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Buzz Bits: Dow, Nasdaq Head Higher

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Your daily Buzz highlights...

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Editor's Note: This is a small sample of the content available on the Buzz and Banter



Earnings Report - MV News
  • Maxtor (MXO) reported EPS of ($0.40) vs ($0.37) cons on revs of $881.0 mln vs $903.99 mln cons.
  • Xilinx (XLNX) reported EPS of $0.32, including charge and gain and not comparable to $0.28 cons, on revs of $472.3 mln vs $464.95 cons.
  • Centex (CTX) reported EPS of $2.92 vs $3.11 cons on revs of $4.55 bln (in-line).
  • LSI Logic (LSI) reported Q1 EPS of $0.11 vs $0.07 cons on revs of $476 mln vs $480.5 mln cons.


Flashback! - Bill Meehan - 3:30 PM

This day in market history...
  • Closing levels 6 years ago
    • DJIA: 10,945.50
    • NAZ: 3,630.09
    • S&P 500: 1,460.99
    • Crude: 24.69
    • Gold: 274.80


This day in Minyanville history...

  • In '04 Laurie McGuirk took a look at metals in Go for Gold?


In other news...

  • In 1986, the fourth reactor at Chernobyl explodes, 31 die in the worst nuclear disaster ever.


The Longest Yard - Todd Harrison - 2:36 PM

Alrightee then, the Beige Book is in the rear-view as we set our sights on the heels of the Hump. What goes on? Nada mucho, in terms of overall tape movement, as traders seem to be focusing on their tans more than the tape. Alas, we're here for you in the 'Ville and will try to muster some value-added vibes on an uber-slow day.

  • The tan man said that firms have a limited ability to pass on energy costs." What's that mean in layman's terms? Margin contraction, which we've been on the lookout for.
  • I'm watching some of these small cap speculative stocks rip roar today. I'm not complaining (I sometimes dabble) but 40%+ gains in a day tingle a distant memory in my innards.
  • Note NYSE breadth as it moderates into contra-hour (9:7).
  • I've left on some Golden West puts on as I wanna watch how it reacts to multiple lows (coming up quick).
  • Hmm...who could this be?
  • "Ain't no bull market like a gold bull market" Jeff Saut of Raymond James
  • Wanna partake in a Succofest? Dance with DeMark? Sing with Saut? Shine with Shobin? Ruminate with Roque? Schwing with Santoli? The planets will align over the rocky mountains in a few short months!

    R.P.


Position in GDW



Mini-Minyan Mailbag - John Succo - 1:01 PM

"Professor,

The Fed fights a guerrilla war on inflation with incremental rate increases and uses the nuclear option to maintain liquidity. It's easy to understand yet hard to understand how they expect this will 'fix' the systemic imbalances. Looks like a good day to sell a little stock into those rallies, though.

Minyan Ron"

MR,

Yes, on days like this we scale sell into rallies trading our gamma.

Risk seeking behavior is encouraged by the government and is necessary to keep the "bubbles" active. But despite bureaucratic efforts, the big bubble is indeed faltering. Fil's analysis on housing is correct. The following is from David Rosenberg at Merrill Lynch:

"The total of 6.92 million SAAR units in March was a touch above the 6.90 million we saw in February and well above the 6.60 million consensus estimate. The problem, however, is that re-sales tell us about the past, while mortgage applications tell us something about the future: they have fallen hard in each of the past three weeks (-4.4% in the April 21 week) and now stand at their lowest level since November 2003 and off 26% from last summer's peak.

Little press was given to the fact that over the past 12 months, actual sales are down 0.7%, but the inventory level has ballooned 39% (and up an astounding 85% in the condo market). This unsold inventory backlog, in terms of months' supply, will likely only get worse before it gets better, in our view."

In risk seeking behavior, focus is on the good news and both the government and the media reports encourage this. This creates compression.


Phelps Dodge - Tom Peterson - 11:53 AM

As mentioned in the Buzz, Phelps Dodge (PD )is expected to report soon.

Copper seasonality and some slight negative divergences cropping up in PD argue for it to have a near-term correction/consolidation. Perhaps traders will 'sell the news?'

