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Buzz Bits: Markets Jump Ahead

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Yowser! - MV News - 4:09 PM

Maxtor (MXO) guided Q1 EPS to ($0.39)-(0.40) vs (0.16) cons on revs of $875-885 mln vs $959.3 mln cons.



Show Intel - Kevin Depew - 3:41 PM

Minyan LC asked about Intel (INTC) and the status of that trade. I had to step aside today as the same technicals that got me in are now flashing short-term caution. Longer-term weekly DeMark indicators are more constructive than the dailies, but as this was just a trade, discipline dictates standing aside.



Cinch Up - Jason Goepfert - 2:42 PM

Toddo, in a buzz a little bit ago, asked: "Do you know that the S&P has been in (more or less) a 15 handle trading range for the past 15 sessions?"

Indeed, and it's probably not going to get much tighter. The current three-week closing range in the S&P is now the narrowest since October 1995. There were a couple comparable periods in '95 and '93, then before that we'd have to go all the way back to 1976.

What's it mean? Anyone's guess - highly compressed markets can expand any number of ways, up, down or sideways. One thing that is consistent is that the range should break very soon. Something to be wary of with these things, though, is the tendency to see a short-term spike out of the range that proves to be "false", then an even greater magnitude move in the other direction.

Time to cinch up, MInyans.



Mini-Minyan Mailbag - John Succo - 2:30 PM

Prof. Succo,

I too have felt the
market acting strange. I've got a hypothesis that it's really been exacerbated since the Fed announced the discontinuance of M3 on November 10th. It seems that three things are sending the market higher -- gold rising, the dollar falling, or the market reacting to a prior down day. I decided to do a quick check of this.

Since 11/11, there have been 20 days (including today) where the SPX is up at least 50bps. 12 of these days coincided with rises of at least 50bps in spot gold. Four of the 20 had DXY selloffs of at least 50bps, although three of them occurred during the gold rises so this only adds one unique day to our total. Of the remaining 7 days, three occurred after the SPX sold off by at least 50bps the prior day. One more was after a 33bp drop. That leaves three days out of 20 where the SPX rose without an accompanying dollar drop, gold surge, or prior day selloff. The last of these was in January. If the Fed is willing to let the dollar get cut in half and gold go to $1000-2000 I see no reason why the S&P can't run to 1500, 2000, or any other number of their choosing.

Minyan Conor


MC,

In other words, the market is responding to liquidity as the Fed manages asset (stock) prices.

Your scenario is plausible and is Marc Faber's call. An equally plausible scenario is as gold rises and the dollar falls, rates in the U.S. back up substantially to finance capital needs and stocks collapse.

Position in gold


Energy Drink - Brian Gilmartin - 2:15 PM

My biggest worry about energy here is that the forward eps estimates for the energy sector have stopped rising, and in fact for the 3rd quarter have fallen a little, which is very different than the trend we saw in 2004 and 2005.

We download First Call eps sector data weekly, usually on late Friday or over the weekend when it becomes available, and for the energy sector, for the last two years, forward eps estimates were revised higher each week to the tune of 1% - 2% per week.

In '06, these upward revisions have stopped, and although we aren't seeing sharp negative or downward revisions, the estimates have been flat to slightly lower during the first quarter of the year.


Oil ETF - Kevin Depew - 12:24 PM

A number of Minyans have asked about details on the mysterious new AMEX-listed Oil ETF, sponsored by Victoria Bay Management. The ETF will trade under the symbol USO and invest in crude oil futures. It was reportedly to begin trading yesterday, pending SEC final go-ahead, but is not listed on the AMEX site and is not yet trading according to Thomson quotes, though the symbol is valid.

The U.S. Oil Fund will track the West Texas Intermediate light, sweet crude oil delivered in Cushing, Okla. Its per-share price will track the price of futures on the New York Mercantile Exchange.

The prospectus says that each ETF share would represent one barrel, while the futures contracts represent 100 barrels. Unlike the gold and silver ETFs (with silver set to debut soon) the oil ETF, because it is tracking a futures contract and does not represent physical ownership, will not have a similar effect in the supply/demand relationship for oil as those ETFs do.



Will the real Slim Shady please stand up? Please stand up? Please stand up? - Todd Harrison 0 10:41 AM

Alrighttee then, we're knee deep in a thick fix of flickering ticks as the critters wrestle for control of the Tuesday tape. What stands out to these old eyes? The dollar, for one, as the DXY broke the March lows and is feeling somewhat "isolated" by the recent vernacular. That may not be the actionable tidbit that some Minyans are looking for but please keep it on ye radar--it's that important.

