Buzz Bits: Nasdaq, Dow Slips Lower
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Where I Stand: Six Major Themes - Bernie Schaeffer - 2:37 PM
In light of the market turmoil of late, set forth below are six major themes to help put my current views in perspective.
1. The small-caps will resume their leadership on rallies. Maintain your emphasis on the small and mid-caps and also maintain an aggressive cash reserve of 25-50 percent.
2. Don't fall into the large-cap trap looking for "safety." If this market is headed for bear territory, these names will take it on the chin as well, and they will continue to disappoint on the upside.
3. Large-cap technology remains the most dangerous sector. The Nasdaq could easily shed another 10 percent on further market weakness. Don't be fooled by possible dead-cat bounces in moribund names such as Microsoft (MSFT) and Cisco (CSCO) .
4. Bearish sentiment on the financial sector is extreme, especially in the context of the relatively strong price action in such sub-sectors as the brokers and the exchanges.
5. As I stated in my June market commentary: "The award for 'most shell shocked' from this pullback has got to go to those who invested in the precious metals and the precious metals shares. They thought they were buying an "uncorrelated" asset class that could benefit from market turmoil, and instead they found themselves in a trade that moved in lock step with the India stock market. The potential for further disillusionment keeps me wary of gold for the shorter term, though I like the longer-term case."
6. I see the potential risks in the emerging markets as too high relative to the potential rewards.
Scattered thoughts... - David Miller - 1:39 PM
- Patrick Bedard has a good article on ethanol in the current Car & Driver. He's a professional skeptic about automobile regulations and is usually well-researched in his opinions. Also catch the op-ed piece in the same issue about the screwy statistics that perpetuate installation of red-light cameras. I had the flash for one of those go off above my head at an intersection in Atlanta. Didn't realize it was there and it about scared me to death.
- If the Vonage (VG) naked short sale accusations turn out to be true, will people get off Patrick Byrne's back? Nope.
- Take a silent moment today for the failure of the internet neutrality amendment. Five years from now, consumers will look back with wistful appreciation for the "good old days."
- How long has it been since you heard about someone going in for a tonsilectomy? When I was in grade school, it was about one kid every two weeks in winter who had their tonsils out.
- NBI breadth switched from 2:1 positive to even.
- Everyone raise their hand who really wants to take large positions ahead of the weekend. Now look at the screen.
- Do you think Snapper is related to the Slowskys?
Promises, Promises... - Jeff Macke - 1:33 PM
Greetings from MVHQ where the mood is in danger of going from the current Dickensian longing to Attica-style rioting if that long-promised sushi doesn't get here soon. If one of these interns wanted to impress me and the rest of the all-star guest list they'd be grabbing their fishing poles and getting me lunch right about now. Other thoughts, if only to keep me away from my stabbing hunger and sense of betrayal...
- Disney's (DIS) $150,000,000 version of the Chevron commercial, "Cars," is out and getting good reviews. The movie may be great and I might even see it; neither of which will change the facts that Disney overpaid to buy the Pixar top. I've only seen the preview but, based on that, the film has something to do with cars making vague references to drugs and genitalia. Doesn't scream "Bring the Kids!" to me but maybe I'm not the target audience... what, with my two young children and a life-long love of film and everything.
- Still no sushi. I'm tracking down rumors that Nicole Ritchie started working for Todd-O about two years ago (when she still had flesh).
- Speaking thin reeds and betrayal, after a one-month drop from 1326 to yesterday's 1235 low, the SPX rally attempt is starting to look like a miserable disappointment. The 200-Day moving average is suddenly looming large at 1260.
- I'll bravely offer that I don't see us surmounting that 200-day again this afternoon. Especially not with what seems to be a city-wide sushi-delivery worker strike.
- Does anyone know if they serve Rainbow Rolls at the Chelsea Pier driving range?
Mini-Minyan Mailbag - Laurie McGuirk - 1:20 PM
I really love your stuff - keep up the great work. I hope you and your family are doing well. I have been overweighting myself in silver because I think it has a much larger upside than gold. Since it is 75% off its all-time high - it's hard to be wrong buying in here….although the past few days have been a steel-toed boot to the groin.
