Buzz Bits: Dow, Nasdaq Lose Ground
Your daily Buzz highlights...
Earnings Report - MV news
- Intuit (INTU) reported Q3 EPS of $1.79 vs $1.68 cons on revs of $953 mln vs $943.8 mln cons.
- Limited Brands (LTD) reported Q1 EPS of $0.25 vs $0.19 cons on revs of $2.08 bln, which it reported May 4.
The Worst! - Scott Reamer - 4:18 PM
Today's NYSE breadth low (-2,353 issues) is the worst breadth in 738 days. But the interesting part is that that last record - in early May 2004, came at the END of a correction that lasted 68 days and took 7.5% off the SPX index. In fact, by May 7th and 10th in 2004 the SPX was down 4.9% and in its 66th day of the decline.
What we have today is vastly different: we are 11 days from an all-time peak in the transports, the Russell 2000 and multi year peaks in the SPX and DOW and we're down only 4.3% in the SPX. Thus, we have extreme breadth readings in a much much shorter period of time. This is an important contextual difference in this correction that, in part, is captured by Kevin's PnF work.
Position in RTY, SPX
The great mutual fund predicament....... - Bennet Sedacca - 3:06 PM
I have previously discussed (and been questioned on it) equity funds having ALL TIME LOW CASH LEVELS of approximately 3.7% of assets. The matter is moot as long as money pours in and there aren't any net redemption's.
In addition, to Mr. Succo's comments, I might add that the funds, if faced with redemptions if this plunge/correction remains sickening, retail will quickly reverse course and sell, Mortimer, sell. That would just exacerbate the move.
That, Minyans, is one of the biggest problems. Even, Boom Boom's printing press couldn't stop that avalanche. The last time it happened, incidentally, was in July 2002.
Well baby, there you stand
With your little head, down in your hand
Oh, my god, you can't believe
It's happening again - Todd Harrison - 1:49 PM
It's Deja Boo all over again as we noodle the tape and sharpen our pen. Its a tenuous time, to be sure, and we're doing our best to keep ye faithful up and in the loop. I've been pinging with the professors all day and, yes, it appears as if the topics we've been talking about are evolving in front of our eyes. Alas, if I've learned anything in this business, it's that when you think you've got the Minx figured out, it's likely the time to put your right hand up.
My concern, as it stands, is that I may be a bit early on the energy and metals nibblage. I think they're relative winners, as you know, but given the macro blizzard, we must be conscious of absolute returns. I'm "pared," so to speak, as I've got the other side of the trade on (via the financials) so, with a humble nod to the trading Gods, I'm gonna hang tough for the time being.
With that in mind, and with expiration looming, please be conscious that exacerbation is a distinct possibility as we edge towards the hump day close. We're being told that a very large option trade is being unwound (the negative gamma we've discussed) and that it's got a ways to go.
I don't like betting on horses I can't see so please take this with a grain of salt, a shake of pepper. The "other side" of exacerbation is extreme whippage and while that's a low probability affair (given our tea leaves), it remains in the spectrum of probabilities.
As always, I hope this finds you well.
Position in energy, metals, financials, hair club for men
Sheeee is baaaacck!! - Fil Zucchi - 1:32 PM
Ms. Volatility is back with a vengeance and if you treat her kindly, she can be your friend.
- The dollar Snapper together with the nasty reversal in the commodities (copper limit down at one point) raises anew the possibility someone got stuck on the train tracks.
- I have been nibbling where I like the longer term fundies, for example F5 Networks (FFIV) (down 10% at one point), and Electronic Arts (ERTS)
- WIth the Nasdaq 100 (NDX) down 7% in 7 days, Google (GOOG) green and Apple (AAPL) making a stand near the 200 DMA, I am officially on Snapper watch.
- I have covered a bit of my homies as the Philly Housing (HGX) get closer to support.
- Volatility after big runs often precedes a change in trend. The intra-day volatility in gold and silver is out of sight.
- Do you see Aunt Fannie (FNM) hanging on to support by the skin of her dentures?
- The big conglomerates are getting drilled today (MMM, CAT, etc. . . ): that' s one group that the market cannot lose, IMHO.
Position in FFIV, ERTS, HGX, precious metals, FNM
Chocolate Volatility - Kevin Depew - 1:13 PM
- More than likely the very broad NYSE Bullish Percent will reverse down today for the first time since October.
