Buzz Bits: Dow Gains, Nasdaq Falls
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Earnings Report - MV News
- Take Two Interactive (TTWO) reported Q2 EPS of ($0.47), unclear if comparable to ($0.11) cons, on revs of $265.1 mln vs $258.6 mln cons.
- National Semi (NSM) reported Q4 EPS of $0.41 vs $0.38 cons on revs of $572.6 mln vs $565.0 mln cons. Q4 gross margin was 61.4% vs 61% exp.
- Texas Instruments (TXN) raised its Q2 EPS guidance to $0.46-0.48 vs $0.38-0.43 prior and $0.40 cons. TXN also raised revs guidance to $3.63-3.78 bln vs $3.46-3.75 prior and $3.62 bln cons.
More Swings than a Hedonism Vacation! - Todd Harrison - 3:40 PM
If you're slappy and you know it raise your hand! Yes, if it wasn't for the need for typing speed, I'd have both hands raised (and both eyes shut). This volatility isn't for the faint of heart and I, for one, have seen enough flickering ticks for the day. Before I juggle my struggle to focus on my afternoon 'to do's'', however, I'm gonna give this Buzz thang one more try.
While Snapper thus far saved the day (don't blink), I remain ever-so-conscious of the caveats discussed in my 1:00 PM Buzz. And while I'm still there in a slew of exposure (some cores, some pure rentals), I'm not confusing luck with skill or trades with investments. I've been intimate with the Red Dye cause for too long to pretend it doesn't exist because I happen to own some merchandise.
Be that as it may, Hoofy is trying to calm the nerves of his fellow bovine by painting the screens green for the day. I mean, Jeez, if you just walked into work and took a snapshot of the tape, you'd think it was just another sleepy summer slither. Not so much, judging by the follicles on my desk, and the fun will likely continue into the weekend. In that regard, if you were choking on risk when we in the abyss, remember how you felt as you manage your overnight risk.
Before I go, I wanna address a question I got from Minyan Bryan. He asked if I'm getting that "old familiar feeling" (ala 2000) in the materials space. The answer is a resounding no--I continue to think that they'll outperform and while we could see meltage, I don't believe it'll be specific to that complex. I may be wrong--it wouldn't be the first time--but I'll always be honest.
Fare ye well into the bell, Minyans, and may peace be with you.
A few quick notes on market action and rhetorical questions..... - Bennet Sedacca - 2:02 PM
The BIG picture in my view hasn't changed one iota. The leverage exists, the risk premium is this, but growing and I see the the top of stocks of around May 1 we called for as THE top to the cyclical bear. We are long our bonds, but need REAL WEAKNESS in stocks and uber-market/economic weakness for 10's to really rock and roll and get a MAJOR inversion.
From a short-term perspective, tensions are mounting and I understand how people like my good friend Toddo would lean long into this stress. As longer-term players, we respect the chance for a healthy bounce in stocks near-term, but am sticking to our intermediate views and maintain existing positions. Defensive in stocks, quality in bonds and away from submerging markets.
Eventually, I think the leverage will take over but I still think that takes place in the fall.
ONE IMPORTANT CAVEAT. There has NEVER been leverage like this or 9,000 hedge funds floating around all at once, so the process, as Professor Succo and I pinged back and forth about the other day, could move things faster than normal. So we are on the lookout there.
Big picture take--bounces in bear markets are always short and sharp, but they are just that--bounces. If I were still in the hedge fund business, would I take a shot? Perhaps. But as capital preservationalists, we are staying our boring course that doesn't lose much in the face of adversity.
Note to golfers: If you don't hit it straight, DON"T PLAY SAHALEE IN SEATTLE!!!!
Position in treasuries
Volatility - John Succo - 12:35 PM
By definition, as volatility picks up, liquidity drops. Volatility picks up as investors try to reduce risk, which they are doing now.
This will ebb and flow. Our biggest point to Minyans was to reduce risk before the masses tried to do it. Even though this process has just begun, there will be opportunities for "traders" like me to play this ebb and flow.
We are currently selling a great deal of volatility that we have purchased at much lower levels. We are still maintaining a long gamma profile, but the price of risk at this point in time is good enough to sell out what we own.
I do not advise Minyans to play these ebbs and flows.
Secularly, I think we are entering a period where the credit bubble will unwind and central banks can do nothing about it. But this is probably not a crash scenario, but a long process where volatility in general will be higher.
Is there any good news anywhere? - Brian Gilmartin - 12:26 PM
Although it may not come with Texas Instrument's (TXN) mid-quarter update tonight, we need some positive earnings commentary to change the rather synoptic Fed view and take the focus off of inflation, Fed rate hikes and plunging emerging markets.
We are now below 1,245 on the S&P 500 or the point of the May 24th low from which we had a successful reversal day.
Lehman (LEH) starts off the major white-shoe brokers reporting next Monday, and we will hear from Fed-Ex (FDX) and Nike (NKE) over the next two weeks.
