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Buzz Bits: Markets Continue to Rise

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Your daily Buzz highlights...

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Earnings Report - MV News

  • Bed Bath & Beyond (BBBY) reported Q4 EPS of $0.67 vs $0.65 cons on revs of $1.69 bln vs $1.64 bln cons. Q4 comps came in at +6.3%.
  • Hott Topic (HOTT) reported March comps of (12.7%) vs (11%) exp and lowered Q1 EPS guidance to ($0.01)-($0.04) vs $0.03 cons.

Flashback! - Bill Meehan - 3:40 PM

This day in market history...

  • Closing levels 5 years ago
    • DJIA: 9,527.21
    • Naz: 1785.00
    • S&P 500: 1151.44
    • Crude: 27.24
    • Gold: 257.90


This day in Minyanville history...


In other news...

  • In 1987, FOX Broadcasting Company launched with two Sunday night offerings: Married...With Children & The Tracy Ullman Show.


Divergence - Kevin Depew - 1:48 PM

Rod David makes the point below that "today's rally isn't so much a product of buyers increasing their efforts, as much as sellers holding back." This is evident in the bullish percent index for the S&P 500 too, which for the third consecutive day is showing more new sell signals than buy signals as the index itself moves higher in price. In other words, demand is not increasing as the price of the index increases.



Low Hanging Kiwi Fruit? - Vitaliy Katsenelson - 1:35 PM

Telecom New Zealand (NZT) is rebounding today after making multi-year lows. Stock has been in decline for several reasons: increased political risk and drop of Kiwi against the US dollar, among them.

After the stock hit the $26 mark we added to our position. After re-evaluating NZT we came to the conclusion that the worst possible outcome of political risk was priced into the stock. We don't believe the government will tinker much with NZT regulation for two reasons: NZT is 25% of New Zealand's market capitalization and it is one of the largest employers in the country. So what is good for NZT is good for the New Zealand economy and politicians will likely want to treat NZT with kid gloves.

Position in NZT


Eyes of the World - Todd Harrsion - 12:58 PM

Bovine Maximus has started to flank S&P 1310 as the bovine smell blood in the retreating Red Dye army. While there's nothing magical about that level, other than the collective perception that it'll sound an "all clear" signal, expect to find alotta stops nestled on the other side of that ride (if and when).

As it stands, NYSE internals have improved slightly while Nazz breadth is still dancing pretty in pink. I'm taking these readings with a grain of salt, however, as they'll likely lag futures led buying if the acne arrives.

Maybe I'm being a bit too glib--or perhaps sixteen years of experience has taught me patience--but I've got a loose grip on the handlebars as I watch the ticks flicker and the snow fall. I am building a bit of a laundry list (for purposes of renting exposure) but, as alotta those trades are "quickies," some will stay behind the Buzz.

As always, hope you're hangin' tough and enjoying the ride. And, while we're here, we gotta send some additional white light to Minyan Paul Downer. There are alotta heartaches out there, Minyans, so keep your P&L in perspective please.

R.P.



Recap - Herb Greenberg - 12:51 PM

To recap what I wrote in my column today on MarketWatch, and mentioned on CNBC's Squawk Box this morning: The condo market in downtown San Diego has hit glut stage.

A story in the Sunday Union-Tribune pointed to 600 resales on the market -- double a year ago. There are an additional 2,100 new or in-construction units being aggressively marketed. The guy who runs the camera at the studio I use told me the Realtor in the storefront next door now surfs the Internet all day because he has nothing better to do; that wasn't the case a number of months ago when he couldn't keep up with the demand.

I used that as a way to hoist warnings over Corus Bankshares (CORS), whose construction loan portfolio to developers has ballooned in recent years to be 90% condo-related. California is its biggest market, accounting for 20% of its loan portfolio; 6% is in San Diego.

One day that may actually matter!

Over and out.


Mini-Minyan Mailbag - Kevin Depew - 12:31 PM

Prof. KD -

Tom DeMark sent me something recently (not advice!) about looking at the SPX or SPY from a monthly chart as completing a TD-Sequential sell pattern.

