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Buzz Bits: Markets Slip, Dow Closes Below 11,000


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Earnings Report - MV News

H&R Block

Earnings Report - MV NewsH&R Block (HRB) reported Q4 EPS of $1.77, unclear if comparable to $1.78 cons, on revs of $2.5 bln (in-line).

I'm looking for a chateau
21 rooms but one will do... - Todd Harrison - 3:40 PM

Another day in the minxy fray is edging to an end as we ready to put a neat little bow on the Hump Day session. The action is unremarkable at best and disappointing at worst. Indeed, despite the ol' college try by the Matador Crowd, the bovine couldn't find their footing and some towels are tossing as we eyeball the bell. And as the ticks are beginning to flicker quicker, please allow myself to introduce...some randoms.

  • The standout action? The drillers, prolly, as the OSX is off a stunning 5%. I'm involved in this complex (mainly through my buddy Weatherford) and as my horizon is longer-term, I'm looking at this as an opportunity to scale into some cheaper inventory. Not advice, just so you know.
  • While I traded 'em from the long side this morning, my trailing stops once again saved my day. I'm holding on to some of my metal additions, which is a conscious choice rather than rationalization.
  • I've gotten some feedback on Silver Wheaton from folks I hold in high regard. So, while I listed it as a 'core' earlier, I'm soft circling it as I do a bit more work.
  • The Cliff Branch on the Bovine Ranch? Yep, the financials, as they're exhibiting relative strength in the face of crimson cross-currents. Hey, as go the financials....?
  • Wax on, wax off? Brazil is down 2.5%.
  • My grandfather taught me to take the high road as it's entirely less crowded and boasts a better view. That, more than anything, is why I bite my lip on issues I would otherwise highlight in this space. You may not understand what I'm talking about but, worry not, one day you will.
  • On that note, fare ye well into the bell, my friends. It's not always easy but, as we know, it could be a lot worse.


Position in WFT, SLW

Health care outperforming during correction as expected...... - Bennet Sedacca - 2:33 PM

It is no secret that health care is the best performing group during cyclical bears and as such, as long only managers, that is where we are hiding, along with large cap value generally. If you take a look at XLV, the broadest and most liquid of all health care ETF's, they are actually UP since this correction began, and I expect continued outperformance.

Why do they outperform? Well, in this case, they were truly hated, but our feelings were all the bad news was already discounted. Secondly, as debt managers, we believe (it is actually indisputable) that they have he best balance sheets. Third, their businesses truly are defensive. Particularly in an aging society.

From the fixed income side of the ledger, we continue to find Treasuries attractive for the balance of 2006 -at least until October-and continue to add to MIN- as it heads towards an unprecedented 13% discount to NAV (they cut their dividend by .001 per quarter and think this may be causing the weakness-not enough for us to abandon our position, but a reason to add).

Position in XLV, Treasuries and MIN

I see a little silhouetto of a man, Scaramouche, Scaramouche, will you do the Fandango - Todd Harrison - 1:45 PM

Today's fandango is a tenuous try as we've got some good (breadth, financials, biotech, pharma), some bad (energy, semis) and some ugly (Farley with a mohawk?). We've also got alotta nervous traders with itchy trigger fingers, ready to bet on whatever side of the fence we happen to fall. Reactive? You betcha, as this tape is testing the most rigid of convictions.

For my part, and as a function of my desire to trade 'in between,' I've made partial sales on the morning grabs and will use some trailing stops on that side of my book. I am, for the record, comfortable holding on to a spate of my metal holdings as part of a longer-term vibe. I was bummin' when they ran without me and I haven't forgotten that now that they've come in. I'm not busting at the seams with exposure, but I'm "there" if you care.

My sense is that Boo will spend the next hour probing the bids and seeing what Hoofy's got up his sleeve. If the bovine can hold the line--and the breadth/financials stay snazzy--we could see a bit of liftage. Again, I'm not "hoping," I'm just sharing, and if I'm wrong (like yesterday), I'll exercise the discipline necessary to stay in the game.