A positive pre-announcement from a company in a sector from which none is expected, would be a big plus, but then again, so would winning the lottery.
Remember, in their April earnings report TXN had stronger-than-expected 2q guidance, and the stock has gone nowhere. Healthy product cycles in 3G, DLP and wireless should be reiterated in tonight's call.
Position in S&P500 index funds, TXN, LEH, FDX, NKE
Mayday - Scott Reamer - 12:12 PM
The Russell 2000 (RTY) had a 3%+ down day on Monday and the last 24 hours have seen a near 5% decline. This is a good example of the type of statistical rarity (anamoly) that financial time series demonstrate all the time: heteroscedasticity.
This type of volatility clustering - when large outlier events actually INCREASE the probability of subsequent large outlier events - is essential to understanding the non-gaussian nature (the non linear nature) of stock price behavior. All the traditional models for understanding financial markets - capital asset pricing theory, modern portfolio theory, the Black Scholes option pricing model, etc. - all assume linearity. They all assume rationality.
They are wrong. And the volatility clustering taking place right now in the RTY is just one more example of why they are.
Position in RTY
Andale andale, arriba arriba!!! - Fil Zucchi - 12:03 PM
It looks like a few people believed the market would never go down again and they are a wee-bit surprised. A Minyan asked me which side of Broadcom (BRCM) interested me as I was very cryptic in my earlier post. It is the "nice" side. Twenty more point and the SOX will be down 25%. That's a fair chunk by all measures.
My sense is that semis are adjusting to a much slower economy to come, but some companies already discount much of that. My scale buys in chip land are very wide and if they turn here, positions will not be worth holding (too small).
If the pasting continues and I get longer, the more difficult question will then be whether to sell the likely sharp bounce or stick around for a cyclical move - which may test my patience.
One thing at a time folks.
Position in BRCM, homebuilders
Pressure Points - Kevin Depew - 11:45 AM
- The SPX 1245 level is now in Boo's rear view mirror, an important contextual breakdown in PnF terms. As was 1240.
- The Positive Trend indicator for the SPX, which we looked at yesterday, right now appears to be inching closer to a serious breakdown. Remember, we need a net 10 new PnF trend violations to add fuel to the negative contextual fire.
- So far, Anadarko Petroleum (APC), Marathon Oil (MRO), National-Oilewell (NOV) have violated PnF trendlines today.
- No matter how Hoofy tries to spin it, former leadership violating contextual trendlines is not healthy for the market.
- The Nasdaq-100 has given a second sell signal on the PnF long-term 20x3 chart, violating the cyclical bull trend from the October 2002 lows.
- This tells me the selling we are seeing is structural, not cyclical. This is a structural breakdown, a resumption of the structural trend that was already in place but deferring to the cyclical forces, not a cyclical correction.
- I believe the structural forces in place are deflationary, not inflationary. That is why stocks, home prices, commodities, gold are declining, and why bonds and the dollar are going up - the recipe for deflation.
Position in ES/U6, gold, silver
Once we had an easy ride
And always felt the same
Time was on our side
And we had everything to gain - Todd Harrison - 10:56 AM
Where's Eddie Van Halen when you need him most? The Thursday brew is a minxy zoo as the wheels are wobblin' on the wagon. I've spent alotta time on the horn this morning with my brethren around the Street and the noodle seems to be constant. At the heart of everyone's matter is a single, simple question: Has the big picture cometh?
Old school Minyans understand the global caveats and structural smoke. Heck, we've been talkin' about them for the last few years, often during times when the tape would deem them premature. Those in Ojai were given this script although, as is often the case, the timing of the release was out of our hands. Now, as buzz makes its way around the theater, science fiction has morphed into a reality show.
I'm not smart enough to offer if "this is it" but, as I've communicated, I'm using the carnage to nibble and pick at names I wanna own (not rent). So, while the epitaph is being written in the energy and metal spaces, many of them by the same folks who couldn't own enough at XAU 170ish and OSX 240ish a month ago, I'm going the other way. Hey, I've been there before and odds are, I'll be there again.
The risk, as we know, is continued liftage in the dollar. And from a "trading tell" standpoint, the breadth continues to warrant caution. Time horizon is a key component of any financial decision so choose wisely and stay disciplined.
As always, I hope this finds you well.
Position in metal, energy equities
Shorting Chips, Charily - William Fleckenstein - 9:43 AM
As I noted a few weeks back, I started putting shorts on a package of secondary/tertiary chip stocks, and I've kept those positions to here. I have been somewhat surprised by just how weak they've acted. However, although I keep fearing a Fed-is-done rally, and don't want to have my short positions maxed-out until after it's occurred, I must also admit my surprise at just how weak the tape continues to be. If this is any indication (and I believe it is), the latter half of 2006 promises to be very ugly, indeed.
Yesterday morning, I re-established a partial gold and silver trading position (now that my investment position is back to full-strength). But, I'll be forced to dance around my trading position a bit if the price goes against me. Meaning that although I think it's worth taking a shot at more, I'll have to respect the price action and not let it go too much against me.
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