All people want to talk about these days is momentum. I agree with John Succo that momentum is great, until it disappears...

Minyan Ron

MR -

I am very much a fan of the long-term, monthly DeMark indicators. Here is a Thomson Financial chart showing the recently completed TD-Sequential sell pattern in the S&P 500. Meanwhile, I see there are long-term monthly TD-Sequential or TD-Combo sell signals currently active in the following indices: NDX, Dow Jones Industrial Average, Dow Transports, Russell 2000, and the Nikkei 225.

To add to Prof. Succo's point that you note, today the pain of missing a 4.6% move higher as in the case of the S&P 500 year-to-date, or the more outlandish 13.2% move higher in the Russell 2000 year-to-date, far exceeds the numb, unemotional rationality of managing one's long-term holdings for risk. But then, that is why markets are always the same and many investors and traders almost never learn from their emotion-influenced perceptions of, and reactions to risk.

Someone once asked me what makes me so special that I don't fall into that category. The answer is that, like everyone else, I have problems dealing with my emotions too. As a result, I have tried to find the proper tools that suit my personality and to help keep my emotions from influencing my decision-making as much as possible. Sometimes I am more successful at this than others.



Russell Ziske - Adam Warner - 10:56 AM

The only risk in shorting puts these days is not shorting enough of them. Or so it seems. What starts out of the money stays out of the money. Not only that, there's nary a scare, much less a shakeout.

Can this last forever? You would think not. But I have felt this way before and watched the paint continue to dry, and the market continue to grind.

The only "real" fear around, and this is all relative, remains in the Small caps. I am not big on put/call volume, but it hit 2.86 in the iShares Russell 2000 Index (IWM) on Monday, the highest in 3 months and 2nd highest in 2 years. But it's misleading to call this fear of an implosion, rather it is fear that you are going to underperform when that great shift to Big Cap kicks in.

Position in IWM


Is it flag day or what? I thought that was in June??? - Bennet Sedacca - 9:44 AM

Funny thing, some worthless trivia, I got engaged 100 years ago on Flag Day, so there MUST be some significance! Way back in Jan-Feb, we saw a similar flag that we thought would eventually break (it did). Then we had the multi year flag in our piece, and IT BROKE.

Well now see the chart attached and we have yet ANOTHER FLAG formation. The chart is of the perpetual 10 year future, courtesy of Bloomberg. There are many levels of resistance. First the minor resistance around 106-24, then major resistance closer to 107-16, which incidentally defines the multi-year flag resistance.

As you can see, the oversold situation has been relieved so a resumption of a downtrend can occur at any moment. If, however, the trend line is broken and closes there, we will quickly change views. So, risk/reward is nice and tight, which is what we like.

Wanna handicap this? Well, not advice, but we are still (yes, still) avoiding the long end until the market proves us wrong. When Mr. Market yells, 'Hey, go long,' we won't ignore it.

Position in various Treasury securities



Sandisk faces tough comps in 2H '06 - Brian Gilmartin - 9:33 AM

M System's
upside guidance this morning is boosting Sandisk (SNDK) in pre-market trading.

Sandisk was one of our best performers in 2005, doubling in price in the second half of the year, but we are a little leery of the stock as it enters the back half of 2006, since it will be lapping 90% and 62% year-over-year eps growth from the 3rd and 4th quarters of 2005.

In terms of secular growth, SNDK is a core technology/semiconductor position within client portfolios, but we cut our position in half prior to the January earnings release.

At $59 per share, SNDK is trading at 25(x) earnings with 20% eps growth expected in calendar '06. In addition SNDK has almost $9 in cash sitting on the balance sheet, evidence of the significant cash-flow and free-cash-flow generation at the sweet part of the cycle.

At the Nov '05 lows of $45 - $46 per share, the stock would get very interesting again, but know that with owning the premier NAND flash memory manufacturer, a shareholder sees significant operating leverage and earnings volatility.

Position in SNDK


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