

I show a few dozen times where we've seen two inside days in a row, but never three. It's also never happened in the NDX. I can find one time we saw such a thing in the Dow, that being April 7, 2000, after which volatility exploded higher.

My data could be off - it's hard getting accurate and reliable intraday data back more than 20 years or so - but in any event, this kind of coil is extremely unusual and will not last. I wouldn't necessarily trust the first break of this range, but I am counting on a jump in volatility over the coming week.


Bully Bully - Kevin Depew - 11:35 AM

Minyan Bully (nickname, not description) pinged me to ask my thoughts on what he wonders is a potential triple top (bearish formation, not PnF pattern) forming in the Nikkei 225. I'm not sure I see that, but I do see DeMark 13 sells for darling Nikkei 225 on both TD-Sequential and TD-Combo monthly charts. Some traders/analysts disregard monthly charts for a variety of reasons, but check out the 13 buy signals on the charts confirmed by both TD-Sequential and TD-Combo back in Oct. 2002 and March 2003.

The day-to-day fray is filled with noise, distractions and deceptions that all serve to move a trader's eyes away from the ball. Monthly action provides a context within which to base daily decisions. Tom DeMark noted in last night's presentation at the Bloomberg corporate spaceship headquarters on Lexington Ave. that the indicators are not perfect, but just suggestive of increased probabilities of a significant top (or bottom) being put in.

NKY225 TD-Sequential Monthly

NKY225 TD-Combo Monthly
(Charts courtesy Thomson Financial)

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