Buzz Bits: Dow, Nasdaq Show Big Gains
Your daily Buzz highlights...
Earnings Report - MV News
Applied Materials (AMAT) reported 3Q EPS of $0.32 vs $0.30 cons on revs of $2.54 bln vs $2.44 bln cons. Gross margins were 48.1%, new orders were $2.67 bln and backlog was $3.32 bln.
Abercrombie & Fitch (ANF) reported 2Q EPS of $0.72 vs $0.71 cons on revs of $658.7 mln, which it had previously reported.
Let's Go to the Video Tape! - Todd Harrison - 3:48 PM
- No Succ, there was no incident at second base. MIM3 softball is in the books (and I've got the trophy to prove it). I will, however, offer a "best of five" scenario if you wanna dig in your cleats anew.
- Is it me or have we seen alotta "spike rallies" coupled with double digit VXO dips?
- I've seen some institutional buyers of XLU (utilities) and GLD (gold) in here.
- Why is it that I saw all but two of the Third Annual Minyans in the Mountains Awards?
- I'm tempted to make some sales on my trannie adds but, given that we typically see a probe (following a sizable move), I'm gonna sit tight. It's defined, it's pared (vs. some financials) and it's not big risk.
- "Big risk," so you know, is putting up a picture of your two bosses with a title "Brokeback Mountain" on it. That's "big risk," Pepe. Just so you know....
- Fare ye well into the the bell and have a fantastic evening.
Position in trannies, financials, metals
Speaking of Up Days - Kevin Depew - 2:38 PM
How "good" of an up day is it today? It's a question worth asking because markets are essentially about deception, creating situations where investors and traders are deceived into making the wrong decisions.
I like to judge the "quality" of the move higher by looking at point and figure buy and sell signals. In my opinion this is a deeper view of quality than simple advancers vs. decliners. A PnF buy or sell signal removes back and forth "noise" from the market by establishing "action points" based on supply and demand.
So let's look at the SPX in terms of buy/sell signal breadth.
Right now the S&P 500 (SPX) is up a little more than 1% on the day. How many PnF buy signals are there in the SPX? Two buy signals. Charles Schwab (SCHW) and Symantec (SYMC). As noted yesterday, the SPX still has "room" to 1290.
Position in SPX equivalents
Free Prozac with sale of home!! - Fil Zucchi - 2:01 PM
The National Association of Home Builders Index is out and it is not looking too good. Actually is bad . . . really bad . . . more like awful. You can see just how bad it is on this chart. And by the way, that other line is GDP Domestic Purchases ex-food and energy, for those interested in extrapolating.
Prospective buyers' traffic is down to 21 - i.e. it may as well be zero. The key here is that with this degree of apathy, buyers won't show up until prices are much much much lower. The psychology of popping real estate bubbles is that one will eventually be able to buy at foreclosure sales.
Unfortunately, as I suggested in the break-out sessions in Vail - I don't really see that great reward/risk in shorting the equities of most homebuilders down at these prices. There just aren't that many dollars left in most of them. IMHO, the debt of the homies is where the next big money will be made on the short side. There is no worse brew than meaningful leverage and disappearing cash flows. Unfortunately for me, those plays are out of my league.
Those using a Bloomberg can keep an eye on the homies' Credit Default Swaps using function CDSD.
Position in BZH
Will this one stick? - Rod David - 1:47 PM
S&Ps gapped up sharply at Tuesday's open, much more so than Monday. But a gap's size doesn't matter so much as what buyers do with it. So, what have they done with it? And for that matter, what has been accomplished by two successive steep morning gains?
What each gap's buyers have done is reject the prior session's sellers. Monday's open gapped up to Thursday's high, and this morning's gap tested yesterday's high. But in neither case were those rejected sellers substantial. Friday and Monday's volume wasn't impressive, and even today's higher high is under last week's prior highs. So all of this buying pressure is being expended, while S&Ps have only traveled from one end of the range to the other.
None of which amounts to being a sell signal. In fact, sellers don't seem interested in popping buyers' optimistic balloon today. The market could still fall of its own weight during the last hour if price hasn't improved by then. But if the optimism balloon inflates any further, then it is likely to inflate a lot, potentially doubling this morning's gain.
Whoa, just a minute here. Now I KNOW I am missing something - Bennet Sedacca - 11:10 AM
OK, let's ASSUME the data is correct, the Fed is still talking dovish tightening, yet all that I saw was deflationary news (why I own so many Treasuries), a survey economy is slowing, rising Treasuries, HUGE foreign inflow to support their position IMHO, as I have mentioned previously.
One day does not a market make, but it seems like all of our MIM3 panels, breakouts and commentary about recession/deflation is upon us.
I still own my large cap stuff, but you can have beta. The consumer is dying a slow death - as Tony Dwyer said at MIM3 (quite correctly, but I am not sure why we are celebrating) DEFLATION/STAGFLATION.
Personally folks, it scares the you-know-what out of me. I am sticking with my large Treasury bet, and my bet on large cap value and growth stocks, not mega or small stocks, stays in place (again, thanks Tony Dwyer); but as a trade. The bid trade to me is a bet on lower rates and a bull steepener as we realize the consumer is tapped. Period.
Positions in Treasuries and large cap stocks
Stagflation - John Succo - 10:04 AM
The key to the stagflation theme is this chart in Kevin's Five Things this morning - PPI Finished Goods vs. Intermediate Goods. Companies are having more and more difficulty in passing on increased costs to end users as the over-capacity continues to act on margins.
Clearly, a very significant portion of earnings gains by companies, like HD this morning, have been driven by cost cutting. That seems to be failing as this chart illustrates.
Taking a look at the futures... - Jason Roney - 9:18 AM
The S&P futures are set to open higher by more than 0.75%. At MIM1, I outlined a few general rules for +0.75% or more opens. Here they are:
- The S&P closes higher roughly 85% of the time, trades negative less than 33% of the time and remains positive throughout the day more than half the time.
- At some point intraday, the index retraces 0.25% (roughly 3 points in today's terms) more than 77% of the time.
- But the most important historical fact comes from the action after the first hour. If the SP scores a new intraday pit session high after the first hour, the odds of a reversal diminish significantly and the probability of a higher close is more than 95%.
So those are the historical facts. What about recent action? It's no secret that over the past year, this market has been prone to the "gap n crap". In 2006, the SP futures have scored significant overnight gains and actually lost ground intraday. The last time the futures opened up more than .75% was May 23. The SP made high in the first hour (remember from above - the first hour action is key) and closed negative on the day.
What you need to know... - Jon Doctor J Najarian - 8:23 AM
Dell (DELL) Replaces 4.1 Million Batteries - Dell said it will issue free replacement batteries to the owners of 4.1 million notebook computers with batteries made by Sony (SNE) that were determined to be at risk of overheating and catching fire.
Wal-Mart (WMT) Earnings In Line, Revenue Light – Income was up 5% to $2.98 billion at $.72 per share, which matched Street estimates, but the revenue was light and missed our targets. The rev was $85.45 billion versus an estimated $86.24 billion. Our target was $86 billion.
Buffett Buys Stake in Sanofi (SNY) - Berkshire Hathaway (BRK) revealed that it has taken a 488,500 share stake in SNY. Shares of SNY closed at $48.70 at the end of June (when the filing was made) and they closed at $43.42 last night.
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