Buzz Bits: Dow, Nasdaq Close Mixed
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Bell Buzz - Todd Harrison - 3:39 PM
- If this is truly turnaround Tuesday, does that mean that we'll resume the downtrend as we hike up tomorrow's hump?
- I will say this--there sure seem to be alotta folks who are waiting for the requisite 10% correction in the S&P. That prolly means we don't get there or blow through it.
- Through my Minyan eyes, I'm spying the recent lows (and the current 'higher low') for clues, along with BKX 108, XBD 205, RLX 677 (thanks Fil), XAU 129 (200-day), OSX 193 (same), the clock (Petty), the scale (MIM3 softball is coming) and Meehan (just because).
- Sometimes the ability not to trade is as important as trading ability. And sometimes the ability not to express something speaks volumes about how you really feel..
- UNH $43.25 will break the right shoulder of the fledgling reverse dandruff pattern. So you know and if ya care.
- It's a split decision in commodity land today as the metals (XAU +2%) and drillers (OSX -2%) wishbone. So you know, OSX 185ish has more bottoms than a Brazilian beach.
Position in UNH, drillers, metals
Mini-Minyan Mailbag - Kevin Depew - 1:57 PM
In your article, Five Things You Need to Know: Stagflation, the last line says, "What we see as stagflation looming on the horizon in our side-view mirror today, may be full-blown deflation up close as dollars are hoarded to pay down excessive debt and reduce, reduce, reduce." Couldn't it also say "gold" as well? If the dollar loses its credibility on the world stage, wouldn't people hoard gold as well?
Ultimately, yes. And that is (at least partially) why I own physical gold. But the rejection of the dollar will come later. In the initial stages of deflation, gold will decline like everything else because, like everything else, it is a direct beneficiary of credit-growth and credit-fueled speculation in financial assets. Since we can't pay our debts with gold under most circumstances, gold does not represent liquidity.
Later (and it is always later), once the Fed sees what is happening, it may respond as Ben Bernanke has said it would, by dropping dollars from helicopters. If they do so, then gold will likely appreciate. But in my view, that could occur from much lower levels than where we are now since the speculative excess that contributed to its recent rise must first be unwound. But I have no way of knowing this for sure, and do not pretend that I do. That is why I own some gold… just in case.
As John Succo has written, nobody wins during a deflationary credit unwind. The task is to avoid debt now, and prepare for the aftermath when the system-cleansing will (and here I am being overtly optimistic) provide opportunity for those who survived financially to take advantage of the opportunity to buy assets at lower prices when no one else wants them and risk aversion has peaked.
Position in gold
Ne Biotech ETF - David Miller - 1:28 PM
News of a new biotech ETF crossed my desk this morning. The First Trust AMEX Biotechnology Index Fund (link is to a PDF) will begin trading around $20 on Monday. It contains a basket of 20 larger biopharma and biotech companies. The ETF is billed as "equal weight," but weightings actually range between 3.5 and 6%. For those looking for a basket of larger biotechs that's put together better than the AMEX Biotech Index (BTK), check this product out. It will trade on the AMEX under the ticker FBT.
You may be building them, but they ain't coming - Fil Zucchi - 12:18 PM
Take yesterday's NAHB sentiment number, (I hear Prozac sales are jumping), add this morning's housing starts (way too many for the expected demand and the out of control cancellation rates), shake well in the toxic cauldron of $1+ trillion dollars of ARM's refis starting in the next quarter or so, and all the ingredients are there for a housing meltdown. I know I might be a broken record folks, but this is shaping up to be "as bad as it gets." Forget next week home sales and focus on "Months Supply" (especially of Existing Homes) as that will probably be a good tell of how fast prices will fall.
Position in homebuilders
VIX Coughing? - Adam Warner - 11:32 AM
Two hours into a mini-rally and guess what? The VIX has gotten oversold.
Just to review, a popular contrary indicator is that when the VIX deviates more than 10% from its 10 Day Simple Moving Average, it signals either overbought (bullish for the market) or oversold (bearish).
Anecdotally, I have observed during this broader downturn that oversold VIX indications on a closing basis have provided good bearish indications in the short term. So if all remains the same, Boo could do a little jig tomorrow.
Full Disclosure... - John Succo - 11:12 AM
Convertible bonds are very heavy today again. I believe this is a function of lower liquidity.
This could seep into other markets. I have to tell you, trading stocks today they seem heavy despite slightly higher indexes.
Look at for example Fed-Ex (FDX). It is a market darling but seems stuck. I sold stock up at 110.35 when the indexes are lower and now stock is lower.
This is just anecdotal, but just passing on "feelings."
This is countered by higher implied volatilities in options which act to put a bid in the market. Option prices did erode yesterday and are doing so again today.
This is typical market process and could work out either way for the next leg of direction.
Small traders in S&P's show largest liquidation since march 2003 low.... - Bennet Sedacca - 9:21 AM
Yesterday, we mentioned how commercial hedgers covered the majority of their shorts in the S&P after the recent 100 point decline. Well guess who they bought 'em from. Yep, you guessed it, small traders. Whenever someone opens a futures account, they have to identify themselves what type of an account they are.
According to data I received from Ned Davis Research this morning, it looks like small traders went from a net long 65,000 contracts to just 4,101. That is a big drop for small traders. The CFTC reported that large speculators positions were virtually unchanged at a slightly long 12,000 contracts.
After our expected May 1 top in stocks, sentiment polls have , on balance, turned decidedly negative. Personally, we expect an A-B-C type of move with the A move out of the way, and the B part (bounce to 1280 resistance?) followed by new lows into the fall. This has been our call since our piece on February 10th titled 'What the Rest of the Year May Bring Us.' So I think Snapper may be lurking, but I still think the secular risk/reward is on the downside.
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