Buzz Bits: Dow, Nasdaq Have a Big Day
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It just takes one rotten one to ruin the whole bunch... - MV News - 4:35 PM
Apple (AAPL) announced an internal investigation discovered irregularities related to the issuance of certain stock option grants from '97-'01. AAPL executives will refrain from commenting further on this matter until the independent investigation is concluded.
Earnings Report - MV News
- Constellation Brands (STZ) reported Q1 EPS of $0.31 vs $0.32 cons on revs of $1.20 bln vs $1.14 bln cons.
- Palm (PALM) reported Q4 EPS of $0.29 vs $0.23 cons on revs of $403.1 mln vs $405.4 mln cons.
- Research in Motion (RIMM) reported Q1 EPS of $0.70 vs $0.64 cons on revs of $613.1 mln vs $601.6 mln cons. Total BLackberry subs were 680k and gross margin was 55.1%.
- CA Inc (CA) reported reported preliminary Q4 non-GAAP EPS of $0.14 (in-line) on revs of $947 mln vs $965.9 mln cons.
Update? It's Not a Down Date! - Todd Harrison - 3:04 PM
- Fear? Nope, not with the VXO down a stunning 20% today.
- Opportunity? Possibly---with vols off 45% in two short weeks and the VXO 200-day coming up quick--I'm not "minding" my autumn paper plays.
- Today's business? It doesn't feel that way with the dollar at session lows (-85 bips), breadth 5:1 positive, leadership leading (watch BKX 108) and S&P 1260 (well) underfoot.
- Are we out of the woods? Doubtful, I could make a case that we've barely begun our forest fun.
- What's the risk? On the short-side, it's the "melt up into quarter-end" scenario. On the long-side, it's the "everyone's covered now that we popped through S&P 1260 and the fact that folks need a rally is the very reason it won't hold" game plan.
- What's my game plan? Other than a 3:30 conference call, a 4:00 conference call, a 5:00 conference call and a whole lotta other "to do's," my plan is to hang tight for the time being and eyeball BKX 108 into the close. In a perfect world, I would like to get thinner before next week's vacation. Further to that, I wouldn't mind paring my exposure as well.
Position in financials
Yay! I'm only paying a quarter-point more to borrow! Oh, wait... - Rod David - 2:32 PM
The mid-day pullback had cleansed the market of its excessive optimism, and the FOMC reaction S&Ps spiked up sharply. This upleg could (should?) touch SPX 1267.50 (ESu 1277'00), where a drop under SPX 1265 (ESu 1274'25) would initially target SPX 1261.25 (ESu 1270'75), and then SPX 1258.75 (ESu 1268'00).
Pullbacks should meanwhile hold any test of SPX 1263.50 (ESu 1273'00) as support to maintain the rally's momentum.
Rhetoric vs. No Rhetoric - John Succo - 12:33 PM
Rhetoric: The economy remains strong and inflation contained.
No Rhetoric: The economy has become bifurcated, with the wealthy benefiting from asset price inflation and speculative capital gains and the middle class losing with personal income stagnant and debts rising. The economy is unstable when the consumer, which represents 70% of GDP, is over-levered and struggling to make ends meet. Strong economic growth can turn negative very quickly, which is what the flat yield curve is indicating.
Rhetoric: The Fed can fight deflation caused by a collapse in the consumer by printing money, by "dropping dollars from helicopters".
No Rhetoric: Consumer and public debt (with corporate debt now growing again) is at all time highs relative to GDP. The Fed can only offer credit by increasing the supply of money; they cannot force the market to take that credit if debt is too high. If the Fed attempts to drop interest rates by supplying the market with that many dollars, interest rates would rise as most of our new public debt is held by foreign central banks. A rise in interest rates would put further pressure on the consumer. The mortgage market, which has supplied most of the liquidity to the markets via home equity loans, has topped out and is no longer a source and the conversion from ARMs to fixed mortgages at higher rates will put further pressure on the consumer.
Hmmmm... interesting.... very interesting - Jason Roney - 11:46 AM
This morning the SP futures gapped above yesterday's high. When this occurred on FOMC decision day, the SP closed higher 76% of the time (21 occurrences). If the gap remains intact until 2pm EST (just before decision time), the number of occurrences drops to just 7. Of those, the SP closed higher 100% of time, managed to reverse and trade negative just 3 of the 7 and closed below the 2pm EST price 4 of the 7.
But this is interesting. Let's assume, just for giggles, the 7 occurrence scenario remains intact (i.e. the gap holds before 2pm EST and SP closes higher). Going forward, the SP was down the next day 6 of 7, lower 5 days later 5 of 7, negative 10 days later 6 of 7.
Cereal Correction - Kevin Depew - 11:35 AM
As global indices rise in unison, something the Financial Times this morning attributed to "herd mentality and serial correlation," it will be interesting to see how much of a memory the market has for May 10, the last FOMC meeting. If you recall, on May 10 the SPX opened at 1324. Five days later it closed at 1270, breaking the series of higher highs and higher lows on the daily chart that had been intact since the beginning of the year.
DeMark TD-Sequential "buy" signals were already in place for the NDX and Nasdaq Composite while the S&P 500 is nearing a potential triple top break at 1260 (5x3 chart). The short-term ducks are all aligned in Hoofy's favor right now. The longer-term context remains negative, however, so how you choose to weigh the crosscurrents will have to be a function of time horizon and risk profile...as usual.
Minyan D pinged me earlier and asked if I thought the SPX would break through the 200-day today.
I said "possibly."
"Thanks," he said jokingly, "I'll put 'possibly' on my screen today."
My response was that he should put it on his screen and leave it on his screen because it's the most important "ticker" out there in terms of thinking about risk.
Position in SPX equivalents
2:15 (EDT) Can't Come Too Soon - William Fleckenstein - 10:49 AM
As things are shaping up, it looks to me like we will go from the last hike to the first cut in world-record time. But markets are markets, and they can do what they want. Right now, what they want to do is be nervous as hell. This afternoon will bring a resolution of the near-term uncertainty. Then we'll learn whether folks were overly uptight or not. My bet is that they have been.
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