Buzz Bits: Dow, Nasdaq Edge Lower
Your daily Buzz highlights...
Earnings Report - MV News
- Hewlett-Packard (HPQ) reported Q2 EPS of $0.51 vs $0.49 cons on revs of $22.60 bln (in-line).
- Abercrombie & Fitch (ANF) reported Q1 EPS of $0.62 vs $0.54 cons on revs of $657.3 mln, which the company reported on May 4.
- Applied Materials (AMAT) reported Q2 EPS of $0.26 vs $0.23 cons on revs of $2.25 bln vs $2.14 bln cons. Orders were +22% q/q to $2.49 bln vs +15-20% guidance, and gross margin was 46.5%.
Biotech News - David miller - 2:00 PM
The respite in the biotech sector appears to be a one-day thing. Neurocrine (NBIX) was a popular name and several people thought Dov Pharma (DOVP) was a "safe" way to play the deal. We're off our lows for the day, but another hit to sector psychology wasn't really what bulls needed.
The chart of the IBB is in the earliest stages of forming a bottom pattern that's been reliable in the past -- one similar to the one I mentioned in January. That's the good news. The bad news is the chart pattern relies on 4-5 more trading days of negative money flow. In August, October, and January -- the three most recent versions of this pattern -- the IBB was able to make the formation going sideways. Also in the good news category is the positive stochastic divergence on the chart.
Watch out for potential 'island reversal' in NDX-QQQQ - Bennet Sedacca - 12:56 PM
While not admitting to be a tech stock experts, I know a potentially nasty technical setup when I see one. In this case, see the chart here for an 'island reversal' developing in the NDX. An island reversal is defined by Bloomberg as a 'pattern on a technical chart in which a reversal in market trends is interrupted by gaps that mark a number of trades on both the up and down sides.'
If we break this trend line I have drawn, we've effectively 'trapped' 6 to 7 months of buyers of tech. In other words, they are in a losing position and become a source of supply. if this occurs, it could begin the downside move (or accelerate) we envision. Not advice, but worth watching IMO.
Parable of the Parabolic Action - William Fleckenstein - 10:50 AM
To repeat what I noted last week, it looks to me like the metals are experiencing a correction (which, God knows, they're "entitled" to). As you can see from a weekly or monthly chart of gold and silver, the action has been straight up -- frightening to anyone with even a modest amount of market experience. (Charts that resemble those sported by the precious metals often experience violent declines, even when they are not done going up.)
As for where gold may be headed (which assumes that it's experiencing a correction greater than the one-day wonders seen in the past group of weeks), Justin Mamis suggested on his call this morning that $650, plus or minus, might be a worthwhile target. For the time being, I am willing to go with that, though I am on red-alert and feel very naked not having my bullion position.
Russell Mania - Adam Warner - 10:44 AM
If you believe an ETF listing can top an index or commodity, then how about when they create a volatility index on it? Or a buy write product?
We'll soon find out, as the CBOE has initiated such products on the Russell 2000, symbols RVX (the volatility calculation) and BXR (the buy-write index).
This was too long in coming in my humble opinion, as the Russell has been a better indicator than anything Nasdaq 100 related for 5 years now. There's no tradable product yet, like the VIX options and futures, but just the calculation of these numbers will give us easy comparisons to the VIX itself.
Change the Channel - John Succo - 10:24 AM
Financial TV is making a big story about Mr. Buffett's new positions in stocks, one of which is COP.
Minyans, this was known on March 31 when Mr. Buffett filed. This is when we found out.
If you are relying on financial TV to make any decisions, you should stop immediately. You are way late.
They are almost as inept as the government. Which brings me to my next topic. Perhaps the primary reason we are in the economic position we find ourselves as a nation is the ridiculous amount of power we give to the government, hubristic bureaucrats that believe they are omniscient (or pretend to be).
Flawed policies, easy fixes, political agendas all are hallmarks of big government. They cannot create a perfect world of limited resources. Only markets can properly allocate capital and resources.
Position in COP
Leg one finished. Leg two yet to begin. I'm writing between legs. - Rod David - 9:34 AM
By recovering from a new low to close above the prior session's low, Monday's close triggered a "Fat Lady" setup (as in, "It ain't over until..."). The pattern typically extends the bounce into the following session's morning, but not permanently. In fact, S&Ps have rallied this morning ahead of the cash session's open to trade above yesterday's highs.
But the Fat Lady's bounce isn't permanent - she's only clearing her throat. Sunday night's lows were "new Globex trend extremes," which requires their retest during regular trading hours. Because Monday didn't do it, Tuesday's cash session also is unlikely to retest the Globex low. But the requirement is there, and any interim bounce only delays the inevitable. And since Monday's low touched April's "pivotal low" (the low prior to the actual low), this also requires an eventual break lower.
S&Ps should gain an additional 2 points above the overnight Globex highs before buyers start to lose traction. That doesn't mean sellers will have retaken control, and despite the longer-term bearish expectations, at this moment it is both too late and too early to maintain or to adopt an aggressively bearish posture.
Trading Places - Todd Harrison - 8:49 AM
After prematurely evacuating my metal equity shorts on Friday, and conscious that the sharpest corrections occur in the context of a bull market, I dipped a toe in Pan American Silver yesterday via defined risk paper. I'm unsure if the group has further to correct (I think it does) but, given the oversold condition in PAAS (relative to its peers), I deemed the risk/reward worth the effort.
In other trading tidbits, I also pared a chunk of United Healthcare calls as that was, in my view, the "easy trade." I'm not smart enough to know if the smoke has cleared for this once proud stock but I'll ride out the rest of my position with trailing stops and let it be. Given my paper was "front month," (this was a pure trade), you can color me gone by the time the Friday bell tolls.
Finally, after paring most of my piggy puts into the Friday drain, I started accumulating out-of-the-money autumn paper anew. Why? I think that, given the field position and the potential pricks to the tape, this complex is vulnerable. In the interest of full disclosure, I've felt this way for a long time--and gotten my eyeballs squeezed as they ripped to all-time highs--but my risk is defined and they're against a spate of situational longs.
Position in PAAS, UNH, financials
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