It is right at the short-term blue trendline (called the 'demand line' - IOW where demand should appear); but if it corrected back towards the area it broke out from ($79 - 80), that would also be a test of the rising 50 day m.a. and I would expect new buyers to emerge in that area. We continue to favor the metals stocks for the long term.

See the chart here.

TRP

Position in PD


Easy homie, let me get some facts in the way of your dreams - Fil Zucchi - 11:25 AM

So the great housing bear market of January-February 2006 is over right? Not quite. Yes the headline of new home sales seemed strong, but consider this:

  • Median home prices were down 6% month/month and 8% compared to October. That's a lot of equity to make up if you have 100% ARM financing.
  • Mean prices were down 7% month/month and 5% since October.
  • Despite the decrease in months supply, the number of homes for sale increased by 15,000, about the average increase for the last 5 months. Considering that months supply is a ratio of homes for sale vs. homes sold, Hoofy may wanna hope that this month's home sales is not an outlier.
  • Along the same lines homes for sale are up 25.4% Y/Y, and spec homes for sale are up 21.9% Y/Y.

I must be bullish, I must be bullish, I must be . . . .

Position in homebuilders



A Few Option Observations - Adam Warner - 10:05 AM
  • The bid-up in volatility ahead of an earnings announcement predicts the magnitude of the expected gap post-announcement. So far this cycle, the bid-ups are maybe a shade light, but not very noteworthy.
  • Anecdotally, the number of stocks gapping outside this predicted range is incredibly low. Google (GOOG) and Chicago Mercantile Exchange Holdings (CME) may have looked exciting on the screen with their 20-25 point moves, but neither was a "surprise" to the options. And those were two of the more exciting ones so far. More typical is the Amazon (AMZN) yawn.
  • Selling puts has clearly become free money, they barely even get shaken out any more. No question this will continue ad infinitum.
  • The volatility of the TLT stock itself is higher than the SPY. You do not see that too often.


Position in SPY, TLT



But what have you done for me lately? - Rod David - 9:35 AM

By the end of Tuesday's noon hour, S&Ps had retraced half of last Tuesday's intraday surge and half of last week's entire rally. The noon hour's losses were probed Tuesday afternoon, and also the noon hour's highs, but S&Ps always returned back into the noon hour's range. Sellers weren't selling anymore, and the Globex gains were a natural reaction.

Meanwhile Tuesday, the negative internal spreads were evenly dispersed between up and down volume, and between advancing and declining shares. This equilibrium makes the first trending attempt likely to retrace and vulnerable to reversing in the opposite direction. In fact, the Globex gains fell on Jobless Claims, back to Tuesday afternoon's highs, another natural reaction. The higher high overnight will inhibit selling attempts until it's retested. But this is a double-edged sword, and maintaining a drop under the Globex lows would mean selling pressure was strong.

So, a break under the Globex lows would get a benefit of the doubt for being able to resume Tuesday morning's decline, targeting a drop under Tuesday afternoon's lows. A retest of the Globex high would also be vulnerable to suffering a similar fate. But we'll want to be long through the close if the Globex highs are broken early.


Bonds just keep getting uglier, and uglier and UGLIER....what next??? - Bennet Sedacca - 9:27 AM

Please see the chart here for what we see as a likely outcome for 10's. As we have mentioned, there is a minor cycle high that exists May 5 - please note that the market is NOT respecting that - a sign of weakness in itself when it SHOULD bounce but won't.

AS we have mentioned, May is THE WORST SEASONAL YEAR for bonds, so we have increased our target to the 5.40% area or so for 10's sometime before Summer kicks off around Memorial Day. Then what?

That puts us squarely into positive season for bonds and would leave room, as the arrow suggests, for a rally of 4-5 points back to resistance.

Fundamentally, my point is that there is SO MUCH DEBT out there that the sheer amount of debt coupled with higher rates will have the economy slow under its own weight. You are free to agree or disagree with me as it is just my opinion, not advice. We intend to begin our buying as we head through 5.25% and towards 5.4% as I am not nearly smart enough to 'ring the bell and catch the bottom.

What about the commercials? Long and wrong, baby. Sounds impossible? Well, I collected data last night that suggest they have been wrong for 3 years running. That is for later......

Position in select treasury securities



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