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Buzz Bits: Dow Slips Under, Nasdaq Climbs


Your daily Buzz & Banter highlights...


Editor's Note: This is a small sample of the content available on the Buzz and Banter.

Earnings Report - MV News

  • Medtronic (MDT) reports 4Q EPS of $0.66 vs. $0.62 cons on revs of $3.28 bln vs. 43.26 bln cons.
  • Men's Wearhouse (MW) reports 1Q EPS of $0.67 vs. $0.64 cons on revs of $496.1 mln vs. $464 mln cons.

A dark side look at utes... - Bennet Sedaaca - 2:12 PM

This is a pure trading call and with defined risk. But utes continue to ignore the developing uptrend in yields. I guess Ryan and I agree here as he mentioned earlier.

I agree that this is a little bit of a 'shot in the dark' and to be frank is only in my personal trading account and not for my clients.

But a 2.5% yield? You must be kidding me.

Also a good exhaustion alert for me has been when the weekly DMI (Directional Movement Indicator) hits 60. It was there on Friday and I am sure it is only higher now. See the chart here.

On balance volume remains positive, so this is a token position.

But like corporates in general, and REIT's these seem woefully overdone.

But like I said, it is a small bet with very defined risk in July paper.

Position in XLU puts

Call Selling and Short Interest - Jason Goepfert - 12:30 PM

I understand how call selling can inflate short interest figures. I'm trying to get a feel for just how much of an impact it could have.

The following chart shows the total number of call options sold to open over the past five years. It is a four-week moving average, and includes data for all the options exchanges (it doesn't include off-exchange transactions).

See the chart here.

Over the past five years, call selling volume has grown 163%. My figures show that NYSE volume has increased by about 30% over that time (using yearly figures) while Nasdaq volume has increased by about 15%, so surely the jump in short interest can't be explained only by an increase in exchange-wide volume - call selling likely has something to do with it.

For comparisons sake, take a look at this chart, which is put selling volume:

See the chart here.

This shows that puts sold to open have increased even more, by 252%.

As for margin debt, yes it's at a record, but I think it's misleading to only give that side of the equation. Cash available for withdrawal from brokerage accounts isn't only at a record, it is 75% higher than it was in March 2000. And it is a not-trivial number.

Summer Camp Market: Blue Ribbons for Everyone! - Jeff Macke - 12:25 PM

The market is (finally) taking a wee bit of a breather but are the shorts (naked or synthetic via options) getting paid? Consider the news, and the reactions, in the following:

  • Children's Place (PLCE) turned in a quarter that looked an awful lot like a miss, along with in-line guidance and the same type of "stock option accounting" issues that killed stocks in 2006. The stock is up over 5%.

  • Anheuser - Busch (BUD) misses but throws the Street a cold brew and says, in effect, "dude, don't hassle the here and now; the future is bitchin!'" The stock is higher all day.

  • Even cases like Lowe's (LOW) which missed and took down estimates are working higher; the stock is up more than 3% over the last five days, which includes the run up to earnings and the "disappointment" which followed the report.

  • Looking to play the over-due breakdown in casinos? Mr. Kerkorian's henchmen are taking you into the desert and burying you up to your neck in 20+% of take-over speculation on MGM.

My personal take-away is that this remains an insanely hard market to short successfully. I'm inclined to agree with Prof. Succo that the high short-interest levels we're seeing are a function of cheap options creating relatively easy "short common; long calls" trades. To short stocks effectively you need a tough-love market, where winners are celebrated and losers are trashed. This is more of a summer-camp tape; the modern version of camp, where all the kids get blue-ribbons, regardless of how they run the footrace.

The momentum may be slowing but I, for one, would hate to be "early" getting short anything unless and until we see actual chart breakdowns. When shorts with bearish catalysts are going higher, generic "gut feeling" shorts are just non-starters.

Good Read and the Sage Sultan of Swing - Ryan Krueger - 9:09 AM

Hope you didn't miss one of the best reads these eyes have seen in a long time. Once the Mavericks got bounced early, the sharpies in Dallas had all this extra research time on their hands, so take advantage Minyans. But Lance, my Mavs/Suns Western Finals tickets have been devalued, and I was forced to cover that trade with a trip to Sea World next weekend instead – a brutal turn of events. I'm already tired of walking and getting splashed with dolphin water.

Is there a good risk/reward setup before his scenario plays out, if it does? I'd consider one, with tight stops. My recent work collided with the sage sultan of swing, Bennet Sedacca (word is he cut up Winged Foot yesterday topped only by one of the sweetest swings on the east coast – his son's), and we agreed on one spot with tremendous vulnerability: The (UTH) Utilities Holdrs.

I will note the Sultan, who knows more about the bond market than anybody I know, nailed the top in the (IYR) iShares DJ Real Estate, with a darkside drive as well.

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