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Buzz Bits: Markets Dip


Your daily Buzz highlights...


Earnings Report

  • Genentech (DNA) reported Q1 EPS of $0.46 vs $0.41 cons on revs of $1.986 bln vs $1.96 bln cons.

Flashback! - Bill Meehan - 3:34 PM

This day in market history...
  • Closing levels 1 year ago
    • DJIA: 10,448.56
    • Naz: 1991.21
    • S&P 500: 1181.21
    • Crude: 53.71
    • Gold: 427.9

This day in Minyanville history...

In other news...

  • In 1947, Jackie Robinson became the first black player in major league history, playing in an exhibition game for the Brooklyn Dodgers.

It's scientific - Kevin Depew - 3:24 PM

Minyan Vijay asked about the PnF and DeMark context for Boston Scientific (BSX). On a PnF basis the stock is trying to hold support at 21.5 (basis .5x3 chart), but the primary trend, as one would expect, is decidedly negative and there remains risk to 18. Using the DeMark TD-Sequential and TD-Combo indicators there are buy setups on the daily chart, but still no actual buy signals, while the weekly and monthly charts show no indications of a high probability bottom having formed.

Thank you to Minyan KK for pointing this out........ - Bennet Sedacca - 3:14 PM

The intermediate uptrend in S&P (unless the rally into the close has been broken) and 50 day is being challenged. Right in that mid-April area. And VXO is still not a teenager. Very interesting......

See the chart.

Divergence in the Mining Market - Tom Peterson - 1:44 PM

Monday was the first day to exhibit a bearish divergence between the gold price and the precious metals stock indices (XAU, HUI & XGD) since March 3rd. While divergences are deemed to be valuable under virtually all circumstances this timing should have higher than average reliability. See the chart.

Having produced an A-B-C correction down to a measured target (122) , the XAU staged a rally back to the Variable Volatility Band and achieved an RSI (14) reading of 66+. This set of conditions has been present in ten instances during the past few decades. The results can be seen here.

We will be watching for an RSI (14) reading under 53 in the XAU as a point to once again overweight investments in the sector.

Position in gold

Nice Show, USO - Kevin Depew - 12:54 PM
  • Far more new PnF sell signals than buy signals today, as one might expect.
  • Meanwhile, the High-Low Index for the NYSE has joined the Percent of Stocks Above 50-day Moving Average indicator in reversing down to negative, increasing the probabilities of a meaningful move lower.
  • As noted yesterday, the high risk of the PnF indicators along with the alignment of DeMark sell signals on long-term monthly charts paints a grim picture going forward.
  • Mini-Mini-Minyan Mailbag: "The new oil ETF is based on June Nymex contracts (CL/M6). But the June contract seems to be trading almost $2 above the ETF. What am I missing?"
  • The US Oil ETF (USO) is designed to track the movements of light sweet crude. Although it does invest in oil futures on the NYMEX, it can also hold other interests such as cash-settled options and forward contracts, so its price may not always be a mirrored reflection of, in this case, the June contract.
  • Here are the current holdings of the USO as of April 10: 96 June contracts (CL/M6)
    $6,793,000 cash.
  • B-I-N-G-O? B-I-N-G-Ow!

Bonnie and Slide? - Todd Harrison - 10:49 AM

S&P 1295 fell by the wayside and the Minx slipped faster than a Bonnie Tyler tune on the charts. Some Minyans pinged to ask me if that level was "responsible" for the downdraft and I'll say "yes and no." Yes, in that alotta sell stops were set below that zone and, once triggered, they ushered in a spate of supply. And no, in that technicals are but one of four primary metrics and there are plenty of other catalysts to factor in.

Be that as it may, NYSE breadth is 2:1 negative (3:1 negative on the Nazz) as we hop, skip and jump through Turnaround Tuesday. Of note, as well, is the reversal of fortune in the energy complex, as well as the give back in metal proxy Newmont. I wanna buy both these groups on sizable slippage but I'm trying to remain conscious of the dreaded "fear of missing" that can sometimes cloud judgment.

With regards to what I'm doing, I snuck in a $5 bid for some SunMicro and got hit faster than Austin Power's five. I'm in "scale mode" on this puppy and I understand that I may experience a bit of pain before potential pleasure. Such is the nature of the beast and, thus far, my short piggies are making up for my other pokes.

Position in SUNW, financials

It's all about the cash flow! - Brian Gilmartin - 10:37 AM

Reading and digesting the back-and-forth on Pfizer (PFE) between Toddo and others, I'll chime in and say that we have been considering a position in PFE since the double-bottom at $20 per share in December '05, but as of yet haven't pulled the trigger.

What isn't as well publicized from a fundamental perspective, is that PFE has retained its AAA-credit rating (Moody's has a negative outlook on the debt as of the 10-k filing), and is generating just a boatload of cash and free-cash flow, which gives a solid defensive posture to the stock, for those who feel the rug will be pulled out from the market in the next year.

As of 12/31, PFE was generating $2 per share in 4q trailing cash from ops, and $1 per share in free-cash-flow, and had another $3 in cash and equivalents on the balance sheet.

Since they don't have a lot of debt - about $6 bl or 21% as a percentage of market cap - and given the high credit rating, they don't really need to reduce debt. Three things can happen with the cash: 1) Continue to boost the dividend, 2) repurchase stock, or 3) make an acquisition.

#3 isn't likely given that PFE is still trying to swallow Warner-Lambert, and would likely depress the stock price even further.

Right now, I'd rather be PFE than Merck (MRK) or Schering-Plough (SGP).

The prodigious cash flow provides a lot of options.

An update on bonds, from our perch..... - Bennet Sedacca - 10:30 AM

As Katie Townsend mentioned earlier, 5% was a natural 'physiological' place for yields to stop in 10's and a likely place for traders to cover some bets. And indeed, that was the case. But as Katie also points out, the utes (and I will add REIT's) act like doo doo and that may have just been a good place for oversold bounce. That is what it looks like, so far.

But we are running out of our negative seasonality, at least from short-term perspective and will respect this as we have to be disciplined to survive. We don't want to go from believers to hopers - it is a sure way to lose.

Our bet is any move through 5%, even though off the run 10's got there, may bring the end to THIS PHASE of the move, in barf fashion. What if we are secular bears in bonds? All bets are off. Just sell bounces for the next 20 years! More on that later. Inflation? Deflation? Hyperinflation? Disinflation? You could make a case for almost anything now.

As for stocks, we are sticking to our mid-April high thesis, and wouldn't be surprised if the top wasn't already in. Bids seem like they have vanished to me......Anyone else?

Positions in various Treasury securities.

Mindless Drivel - John Succo - 8:54 AM

(AA) earnings were declared "great" by financial TV.

The analysis continues to be mindless.

EPS were better because of a lower tax rate

Margins were down.

The company degraded their balance sheet: with high prices, they super-charged earnings by not replacing assets to get at those earnings later. They did not replace/upgrade plant and equipment.

It was not a bad quarter, but shows us signs that rising costs are compressing margins for even AA.

Position in AA

Happiness is a warm gun - Phil Erlanger - 8:06 AM

Yes, that seems to be the case for the longs in Smith & Wesson (SWB) which has staged a nice turnaround with their new leader Michael P. Golden. The New York Times this morning features a lead article on the gun manufacturer. We note that the stock remains a short squeeze with a technical rank of 90%, short intensity of 91% and a short ratio of 2.49 (see chart). Shorts began adding to their position last July at an average price of around $5. It will be interesting to see if today's article pushes the short squeeze to the next level.


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