Buzz Bits: Dow, Nasdaq Move Higher
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Earnings Report - MV News
- TiVo (TIVO) reported Q1 EPS of ($0.13) vs ($0.22) cons on revs of $56.5 mln vs $50.5 mln cons. Service and technology revs were $55.1 mln.
- Network Appliances (NTAP) reported Q4 non-GAAP EPS of $0.23 (in-line) on revs of $598.0 mln vs $585.4 mln cons
Flashback! - Bill Meehan - 3:53 PM
This day in market history...
- Closing levels 5 years ago
- DJIA: 11,122.42
- Naz: 2,282.02
- S&P 500: 1293.17
- Crude: 27.97
- Gold: 279.00
This day in Minyanville history...
- In '05, Prof. Reamer answered a mailbag regarding Austrian Economics
In other news...
- Happy 65th birthday to Robert Zimmerman! You make know him better as Bob Dylan!
So much for the "flu" story. What else 'ya got? - Rod David - 3:10 PM
The overnight low was a "new Globex trend extreme" that required being retested during regular trading hours. Despite this morning's bounce, the retest was satisfied this afternoon. The test immediately produced a bounce back into the morning's range, and back to the same SPX 1259 (ESm 1262'00) level that had kept sellers in-check through mid-morning.
A close above this morning's SPX 1251.75 (ESm 1253'50) low - and preferably 2 points higher than that - would form a "Fat Lady" setup. The pattern tends to produce a non-permanent surge at the following session's open before reversing down to retest the lows. Usually, this retest holds to form a more durable bottom.
If the Fat Lady fails to generate strength at tomorrow's open - or worse, the open gaps down under this morning's lows - then the eventual retest of today's lows would be unlikely to hold. And more likely to extend the decline sharply lower.
So. So what? So tell me. About what? About this tape! - Todd Harrison - 12:41 PM
The Minx slinks over the Hump as traders trade and critters jump. I was just pingin' back and forth with Bennet regarding the afternoon and we both agreed that the tape should bounce. Its trying to hold (S&P 1250 and 1257) in the face of alotta angst and, like yesterday, it's got every excuse to snap higher (to S&P 1280 and NDX 1635).
The risk--and what we were noodlin'--was the notion of forced selling. It's been a long time since we've seen any semblence of mutual fund redemptions but that, along with hedge fund liquidation, becomes increasingly likely with each slide down the slippery slope. Indeed, with market internals 2:1 negative and the dollar sharply higher, we'll have plenty to post-rationalize after today's dust settles.
For my part, and while I've been swimming upstream on my metals vs. financials bet, I've been aggressively trading around my (defined) risk and have side-stepped (what would have been) a tough nut. One of the most important aspects of effective trading is synching our time horizon and risk profile. I had alotta front-month paper in my coffers yesterday but I fast fingered my risk to autumn. Now, I'm much more comfy layering into further exposure (selling blips in the banks, buying dips in thy precious ones) as a function of price.
Hey--it may not be right but if you've learned anything about the 'Ville, it will most certainly be honest. I continue to get emails about trades gone awry and accounts run dry. Minyanship means many things but at the top of the list, discipline and risk management are staples of our professional path. I hope this finds you well and finding your way.
Position in metals, financials
Are junk bonds really expensive or is it my imagination? - Bennet Sedacca - 12:16 PM
I have been asked by many a Minyan what I mean that 'spreads are tight' and why are risk premiums so low. Well, courtesy of our good friends at Ned Davis Research, see the chart here that depicts just how unattractive high yield (JUNK - sorry I'm an ex-Drexel Burnham guy - that's what I call it!) is relative to Treasuries historically.
Once again, a picture tells a thousand words, which I could fill up this page with describing the lack of risk premium and lack of fear out there, IMO.
Many people use the put/call ratio, VIX, etc. to determine fear in the market. Well as the 'bond guy' of the 'Ville, I use corporate bond spreads to determine fear. Simple concept - when spreads are widening, fear is on the rise and vice versa.
As you can see here, both BB- and BB+ rated bonds are 'tight to Treasuries' and show no signs – yet - of increasing. We will know the bear is here for real when these spreads widen. I think it is possibly the most important stat to watch to know if and when a contagion and /or recession are on the way - if you believe in that kind of stuff.
