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Buzz Bits: Dow Up, Nasdaq Down

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Earnings Report - MV News

  • Google (GOOG) reported EPS of $2.29 vs $1.98 cons on revs of $2.25 bln including TAC vs $2.15 bln cons. Ex-TAC, revs were $1.527 bln vs $1.44 bln cons.
  • Sandisk (SNDK) reported EPS of $0.44 vs $0.45 cons on revs of $623 mln vs $623.9 mln cons. Gross margin was 38% vs 39.3% exp.
  • Capital One Financial (COF) reported EPS of $2.86, which may not be comparable to $2.06 cons, on revs of $3.07 bln vs $3.49 bln cons.
  • F5 Networks (FFIV) reported Q2 EPS of $0.49 vs $0.50 cons on revs of $94.1 mln vs $94.5 mln cons.



Notable breakout in 2's-10's spread? - Bennet Sedacca - 2:20 PM

Remember when we were all focused on an inverted yield curve? And how that was bad for financials (well - nothing seems to be bad for financials the way the stocks trade)? Check out this chart attached. For the first time in YEARS, the spread is above the 50 and 200 day moving averages and the 50 day has turned upward, confirming the trend.

So far, it is a bearish move across the curve, with 10's moving higher faster than 2's. This to me, is a further sign of inflation expectation on the rise, along with commodity price increases. If this continues, inflation fears continue.

On the other hand, it is possible, that the economy could weaken, and later on in the year, the steepening continues, if the economy weakened and the fed CUT RATES and 2's fell faster than 10's.

I personally give these two possibilities a 50/50 possibility of occurring.

Positions in various Treasury Securities



Clowns to the left of me
Jokers on the right... - Todd Harrison - 1:30 PM

Here we are, stuck in the middle with you! The wild ride and attempted slide has found a steady rudder in the form of the frisky financials. They're well off their highs, as you know, but they've seemingly got some sponsorship below. The XBD and BKX should be on all ye Minyans radars regardless of the exposure you're carrying.

A quick sniff around the 'hood finds NYSE breadth slightly negative (Nazz still nosty), the metals off their lows (silver futes only down 15% and their yellow counterparts off $21) and our most telling technicals nestled between support (S&P 1295-1300) and resistance (S&P 1315ish). Other than that, and in front of April expiry, it's business as usual (however unusual it may be).

I continue to sense that there's something fishy in Denmark--or however that goes--but it won't matter until the flickering ticks dictate that they do. Until then--and when "then" arrives--the onus is on us to remain disciplined in our approach and lucid in our thoughts. In other words, don't let the tape dictate your course of action. The goal, as always, is to use price to your advantage.

May peace be with you.

R.P.

Position in financials



Google (GOOG) technical comments from Minyan Raghu "The Great" CMT - MV Technicals - 12:29 PM

Google (GOOG) is set to report earnings after the close today. After gapping down nearly 30-points following the last earnings report and poor guidance, this stock traded as low as 333 testing the top of another gap from October 05 before recovering and rallying back to the 410 level. The chart is constructive right now with a 3-month cup with handle formation and a close above 423.50 level will put it in a position for a test of the all time highs. A trade above 423.50 will also close the gap left from the 2/01/06 earnings report.

See the chart here.

There are about 39 analysts covering this stock and a majority of them have a buy or better rating. There are only 8 analysts with hold or worse ratings. Analyst community also seems to be overwhelmingly bullish on this stock as they have always been.

Google is expected to report $1.98/$1.44b with the whisper number at $2.00. They have beat the mean estimates by an average of 20 cents in three of the last four quarters except the December 05 quarter when they fell short by 22c.

Raghu Kanadam, CMT


Hey Boo, take a gander at these random geese... - Hoofy the Bull - 12:00 PM
  • The XAU is off almost 5%? So, the most vicious corrections occur in the context of a bull market. The XAU is still up 66% since we rode my mechanical cousin in Ojai.
  • The time to buy acne is on the retest of the breakout and pullback to S&P 1295-1300 shouldn't be sweated.
  • The financials trade dry and have recently sported some acne of their own. Until BKX 108ish or XBD 236ish falls by the wayside, why fight it?
  • Blimely! Europe hasn't flipped any crimson switches either.

    R.P.


Just Missed! - John Succo - 9:57 AM

Golden West
(GDW) missed earnings estimates by a penny as revenues indicate new loans have peaked.

But the real story is below the line. The company increased loan loss reserves four fold from $885k to $4.2 mln. Management is clearly worried about the quality of loans. The company is one of the largest mortgage lenders and has the largest percentage of ARMs to their portfolio in the industry.

This is news you won't see on financial TV. This I believe is very important indicator of what is going on below the radar.

Position in GDW



Pre-Market Update - Rod David - 8:57 AM

Tuesday's steep rally reflected optimism. Obviously. But so did Wednesday's narrow range, which was faced with a single challenge in the mid-morning dip. The morning's recovery wasn't exploited by producing a new rally leg, which would have been bullish. Wednesday's relatively shallow consolidation reflects that Tuesday's optimism remains intact, but the quick pullbacks from new highs suggest that the optimism is running low on energy.

Higher highs are still likely, but one of the next two challenges will be much more difficult to absorb. Wednesday morning's new highs during Globex are almost historically mandated to be retested during regular trading hours. That shouldn't take much since that's less than 3 points above Wednesday's close. But it shouldn't have taken much all day Wednesday, and yet the high-volume session made no meaningful movement.

Nobody likes to fade sentiment extremes more than we do. But if S&Ps can surge through yesterday morning's Globex highs and not turn down immediately, optimism will have refueled for another rally leg. Otherwise, trading much more volume at this critical level without moving price higher will start to weigh heavily on S&Ps.


Intel - Dirt Cheap on Cash-Flow Basis - Brian Gilmartin - 8:06 AM

After updating my firm's internal spreadsheets with last night's results, the one thing I didn't like to see was the 2% lower tax rate (28% actual vs 30% expected) which helped Intel (INTC) meet GAAP estimates of $0.23 per share, but I was right with my Tuesday post in that the company bought back almost $3 bl shares of stock (and reduced their cash balance by $3.5 bl) and is still generating a ton of cash.

4q trailing cash from operations is almost $15 bl, and 4q trailing free-cash-flow is $5.6 bl, leaving Intel trading at 8(x) cash from operations and 20(x) free-cash flow. (Cash from operations was estimated for q1 assuming net income plus depreciation plus stock option exercise cash, but before working capital changes and the free-cash-flow calculation subtracts cash generated from stock option exercise, capex, and dividends to arrive at FCF.)

The stock has absorbed a ton of bad news in terms of company guidance and Wall Street downgrades, and hasn't given up much ground since early February.

That being said, we have to wait another three months for a potential positive catalyst.

No question the stock is cheap, and with the cash generation, Intel management can defend the stock with the buyback program, and the current price discounts quite a bit of bad news, but a buyer will have to exercise patience with the name. A positive catalyst is nowhere to be found, at least for now.

Position in INTC


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