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Buzz Bits: Markets Dip


Your daily Buzz highlights...


Freaky Monday dude! - Fil Zucchi - 3:36 PM

  • Gold and silver are overbought on both daily and weekly time frames, and yet both had eye popping moves today. Thus is the nature of primary bull moves.

  • The most catchy thing I saw on my screens today? The dollar caving like a wet noodle on the mere suggestion by the WSJ that the Fed may be close to stop raising rates; and it happened without any meaningful recovery in bonds. Not something that makes Boom-Boom too happy me thinks.

  • I've added to my StreetTraccker Homebuilders (XHB) short, as a way to get more exposure to NVHomes (NVR). Without financial engineering maneuvers (take private, buybacks, whatever) this one IMHO is not worth half its price. To go at it directly though it's just too dangerous.

  • Outside day reversal in Caterpillar (CAT), commodities notwithstanding.

  • "Sorry folks, park closed!" Thanks to Minyan JB for spotting this intriguing piece of news.

Position in XHB, precious metals

Oooh! Oooh! Oooh! Yes, Horshack... - David Miller - 3:16 PM

Two other thoughts...
  • NBI breadth is ugly at 30 up of 159 stocks, but it's been below 30 three times in the last nine trading sessions.
  • I opined that the "bubble" in stocks shifted to real estate and that the trick was to figure out where that bolus of money would go when the real estate "bubble" started to deflate. I figured equities and options/derivatives. I think I'm wrong. I think it's commodities, specifically gold and oil. I couldn't care less about the former, but if all that excess capital flits into oil then we're all in trouble.

Position in IBB calls

"Smile, Caroline, there's justice" - Bud Fox - Jeff Macke - 3:07 PM

(TIVO) has given back about half of it's after-hours move from last Thursday after winning their patent suit against Echostar (DISH). has a cautionary piece on the news, noting that TiVO has a long way to go before they cash this court W into ongoing business.

Also on the case are our friends at Weisel and William Blair, both noting that the win is "crucial" and "big" for TiVO in terms of leveraging future relationships with cable MSO's.

From a strategic perspective, from where I'm sitting it seems that TiVO becomes a fairly obvious acquisition target for any number of players in the media foodchain from cable to set-top boxes.

Position in TIVO

A look at the Utility Index - Tom Peterson - 1:46 PM

Since luckily snagging the late January rebound high in the UTY (as it tested the underside of the broken blue trendline), we've been expecting at least a test of the 400 area support extending back to October 2005; while also being appropriately bearish on treasuries (plus the US dollar, which is important for many fixed income managers).

Now we are here close to interim support on the UTY - what next? I expect a bounce here soon because it is oversold and probably can't sustain this downside pressure much longer . But I don't expect an oversold rebound to go much more than back to test underneath the broken "ice" support area near UTY 420 -422.

Thereafter, I would look for a drop to extend to test the 375 - 385 area. There was not a lot of action below 390 a year ago to say for sure where it could stop; while the meat of trading was in the 380 -382 area, it may find support as high as 388.

See the chart here.

Someday, everything is gonna be diff'rent
When I paint my masterpiece... - Todd Harrison - 12:59 PM

With the paint slowly drying on the Monday Minx, a crimson glimmer has begun to glisten. We noted the "S's over N's" dynamic earlier but the post-hump action has more of a N's under S's feel to it. In other words, the weight of the latter seems to matter more than the early jig in the old school. It's subtle, fer sure, but it's there if you squint.

While my primary tea leaves remained mixed--sticky green financials, strong energy and envious metals are offsetting pronounced lethargy in the homies and a general overall market malaise--our internals are drifting on either side of the flat line. That's a recipe to do a bit less for active traders looking to squeeze profits from the holiday thinned stone.

The one area that isn't asleep is in the commodity (and dollar) spectrum. Front month gold futes are up an udder $15 while silver counts it's Bar Mitzvah blessings. And they're not alone. Nat Gas is up 3.5%, copper is up 3% and chuga (aka Sugar) is higher by a deuce. Remember our discussions at CRB 320? They defended that level with gusto yet the S&P is 1% lower while the CRB is 8% higher. A recipe for ketchup or signs of supply?

Things that make you go hmmm....


Position in financials

Schwab: Leveraging the P/L - Brian Gilmartin - 11:09 AM

Since Charles Schwab (the person) took over at Charles Schwab & Co. (SCHW), the stock price has sat up and taken notice.

This morning, SCHW reported q1 '06 results, with eps in line with recently raised guidance, and revenues slightly ahead of consensus.

What caught my eye in updating our spreadsheets was the P/L leverage: Net revenues grew 21% y/y, while expenses grew just 8%, resulting in eps growth of 58% from 3/31/05.

Pre-tax income margins have risen to 31% from last year's 23% in the March quarter, primarily due to the return of the individual investor to Schwab. Per the 10k numbers, the individual investor accounts for 74% of revenues, but 84% of total pre-tax income.

Despite the positive developments, SCHW has underperformed TD Ameritrade (AMTD) the past 12 months, although SCHW is starting to close the performance deficit.

Position in SCHW

It's gettin' so a businessman can't expect no return from a fixed fight. Now, if you can't trust a fix, what can you trust? - Kevin Depew - 11:01 AM

This week 119 S&P 500 companies are reporting earnings. PPI and CPI data arrive on Tuesday and Wednesday, respectively. Fed minutes tomorrow afternoon. The Chinese President is also arriving tomorrow morning for a four-day tour. In other words, things are wrapped tighter than a mummy in shrink-rap.

On the indicator front there are no real changes from last week. Risk remains high... still... and with many potential catalysts on the horizon this week, the road could be littered with unexpected potholes with probabilities favoring downside resolution.

Additionally, former breakout levels for SPX, RUT, NDX, DJIA are now overhead given last week's technical damage. The bright spots continue to be energy and financials - the BKX in particular held support at the 106 level last week while other groups were giving up the ghost, and of course

Position in RUT/SPX equivalents

State of Things... - John Succo - 9:31 AM

In my opinion nothing has changed. The U.S. economy is literally on "borrowed" time with no "dark matter" making things better than they really are: foreign investment in the U.S. is earning paltry treasury returns while the much smaller investments by the U.S. overseas is currently earning much higher returns as foreign stocks significantly outperform the U.S. stock market.

If that ever slowed down we would see a real crunch in the trade gap and current account deficits.

I have said it several times: income has been replaced by capital gains. The U.S. economy without capital gains is in real trouble. Can they go on forever? Perhaps, but the risk is significant that they will not.

There is a reason why no "respectable" person of financial acumen will take the post of treasury secretary: all are literally scared of current policy and its possible outcome.

Risk is high.


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