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Buzz Bits: Nasdaq, Dow Show Some Life


Your daily Buzz highlights...


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

Bell Buzz - Todd Harrison - 3:54 PM

  • I could swear I just heard Hoofy singing this little ditty.
  • What am I trading? Other than Petty tickets for Tuesday's show at the Garden, I've been pretty quiet today. I've got my bet on and I'm hanging with it for the time being.
  • Yes, that means two legs in the bull costume (50% conviction on the long side), skewed towards energy (OSX +2.5%) and metals (XAU +1.5%).
  • If you wanna see the other side of that metal bet, see the article I linked on the last Buzz.
  • And no, they're not mutually exclusive.
  • If you missed the updated State of the Art--and you're a financial professional--you might wanna give it a noodle.
  • Again, Happy Birthday Fish. Save Ruby, you're the best man I've ever known.
  • You know, sometimes when I'm trading, I get the Chloe face going. I can't help it.
  • I'm off, Minyans--I'll see you bright and early tomorrow. I hope your hump was profitable and that you're overnight journey is mindful.


Positions in metals, energy, petty (pending)

Buzzlets... - David Miller - 2:28 PM

  • Someone(s) still fleeing from the biotech sector. Looks like they are mostly done with the bigger stocks, now their target is the smaller stuff.
  • If you're Fed Watching, you have to decide for yourself if they are raising rates to decrease demand or they are talking tough to blow out speculators. The difference for equity investors is one or two more rate hikes or continued pressure through to early 2007.
  • A stroll through the 164 charts of the stocks in the NBI shows most stocks there oversold. Among those not oversold, most were bounces in the context of a serious market cap whipping.

Debt Repudiation - Kevin Depew - 12:27 PM

  • The Percent of S&P 500 stocks above their bullish support line violated the triple bottom level at 68%, detailed last week here; another reason I believe this is a resumption of a long-term structural decline, not a cyclical correction.
  • So far today I have read in no fewer than four separate places something along the following lines: "The 20% correction in (copper, gold, financials, India's SENSEX) sounds bad but should be viewed in terms of the 300% run since 2003." Although strictly anecdotal, I believe that kind of sentiment, if pervasive, is bearish and illustrates the lack of respect being afforded to the high-risk conditions of markets.
  • Over the weekend the New York Times Sunday Magazine ran an entire issue devoted to debt. Remember, debt repudiation goes hand in hand with risk aversion and a decrease in time preferences. Risk aversion is debt aversion... and in our case, ultimately deflationary.

More precious thoughts - Fil Zucchi - 11:43 AM

Following up on Fleck's review of the precious' plunge, I would also add that as gold and silver were going parabolic, the exchanges jacked up margin requirements a number of times, and down-limits were removed. If I were a cynic I would suggest that perhaps the exchanges were trying to bail out someone too "important" to be left floundering on its own. But I digress . . .

The key takeaway for me is that just as the parabolic ramp was unsustainable, the recent - in part manufactured - plunge is not likely to stand up to the ultimate fundies behind precious metals (assuming you believe central banks will choose the hyperinflation path).

I had some bids out on the overnight futures and I am now back up to 60% long for that particular tool.

Positions in precious metals

Convertible Bond Prices - John Succo - 10:41 AM

A quick update on convertible bond prices for those that care...

The basis, or relative price, of these bonds has been going up. The reason is simple: new money has been coming into convertible bond hedge funds because returns have been good. Just like any other market, prices are driven by liquidity.

The fundamentals have been mixed: higher volatility has helped prices while wider credit spreads have hurt them. But liquidity trumps all and if investors want in they will drive prices higher. Period.

This is a disconnect with what has been happening to other markets.

We have been using higher prices to liquidate our portfolio of convertible bonds. We have taken our exposure from $750 million long in January to basically zero now.

Maneuvering Ahead of a Mindset - William Fleckenstein - 9:39 AM

All in all, yesterday was another very ugly day, and given how the market closed, it looks as though more downside is in store. Having said that, I've been reducing my short positions, as I do not want to be in the same position (i.e. selling stocks) as the people who fear the Fed. I think they're bad company, and when they change their mind, I don't want to get run over by them.

Greetings from the Pacific Northwest! Time to buy for a trade???? - Bennet Sedacca - 9:21 AM

As you know, we called for a May 1 top in equities. We sold and have been hiding in health care , staples and large cap value as best as possible. We were also looking for a trading range to develop in the summer before an autumn plunge. All we needed was a change in sentiment.

All I can say is that big picture hasn't changed but the proprietary sentiment polls we use are in rare, EXTREME PESSIMISM areas for both stocks and gold. So we are adding exposure here after having raised some cash in bonds last week.

Please keep in mind, this is more of a 'overweight trading' position for us, not an investment. Still sticking with quality and also putting on a good size position in iShares MSCI Japan Index (EWJ), which we think can bounce 10% or so.

Even though I'm 'officially' on vacation, I thought we should share our change in stance. Lastly, tomorrow is a short-term cycle low for stocks.

Position in EWJ and GLD


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