- The negative divergence between the NYSE Bullish Percent and the broad indices which only recently made new highs is very apparent. Fewer and fewer stocks giving PnF buy signals while the market rises is a technical condition that cannot be maintained indefinitely.
- Important levels were broken for the Dow Jones Industrial Average (10,275), the NDX (1600) and the SPX (1280) today. While nothing goes down in a straight line, this "context" shift suggests moves higher will now be better to sell.
- Brian Gilmartin, your Minyanville Circle of Trust nickname is... Stifler, per your request.
- Among other breakdowns of note today (oh, and new sell signals are leading new buy signals by a margin of 62-4) are: iShares Dow Jones U.S. Energy Sector (IYE) spread triple bottom break at 93.50; Southern Copper Corporation (PCU) spread triple bottom break at 92; US Steel (X) triple bottom break at 65; Home Depot (HD) double bottom break at 38, testing trendline support from the 2003 lows and will break that support at 37.
- On the bright side, by which we mean, technically, "chocolate volatility," Hershey (HSY) has broken a triple top and the CBOE OEX Volatility Index (VXO) has broken a spread triple top.
Bullishness Rising? - Brian Gilmartin - 10:58 AM
I saw the post earlier on the Buzz that said that bullishness actually rose 2% in the weekly Investor's Intelligence data, which is not what I'd like to see after the S&P 500 has fallen 3% and the Nasdaq has fallen 5% since mid-April.
The spiking VIX has been nice as has been the put-call ratio over 1.20, so I thought we'd hit a bottom sooner rather than later, but the sentiment data has thrown water on that.
Given the market reaction to the FOMC release last Wednesday, I think any market relief will have to start with the Treasury market.
We need to see some relief from the rising 10-year Treasury yield.
Bad Breadth - David Miller - 10:37 AM
Breadth on the NASDAQ Biotech Index (NBI) has been negative for seven days in a row and, unless Snapper makes an appearance, today will make eight. Psychologically, people have resigned themselves to not getting their typical May biotech rally and are increasingly worried the sector may simply slip into the traditional summer doldrums from here.
The whammy in the sector yesterday from Indiplon didn't help. The running tab on downgrades from our friends at StreetAccount.com made it even more apparent how many people thought this one was a no-brainer. The sloppy IR work at Neurocrine (NBIX) didn't help matters.
Keep in mind this weekend traditionally is the one where ASCO selectively discloses abstracts to their members. Some enterprising funds usually grab some off the shipping dock on Friday and the rest have purchased/obtained them by Monday morning. As I've mentioned before, Onyx (ONXX)/Bayer (BAY) and Pfizer (PFE) are likely movers for Nexavar and Sutent data, respectively. The data for these drugs are presented late in the ASCO week (June 2 and 3), though abstracts will move the stocks first.
Heavy Metal - Adam Warner - 10:18 AM
The VIX may sit at pathetic absolute levels, but under the hood, there's a big surge in metal option volatility. In fact, most sit at/near 52 week high levels.
Now, I hate to call everything that goes up a bubble. But I would note that tech option volatility counterintuitively caved in as the bubble deflated, so this is inverse behavior to that. It's a bit of an apples/oranges comparison in that many of the tech stocks themselves were newly listed hypergrowth names, where volatility would be expected to decline anyway over the course of time as the companies matured.
And if in fact this is the end of the metal lift (not my personal opinion), it is very early in the decline. But still, interesting to see the option bid up.
A funny thing happened on the way to a bounce. - Rod David - 9:14 AM
S&Ps had bounced sharply overnight in reaction to Tuesday's accumulative internals (more NYSE down volume than up volume produced fewer declining issues than advancers, diverging bullishly from the cash session's price loss). Any drop under the overnight lows would substantially raise the risk for a retest of Sunday night's low, and S&Ps took the bait when CPI data was released.
Being a "new Globex trend extreme" a retest of Sunday night's low was required. Sunday night's low stopped within a quarter-point of its target, and this morning's drop came within a point of the target. Horseshoes and hand grenades, anyone? That's not deep enough to hold, but it's close enough to qualify as a retest and produce a bounce of the dead cat variety.
Many traders were worried over the weekend that Monday was going to be a repeat of October 19, 1987's "Black Monday." Their collective sighs of relief were just replaced by gasps for air. And that might soon turn to choking when they compare current charts to the price action through Wednesday, October 14, 1987. A cash session test of Sunday night's low probably won't hold much more than hope for bulls, especially if an interim bounce were to fill the gap back to Tuesday's close.
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