Look out honey, 'cause I'm using technology - Kevin Depew - 10:53 AM
- Anything near SPX 1250 is where the rubber band seems to be stretched a little too far to the downside.
- The Amex Gold Bugs Index (HUI) couldn't hold the 320 level. Next logical stop is 296, and I would note the downside risk remains very high despite the nine-session 16% slide.
- Meanwhile, I promised Minyan Frank I'd look at and update gold vs. gold stocks later this afternoon.
- Check out Toddo's excellent CBSMarketwatch vibe.
- I agree, the picture is cropped awkwardly, giving him a bit of a Larry Fine look, but his thoughts summing up the recent dance between the energy, metals and financials are spot on. It's nothing Minyans haven't read here first, of course.
- Minyan Scott notes that bids are being pulled right and left in Saudi Arabia, leaving a lot of folks standing alone at the altar.
Position in gold, SPX equivalents
Land Of Confusion - Adam Warner - 9:35 AM
With the VIX lifting, there has been a desire by many to fade the move. And those that have tried have found you can't actually "sell" a 19 VIX. Aug and Nov options trade at severe discounts,as do their corresponding futures.
And herein lies a big problem with this product. Again, the VIX itself is an estimate of the volatility of the S&P for the next 30 days. A VIX future is an estimate of what that 30 day estimate will be GOING FORWARD from the future/option expiration date. So in other words, you can bet today on how S&P option traders will price September options in August. Or how they will price December options in November.
Just a very confusing product, and one subject to major manipulation. In my opinion, I'd avoid it.
The Box... - John Succo - 9:23 AM
Has the Fed already over-shot rates?
In an inflationary environment the answer is no. In a deflationary environment the answer is yes. So what are we in? I have said in the past we are in both.
First of all, the Fed can't purposely over-shoot. They must do what the market is demanding. The market (Asia) is demanding higher rates because of the immense amount of debt the U.S. needs every day to consume. The more we want, the higher the price. Simple supply and demand. There is a cost to our wild consumption.
Second, the U.S. is experiencing higher prices in input costs and lower prices in output prices. This is a nasty form of stagflation due to years and years of credit expansion while Greenspan was at the helm.
Problems have been subdued up until now as the economy has shown growth. But that growth is based on negative real interest rates (real inflation is higher than nominal rates despite government statistics showing otherwise). Why doesn't anyone look at the situation as given free money why can the U.S. economy only grow at 4-5%. What will happen when the days of free money end?
That day is approaching. The box will get smaller and smaller as it does.
Bernstein Backs TXN - Have to Agree - Brian Gilmartin - 8:59 AM
Bernstein is out in support of Texas Instruments (TXN) this morning, which we would have to agree with since channel inventories are very lean right now, and it won't take very much in terms of improved demand (any improvement) to drive the operating leverage inherent in the semi's in general, and in TXN, in particular.
Yesterday, Applied Materials (AMAT) and TXN were down on heavier-than-average volume, while Micron and Intel also fell but on average or less than average volume.
As of today, our biggest semi position remains TXN, followed by Micron (MU), and we continue to build a position in Intel (INTC). (We have been long TXN off the March, 2003 bottom, so don't confuse the time horizon. We invest for the cycle and the worst semiconductor cycle ever ended or bottomed in 2003. In my opinion, the balance between supply and demand, or capacity and demand has never been as balanced as it is right now.)
At $32 per share, TXN is trading about 13(x) 4q trailing cash from operations, and 12(x) enterprise value to 4q trailing cash from ops.
After the January report, and according to Thomson Financial First call, TXN is expected to earn $1.62 this year, and $1.88 in 2007, for 16% growth in both years respectively, leaving TXN trading at 19(x) and 16(x) respectively at $31 per share.
TXN's guidance for q2 was "materially" better than expected in January (according to one analyst), and yet the stock is now lower than when earnings were reported.
Tread carefully with these back-dated option issues floating around, but TXN is one for the radar screen when you think the bottom is in...
Position in TXN, INTC, MU
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