Away from that fray, as the S's tickle 1300 and the financials meander near BKX 106, we're finding flattish internals, slightly green metals (XAU +80 bips), firm homies and, well, generally lethargic action.

My sense, for lack of a better word, is that IF Hoofy can rally the troops, Boo will have a tough time repeating yesterday's thumper. That's a big if, however, and my tea leaves don't currently support that liftage. When in doubt, wait it out, Minyans, and keep some powder dry for when your pitch comes down the pipe.

R.P.



CFTC/COT data shows hedgers now adding to 10's as well as long bonds..... - Bennet Sedacca - 9:56 AM

For what it's worth, they are starting to fancy 5's too. What do they smell? Lots of stuff.
  • Negative seasonality coming to a close
  • Cycle low getting 'closer in the window' at 4/24
  • Tougher earnings comparisons
  • 4 year cycle high in stocks is here
  • They are becoming attractive versus 1.75% equities


You know we have been boldly negative, but are slowly (very slowly) rethinking our position. We look to catch the meat of the move, not the whole move (no one is that perfect - maybe lucky).

A fly in the ointment is the convexity players selling Treasuries to offset their portfolio's lengthening. Incidentally, prepayment speeds are slowly DRAMATIC AS DATA SHOWS HOMES JUST ARE NO LONGER AFFORDABLE. That throws a wrench in the works as portfolios may extend faster than usual. On the other side of the coin, banks are huge BUYERS of MBS lately - go figure. If we knew what M3 was, maybe we could find out how much cash the Fed was handing out.

So, we are mostly through this move, we think, but when we buy, we will buy QUALITY. In munis, that means pre-re's, and in taxables - Treasuries. The market is again oversold on a 9 day RSI basis, so we once again should either consolidate (time) or bounce, or a combination.

If I were a trader (I'm not), I would be flat - not advice - and as an investor, as we are, my largest positions are boring old T Bills. I can live with 4.81% until the picture is clearer.

Position in T-Bills, pre-refunded munis and various Treasury securities



Noise Alert - Rod David - 9:29 AM

Volatility doesn't necessarily beget volatility. It's just as common for ranges to tighten as market participants absorb the recent shock to the system. The sudden calm might lure in traders, but the first couple of trending attempts usually returns back into the range. That's how Globex reacted to yesterday's wild ride. S&Ps mostly ranged narrowly overnight. A surge to new session highs quickly peaked with a 2-point gain. MACD and RSI diverged negatively into its retest and suddenly S&Ps were making new session lows. That attempt didn't get any further, and the Globex close is back within the overnight range.

The cash session may duplicate the overnight pattern, but the eventual resolution is still expected to be down. Nearly 50% more NYSE up volume than down volume (much of the up volume coming in Monday's last minutes) produced 10% more declining issues than advancers. This internal negative divergence obligates Tuesday's market to reward Monday's sellers for their relative productivity. S&Ps might bounce 4 or 6-1/2 points, first, and anything higher would start to be bullish.


Mini-Minyan Mailbag - Laurie McGuirk - 9:00 AM

Hi Laurie,

I have been reading your columns on the 'Ville for some time now. As a former COMEX local, I find your metals analysis extremely insightful. One question though: Why do you think 600 will be a relatively tougher ceiling for gold to pierce than 500 was? I agree with your analysis that we'll see 575 before we see 605, but more for technical/overbought/stochastic reasons. You seem to discount the importance of technicals now that we're in a truly runaway bull market. I'm curious as to your thinking now that we hit the 595 level
you predicted with authority yesterday.

Thanks,
Minyan John

Hi John-

I don't discount technical analysis completely, I just don't think that many of the disciplines will be that useful in coming years. I agree the stochastics are good indicators and I always look at the divergence from say the 50 and 200 DMA when looking for sell signals. The physical market is my buy indicator.

$600 is far away from where "everyone expected." People had calls for $525 for 6 months prior to it hitting 500, with three runs at $480, and so it wasn't that hard to break through - but no one is calling $600 plus so I expect the "sheep" to be lined up at the high calls which have been, "we may see $600 in 2006." I reckon it may be a brick wall on first crack.

On my basis, we haven't hit 595 yet - I always talk about the SPOT price - not the near term futures contract – spot is CASH GOLD and SILVER.

Silver at 11.50ish is 15% over the 50DMA so I would be getting cautious around here.

Cheers
Laurie

Position in gold, silver


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