I noticed in your last write-up that you did not have a silver target for Bastille day - but I am thinking $13.50/oz sounds about right. What are your thoughts on that? I'm not asking for advise - just want to see if there could potentially be a bet for a Heiniken.
Thanks for the good wishes for the family – unfortunately things went a bit backwards today with Dad's doctors finding another brain aneurism that they wanna go digging for… not much we can do about that. Fingers crossed. Apart from that everyone is well.
I hear ya on the recent metals "nut-kicking." I am swollen like a beach ball but having no leverage makes it easier to stomach. Owning physical also takes much of the pain away - the metal never changed!
Re silver, I love it. I agree it has more potential than gold for many reasons which I have detailed in numerous articles previously. I reckon a fair target is $13.25 for Bastille Day - keeping the silver/gold ratio at about 54ish. I am a big fan of the buy silver/sell gold trade and have positions previously set at 66ish and looking to add more on blips up closer to 60 from the current 55. I took some back in the mid 40's looking for exactly this type of move so don't wanna be greedy.
Why would an Aussie wanna bet a Heineken?? It's a fair beer but nothin' on a nice glass of Coonawarra Shiraz or a cold bottle of Cascade lager (a Tasmanian beer)! I'm gonna be in NYC on July 30 for a few weeks but I doubt there'd be a Cascade in the City.
Position in gold, silver
Heads up Minyans - Fil Zucchi - 12:24 PM
There's a broadly followed technical setup know as an Opening Range Breakout. Basically it involves a move outside of the first three 10-minute bars. I have not backtested it so I am not sure what its record is, but just based on my eyes, it works best when the break-out occurs opposite the "expected" trend for the day.
With yesterday's "broad media" consensus that we had seen a bottom/reversal and this morning fast-out-of-the-gate move, my sense is that the expectations were for a parade for Hoofy. Boo has now spoiled the party putting in Opening Range Breakdowns in the Spoos (ESU), the Russell 2000 ( ER2) and the Nasdaq 100 (NQU) futures.
I bring this up because the mantra that "failed moves lead to fast moves" is rising front and center in my thinking.
Growth Names Showing Good Relative Strength - Brian Gilmartin - 11:10 AM
I'm about to push away from the desk and embarrass the game of golf with my presence on a course (I am one of the few that truly hates the sport) today, but here is what we have noticed beneath the headlines or chatter:
Several of our major holdings held in very well during the sell-off including Starbuck's (SBUX), Northern Trust (NTRS), and United Parcel Service (UPS).
- Starbuck's, after hitting a high of $40 didn't give back very much of the February - March rally, despite its lofty multiple and otherwise lofty valuation. It faces relative easier comp's for the rest of calendar '06.
- Northern Trust had a large earnings upside surprise in the April earnings report, and also gave back very little during the May swoon. Northern is a higher-multiple bank stock with significant capital market exposure given the huge investment management operation.
- Finally, UPS our "safer" transport play did exactly as we had hoped during the transport bloodletting and never traded below $79 - $80 for any length of time. Granted UPS has not given us the upside of Fed-Ex (FDX) or Burlingotn Northern Santa Fe (BNI), but the stock protected our flank in the correction, and should outperform this calendar year. UPS is more of a lower-beta, value-oriented play within the transport group.
There are other names out there which showed good relative strength during this 4-8 week ugliness, but these three are large holdings within client accounts. Not advice per se, just sayin'...
Position in SBUX, NTRS, FDX, UPS
OK . We have beaten on the homies unmercifully for a year. Now what? - Bennet Sedacca - 9:43 AM
See the chart. I use the purest of homebuilders to judge the group. While I still think an 80% (like all bubbles) final decline will EVENTUALLY occur from the top, see the Fibonacci chart attached.
We are now at the point where 50% of ALL GAINS have been given up since 2002. A natural stopping point or a place to bounce in our opinion. I am not buying 'em as I think the fundamentals stink like raw fish, but technicals could lead to a decent bounce here.
Just something for your Friday AM radar. Pleaseeeeeeeee don't take as trading advice, just an interesting data point.
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