Buzz Bits: Dow, Nasdaq Continue Slide
Your daily Buzz highlights...
Some of the bigger names reporting next week include A, AEOS, AMAT, ANF, ANN, BJ, BRCD, DE, DELL, HD, HOTT, HPQ, GPS, GG, SKS, SPLS, TGT and WMT. The podium will be a popular place as we'll hear some Fed Speak from Bernanke, Beis, Geithner, Guynn, Kroszer, Lacker, Minehan, Moskow, Poole and Warsh throughout the week along with the Treasury's Snow and Quarles. Beeks will be busy as always with PPI, Production & Capacity Utilization on Tuesday, CPI on Wednesday, Leading Indicators on Thursday and the normal bevvy of weekly economic data. Have a great weekend!
On the horizon... - MV News - 3:55 PM
1987... - John Succo - 3:40 PM
Thursday was down. Friday was down. Monday saw the deluge.
Thursday and Friday there was not only complacency, there were shouts of enough is enough and "the bottom is in"!
This is not 1987, this is much different. 1987 was the culmination of financial assets going from undervalued in 1982 to fairly valued in 1987. 1987 should have been a normal correction but for portfolio insurance, which turned it into a crash.
This is much more complex and many professors have spent a lot of time on Minyanville explaining the situation. We are now looking at equities that have come from over-valuation to extreme over-valuation due to the final throws of credit expansion.
The credit bubble will be unwound, it is just a matter of how. These will be tough markets and risk control will be essential to living through them. Most are complacent; I still see only option selling. But the macro situation is as never before and no one knows how it will be played out.
I have no advice but to understand how governments have become highly involved in markets and that is not a good thing. They have staved off market forces for years by encouraging risk taking activity. Markets will unwind this excess risk whether they like it or not.
Happy Fry Day - Kevin Depew - 3:32 PM
Some of the bigger names reporting next week include A, AEOS, AMAT, ANF, ANN, BJ, BRCD, DE, DELL, HD, HOTT, HPQ, GPS, GG, SKS, SPLS, TGT and WMT.
The podium will be a popular place as we'll hear some Fed Speak from Bernanke, Beis, Geithner, Guynn, Kroszer, Lacker, Minehan, Moskow, Poole and Warsh throughout the week along with the Treasury's Snow and Quarles.
Beeks will be busy as always with PPI, Production & Capacity Utilization on Tuesday, CPI on Wednesday, Leading Indicators on Thursday and the normal bevvy of weekly economic data.
Have a great weekend!
- I just heard someone on TV say this is "just a blip in a major bull market."
- One man's blip is another man's bear market.
- Among technical items of interest today:
- iShares Real Estate Index (IYR) has broken the trendline from the October lows.
- The PnF target for the 30-Year yield Index is 5.35%.
- The PnF target for the 10-year Yield Index is 5.22%.
- While the commodities bubble vs. trouble debate gets in full swing, I notice the PnF price target for the CRB Index is 376. DeMark sell signals are getting closer to a price completion for the CRB as well.
- DeMark sell signals have recently occurred on monthly charts of the S&P 500, the Russell 2000, the Dow Jones Industrial Average, the Nasdaq Composite.
- But Kevin, all those indices are price-weighted or capitalization weighted. You have to look at something more representative of the average stock; maybe something like the Valueline Arithmetic Spot Index (VA/Y), the Valueline Geometric Spot Index (VG/Y), or maybe even the iShares Dow Jones U.S. Total Market Index (IYY).
- Ok. Looks like the VA/Y, the VA/G and the IYY recently registered DeMark sell signals on their monthly charts too.
- The best advice my mom ever gave me? Two things stand out. One, remember that not everything in this world is about you. Two, nothing is more important than family. Happy Mother's Day, Mom!
Flashback! - Bill Meehan - 3:24 PM
This day in market history...
- Closing levels 3 years ago
- DJIA: 8,726.73
- S&P 500: 945.11
- Naz: 1,541.40
- Crude: 27.34
- Gold: 351.20
This day in Minyanville history...
- Prof. Goepfert noted A Few Extremes in some indicators he follows
In other news...
- In 1847, tired of counting the number of times a rag tied on the wheel of his wagon went around, William Clayton invented the odometer to know how far he'd gone.
I smell like I sound - Jeff Macke - 12:52 PM
If it's mid-day Friday then I must be at Minyanville HQ where my i-Pod and I are serenading a deeply appreciative (?) crew with some "Hungry Like the Wolf." Someone's gotta expose these jaded New Yorkers to the finer things in life; it might as well be me.
Alas, even the lyrical magic of Simon LeBon's crew seems powerless to reverse the selling, particularly in some of my retail longs (Safeway (SWY) and Coldwater (CWTR), to name two). For what it's worth, I'm keeping my buying powder as dry as possible in the 95% humidity of the city. It seems like forever and a day since we've had anything to fear in stocks. While that doesn't neccessarily mean we keep selling off in a straight line it does make me inclined to wait for a few more people to jump off Hoofy's Bandwagon prior to adding long-exposure.
With that, I'm off to prep for tonight's Fast Money (CNBC, 7pm East Coast time). Stay cool like Fonzie and dry like the inside of Boo's mouth as we head into the close, MInyans. Markets tend to pick up steam into the close; with the price action yesterday and today that suggests better buying opporunities (read: "More Pain") into the bell.
