Buzz Bits: Dow, Nasdaq Close Ahead
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Pride Goeth Before the Fall - Jeff Macke - 3:16 PM
- By way of answering a fist full o' emails from Minyan television viewers: "No... we don't actually drink on the set before (or during) the show"
- Wal-Mart (WMT) is defending itself from criticism over CEO Lee Scott raking in nearly $30 million in the fiscal year ending January 31st. My favorite argument? "(Wal-Mart Associates) are proud that their CEO started in the trucking division and has stayed with the company for 28 years."
- Separated at Birth: CNBC's Erin Burnett and Lucy Arnez.
- Does anyone else feel like corporate America has finally learned how to "manage" (read: sandbag estimates then beat them to help the stock) Street communications again, after five-plus years of Sar-Box adjustment?
- Had a great conversation at dinner last night on the topic of IBM (et al) levering up their balance sheets in order to buy-back stock to disguise the fact that organic EPS growth is badly slowing. It's a mouthful, and not actionable as a trade, but is the long-term concern on the state of the markets, from where I'm opining.
With that I'm off to start my weekend (with one-hour stop at the NASDAQ on the way). Make it a great weekend, Minyans. I'll see you on Monday when I'm stepping into Todd-O's seat of Power.
Into the great wide open. Under them skies of blue... - Todd Harrison - 2:43 PM
- Hoofy, the rebel without a clue, is staking his claim to bovine fame. Boo's crew had every excuse to take profits after the tepid GDP, on the heels of a ten percent sprint in the S&P and in the face of fugly breadth. The action is dry, however, which is certainly noteworthy heading into the weekend.
- Personally, I would feel better if the the Matador Crowd wasn't so...ya know.
- I chat and chewed with Minyan E-Knight (among others) last evening and he thanked the Professors for pointing out the caveats in an environment where there seem to be anything but. His chosen approach? To tighten up his time horizon (shorter-term), keep disciplined two-sided stops and hold plenty of dry powder. Smart.
- I've got one eye on the tape and the other on the clock as I allow myself to excuse myself. We've got a lot hopping on the MV front so, if it's all the same, I'm gonna flip lids, juggle the struggle and shift into the next leg of my journey. I sincerely hope you're faring well and I look forward to returning to the 'Ville--and finding a groove--in nine short days.
- May peace be with you.
Gold and the Dollar - Lance Lewis - 1:20 PM
Like Lihir Gold (LIHR) announced last week, Compania de Minas Buenaventura SA (BVN) is saying today that it will try and cover its gold hedgebook as well (54 tonnes).
Thus, with Lihir's 44 tonnes and BVN's 54 tonnes, we're looking at almost 100 tonnes of potential demand underneath the market. Any further decline in the metal is likely to be limited with this sort of demand underneath.
To get an idea of how big 100 tonnes is, the GLD Gold ETF currently holds 493 tonnes of gold and is the 11th largest holder of gold in the world behind the Chinese central bank.
As for the gold action today, the metal obviously isn't responding much to what was clearly stagflationary GDP data, and that probably has to do with the fact that the dollar is also recovering somewhat from its early morning lows.
It could just be that the dollar index is oversold enough that it's going to bounce for a while at this critical area of support and the gold market has been anticipating that a bounce at this level would occur all along (thus explaining in hindsight why gold failed to react much to the dollar's slide over the past two weeks).
Gold and the dollar often take turns "leading" each other. It may just be that gold is going to lead the dollar for a while and make new highs even as the dollar index bounces, well ahead of the dollar index taking out its all-time low since going off the gold standard at the 80 level, thus catching the maximum number of people off balance.
Whatever the exact machinations are of the pullbacks and bounces, the dollar is unlikely to find any sort of firm support given the stagflationary environment and the Fed's hands being tied by the housing bust.
Eventually, foreign central banks will no doubt try and intervene in order to support the dollar, but even then, that may only be enough to slow its decline, and would actually be more bullish for gold, as it will tend to increase the inflationary pressures in foreign currencies as well, since they will essentially be bearing part of the inflationary burden as a result of their support of the dollar.
The environment remains extremely bullish for gold.
Position in gold shares
Revisiting the Short Dollar Trade - Jess Thompson - 9:31 AM
Back in early Feb, I suggested to readers to short the Dollar (refer to our Ultimate Market Timing report dated 2/13/07 Vol. 2 No. 13, available here).
The trade narrative began with a reversal from rising to declining quarterly value lines (See dark blue line at A on this chart) which turned the primary trend back down for the Dollar.
My firm issued a short in February because of the rally into declining value levels which I call strategic sell zones (at point C on the chart).
The weekly chart (see the chart here) shows the trade location in greater detail.
Recently there is a renewed interest in a declining Dollar and its effect on asset inflation, so we thought it timely to revisit the higher timeframe charts on the Dollar.
Back to the monthly (Chart 1), notice the Dollar (continuous NYBOT futures contract) is revisiting the 80.30 to 81.00 zone (point D). This zone is pivotal as a reversal from this area in the Spring of '05 triggered a multi-month rally into late '06.
Bottom line: With sentiment Dollar bearish, I view that zone as a possible inflection point -- a support zone for a reflex rally or a congestion rather than an area to look to initiate new shorts for longer term holds.
I would reduce inventory in short Dollar positions in this zone (D on Chart 1), not increase them.
Position in dollar
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