Buzz Bits: Dow, Nasdaq Close Higher
Your daily Buzz highlights...
Earnings Report - MV News
Flip Switchage! - Todd Harrison - 3:23 PM
- Note the financials as both the XBD (brokers) and BKX (banks) dabble over to Red Dye.
- The homies, flagged a bit earlier, are also picking up some sell-side steam.
- Levels? S&P 1280 and the 200-day are back overhead. Ditto NDX 1510.
- Breadth? Balanced a bit but bouncing better.
- My MIM3 Memoirs are finished and we'll be pubbing 'em in a two-part series tomorrow.
- Have you read President Fish's Media Panel synopsis?
- Silver stocks, meanwhile, have decoupled from the commodity (which closed up close to a deuce).
- I'm edging back into a rhythm after the mountain meld. I'll be up to snuff and back on track by tomorrow.
- Besides, only 364 more days until MIM4!
Position in financials
General Electric (GE) is up more than 2.5% today. The media attribution is to a Wall Street Journal article over the weekend about companies working to solve homeland security problems, such as liquid gel explosives, etc. Last Tuesday we noted that GE's revenue from its security business this year was $2 billion and is expected to be as much as $2.8 billion by 2009. Apparently, this was only discovered by stock buyers this morning in the linear world. Otherwise, the non-linear view (and the one I have based on the technicals for the stock) is that this spike is a one-off event and changes nothing about the deteriorating conditions of the stock.
As futures race higher we have another "tell"... -
SunTrust Banks (STI), another regional bank darling, is having trouble making money. The flat yield curve and high mortgage exposure is causing problems.
This is not idiosyncratic, although so far, however, the market has only punished those like Countrywide (CFC), Capital One (COF), Accredited Home Lenders (LEND), and Deutsche Bank (DB) who have "talked" about it.
Each has its own set of problems but they all are derived from the basic problem of a flat yield curve and high exposure to the consumer through mortgage lending.
Positions in STI, COF, CFC, LEND
Bunnies With Good Noses? - Adam Warner - 11:10 AM
"Do options traders know more about buying and selling stocks than the rest of us?"
That's the quote at the top of an interesting article in the Sunday Times. Basically, the theory is that when you isolate and measure call and put buying interest (from non-market makers, who are essentially taking the other side of the trade), it is predictive of stock direction.
That is, when you measure the ratio between Opening put purchases and compare it to Opening call purchases, it is predictive of future stock direction. When you go with the trend that is, as opposed to plain vanilla put/call readings, which are contrarian indicators.
Anecdotally, as a former floor trader, I totally agree with the thesis. "Hot" money tends to buy, not sell, options. One of the advantages of being on a physical exchange is that you get a better feel who is on the other side of the transaction. The disadvantage is that you are still obligated to fill him, lol.
Whole Foods Upgrade - Brian Gilmartin - 9:58 AM
As a long-time holder of Whole Foods (WFMI), my firm was happy to see this weekend's Barron's article and the JP Morgan upgrade this morning, and we have added a little bit to our long position over the past few weeks, but the attached weekly chart of WFMI is keeping me from making any big changes to the position.
The weekly and monthly charts indicate WFMI should have solid technical support in the high $40's, but after looking at these charts, I also think it will be a while before WFMI gets near an all-time high again.
My own opinion is that it will take a while for WFMI to repair this technical damage.
Using stochastics, WFMI is now more oversold than it has been since mid-1999.
Position in WFMI, JPM
Cedar Fair: Danger of Cheap Stocks - Vitaliy Katsenelson - 9:51 AM
By definition, a value investor is enticed by "cheap" stocks. However, quite often "cheap" stocks are cheap for the right reasons: fundamentals deteriorate or expected growth rates don't materialize - welcome to the value trap, the value investor's hell. I wish there was a silver bullet that would keep the investor out of value traps, but there isn't. Investors might want to do an un-American thing – assume a cheap stock is guilty of been cheap for the right reason until proven otherwise. The burden of proof should be on NOT buying the stock.
Though I never shorted a stock in my life – I run long only accounts, I believe an ability to short stocks may make investor more objective. A long only manager often lacks the dark (short) side's perspective. The ability to walk on the dark side forces investors to look at the negative more objectively.
I'd love to spend as much time in value investor's hell as the next guy. I've stepped in my fair share of value traps – Telecom New Zealand (NZT) comes to mind here. It was one of the worst recent ones by far, and (publically) avoided a few (here and here).
Recently I looked at Cedar Fair (FUN) which attracted me with its 7.6% dividend yield, however, as you'll see from this article, I found that the risk profile of the company has increased exponentially after it bought Paramount Parks from CBS and dramatically leveraged its balance sheet. Though Cedar Fair may be able to maintain its dividend over the years (it will unlikely be able to raise it by meaningful amount), an economic slowdown or bad weather or any other unforeseen event (earthquake, hurricane, flood etc...) will put the company's ability to pay its dividend in jeopardy.
Position in NZT
Double-Secret UN Resolution 1701-b: Disarm the "bears" - Rod David - 8:18 AM
S&Ps are sharply higher overnight. A gap up ahead of the Israel-Lebanon "cease-fire" then edged higher afterwards, equating to a 9-point gain in the underlying SPX cash index. Prior to that was Friday's "ineffectually pessimistic" session, in which a decidedly negative opinion had no meaningful impact.
Despite gapping down at Friday's open and spending the balance of the day in negative territory, S&Ps closed at the session's mid-point. The intraday low stopped a couple of ticks short of actually piercing Thursday's low, which would have allowed a recovery to be considered bullish.
The failure to pierce Thursday's low is actually "ineffectual optimism" that will come back to haunt buyers. And perhaps sooner, rather than later. Opening gaps make it difficult for buyers to gain momentum, and the overnight high has already met this morning's bias-up target at SPX 1275.75 (ESu 1279'25). But S&Ps will need to reverse back under SPX 1274 (ESu 1278'00) to begin signaling that momentum has reversed back down.
What you need to know... - Jon Doctor J Najarian - 8:06 AM
Microsoft Offers Game Creation Software - Later this month, Microsoft (MSFT) plans to introduce a test version of software that according to MSFT will dramatically simplify the creation of basic games for Microsoft's Xbox 360 game console. Will Sony work with other software companies to offer similar solutions? Stay tuned!
Computers Break $300 Barrier For Back to School - Low-end desktops are appearing in stores for as little as $299, but the hot sellers are laptops, which account for about 60% of PCs sold. Average laptop prices have finally dropped below their traditional floor of $1,000, and bargain models can often be found for less than $399.
Search Ads To Top $26 Billion by 2010 - The search-advertising market, with its little text ads published near search listings, is expected to grow to $26 billion in 2010 from $17.4 billion this year, says market tracker Forrester Research. Google (GOOG) accounts for the biggest chunk. The company reported $6.1 billion in revenue last year and nearly $5 billion in the first two quarters this year.
Position in MSFT
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