Shucks - Kevn Depew - 11:57 AM
Corn is sharply higher this morning. It gapped up after the Agriculture Dept. said corn used to make ethanol should increase by 34% over last year's usage. The Agriculture Department also raised the price forecast to $2.65 a bushel fro $2.25 a bushel previously. Interestingly, they noted that demand has risen so sharply that the amount of corn in storage is expected to drop to half that of last year.
Although I am not an ethanol cultist because 1) I expect crude prices to move lower, 2) there are other, more efficient ways to produce biofuels, and 3) there is widespread antipathy on a variety of levels to following a Brazilian path toward increased reliance on ethanol as a fuel additive, I do believe corn is undervalued and the chart appears to have formed a long-term low of significant degree.
Of course, farmers can always plant more corn, whereas they can't simply mine more copper, but today an ounce of gold buys about 260 bushels of corn compared to about 140 bushels five years ago, while an ounce of gold buys considerably less sugar, copper and crude, among other commodities, than it did five years ago.
Position in July Corn
Biotech News - David Miller - 11:37 AM
Biotech, at least the NBI/IBB has moved into "getting whacked" territory. There were only 20 advancers in the 159 stocks in the NBI yesterday, the fifth worst performance by that index in the last year (19 on 11/28/05 and 4/28/05, 16 on 10/11/05, and 17 on 3/29/05). All but the November example occurred within a couple of days of the beginning of a significant rally.
The IBB gapped down the last three days in a row, and four of the last five. Prof. Jason Roney ran a screen for me (thanks!) on the IBB gapping down three days in a row and said it only happened twice since the IBB started in 2001 -- once on 8/06/2003 and again on 4/25/2001. The IBB was higher 1 month later both times, but mixed one week later.
The Minx has refined her game and most people I talk to are increasingly just playing catch up. The fundamentals are very positive in the biotech space across most time horizons (only the nearest term is shaky because of perceptions of an uneventful ASCO). That's simply not reflected in the price action, though.
Eye Balls - Todd Harrison - 10:05 AM
I'm slammy and jammy here this morning, in no small part to the long morning 'view and partially because we "enjoyed our journey" last night. Hey, there's nothing wrong with a little smiling on our time and, as the crew at MVHQ breaks their hump daily, we took some time to soak in some kuon.
While I'm a bit late on this (sorry), I made some more token sales on my piggy puts into the opening muck. I'm still there, trading around some gamma, but I'm hitting for average rather than swinging for the fences. Is there contagion risk of the seemingly smelly smoke? Sure thang. Do probabilities support betting the ranch that they'll unfold? No siree Bob.
The other arena I'm involved with is the metal equities. It's worth noting that the XAU is down again despite the green and bold gold. I'm not sure what to make of this--other than a hat or a pterodactyl--but I'm nibblin' on some shorts as I still think that's the cute side (in the context of a broader secular bull). As old school Minyans know, I wanna buy energy and metals on dips and sell tech and financials on blips. It's just that, given the run in the former, I'm not a long buyer just yet.
Hope you're well, cookie--
Position in financials, metal equities
Is the final leg down finally here in bonds? Has that feel to it.... - Bennet Sedacca - 9:23 AM
Feels like we are in the 'vomitorium,' as my friend Professor Tom Peterson likes to say, in bonds. Targets and time frame remain the same. 5.30-5.40 on 10's (off the runs are already at 5.20) and long bonds are 5.30 or so although off the runs are already north of 5.40. Target there? Maybe 5.70 and 5.80-5.90 off the run. Most other runs have been about 120 basis points so those targets are sensible.
Why do we mention off the run? There truly is no more benefit of more liquidity for me to buy the on the run bond as they usually become off the run at the next refunding and all you really do is lose yield. They are also used to price new issues - another nice game to help issuers offer lower yields.
Target is the still end of May and quality is still the name of the game when we get there. The BIG QUESTION as Professor Reamer and I have been pinging is; is it an end of bear or stopping point in secular bear? You should note that in the 30's, the Fed raised rates too much into 1934, when the economy was over leveraged, and that became the buying point of a lifetime. Or do we have a move to 7% if we break the trendline I highlighted the other day? There truly is no resistance if we get through the levels mentioned above. It all depends on the dollar I guess. And foreigners' willingness to support us and if Big Ben wants hyperinflation.
Position in Various Treasury Securities
Deja Vu, all over again - Rod David - 8:07 AM
Thursday's session-long drop started from an overnight bounce that had been reversed overnight. And now last night's bounce has also been reversed. After yesterday's cash session close, S&Ps firmed 2-1/2 points to its bounce target. The gain ranged there narrowly through the night, and then started sliding sharply to break under yesterday's lows. Just being a "new Globex trend extreme," the overnight low is all but required to be retested during regular trading hours.
The bigger picture isn't pretty. The Dow's leadership and the NDX underperformance were already inverted from what would be bullish. Yesterday's big drops left NDX with only the tentative support of the year's lows, where any bounce would be tentative at best. In a single session, S&Ps fell from above March and April's prior highs, to under them. The Dow still has a big pocket of air under it.
The pattern at Thursday's close put the burden of proof on sellers. Any open stronger than a sharply lower gap down would be likely to surge through the morning. A modest gap down wouldn't reflect enough pessimism at this stage of the pattern to be bearish. And this being a Friday, an opening surge from new relative lows would all but immunize the market from selling pressure through the day. But the setup's corollary is that gapping down sharply at this stage of the pattern - and this being a Friday - could make Thursday's drop pale in comparison.
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