In the Southern twang of Intern Jenna, I hope this finds "y'all" well.


position in pharma, energy, metals

Freddie's Dead - Kevin Depew - 11:24 AM

  • The selloff in commodities is continuing apace with the CRB Index approaching very important support at 340. (See the PnF chart here). A move to 336 will break a triple bottom.
  • Also note gold, energy and commodities struggling once again, with the OSX breaking a double bottom today, silver breaking down again, and gold breaking a new double bottom.
  • The HUI has very important support at 308. The primary trend there is already negative, based on PnF, but 308 represents triple bottom support. A break there sets up a more serious probe lower with the PnF downside count at 288 based on a 4x3 chart.
  • The dollar again faces very important resistance at 85.25. A move to 85.50 will break a quadruple top. With the ECB rate decision on tap tomorrow morning as a potential currency mover, should be interesting to see how the greenback handles that area.
  • Morgan Stanley reiterated its overweight rating for Freddie Mac (FRE) today. On a technical basis, that's worth fading. The PnF chart shows a double bottom break for FRE yesterday, a downside count to 49, and unfavorable DeMark indicators across all time frames.

Energy - the malaise is a result of the estimates - Brian Gilmartin - 10:49 AM

Forward estimates for the energy sector are not seeing near the degree of upward earnings revisions that the sector saw in 2004 and 2005, which in my opinion is causing the lethargic action in the group that we are seeing today.

Here are the year-over-year earnings growth estimates for the next three quarters for the energy sector for the last three months:

6/2/06 5/5/06 4/7/06
q4 '06 0% -2% -2%
q3 '06 +10% +9% +18%
q2 '06 +24% +22% +18%

In 2004 and for most of 2005, we were seeing about a 1%-2% higher revision PER WEEK.

The "momo" is gone from this sector, and we remain underweight energy with about a 5% position.

position in XLE

We interrupt this decline with a breaking bounce from our sponsors... - Rod David - 9:33 AM

The market showed no signs of accumulation during this week's decline. But it did offer the potential for a bounce Wednesday. Tuesday's leg filled the outstanding gap back to last Tuesday's close. The test held, as did a test of May 23's low close, and a test of last Wednesday's low. Total volume increased sharply, while internal spreads reflected more productivity by buyers than by sellers. So long as Tuesday afternoon's high holds as support through Wednesday's opening gap up, S&Ps should bounce back to Tuesday's opening peak - given the right conditions, the bounce could extend another 7 points higher.

As for the bigger picture, Friday's open peaked at the "reverse ascending triangle" pattern's corrective bounce target. This was after the prior Friday's false breakout. You know what they say... "one false breakout here, another false breakout there, and pretty soon you have a trend in the opposite direction." Okay, maybe they don't say that, but they should start. This week's decline has retraced far enough back into the two-week old consolidation that new lows are required. Any bounce in the interim is only a correction of the decline from Friday's high.

Pre-Market Heat Seekers From - Jon Doctor J Najarian - 9:21 AM

Martek Biosciences Corporation (MATK)
Our heat seeker is showing strong bids for MATK in the pre-market and over 400,000 shares changing hands. MATK reported a near doubling in income and a 26% jump in sales thanks to improved sales to its infant formula customers and increased productivity. They reported 2Q '06 record revenue in excess of $70m. Earnings before taxes increased to almost $10m, while net income was $6.3m and diluted EPS was $0.19. Our heat seeker is showing strong bullish movement in MATK, up $2.53 from its close at $25.21 to $27.74.

Bankrate, Inc. (RATE)
RATE is also on the bull-o-meter (Heat Seeker!) with a nice gain of 8% in the pre. A share volume of 66,164 is what our Heat Seeker is showing, enough volume to make RATE move nicely. Mortgage rates have see-sawed back-and-forth in recent weeks on news of a softening housing market and a hawkish inflation stance by the Fed. Mortgage rates are closely related to yields on long-term government bonds. RATE should pop up to $5 in the next few sessions, given the strength of our readings.

American Woodmark Corporation (AMWD)
Although the pre-market volume is light at 14,000 shares, AMWD is popping up on the Heat Seeker ahead of their Q4 conference call today. Our Heat Seeker is showing increased interest from the institutional community for the third largest manufacturer of kitchen and bath cabinets in the United States. AMWD closed at $33.03, so keep an eye on it!

Positions in AMWD and RATE


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