Buzz Bits: Dow, Nasdaq Climb Higher
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Toothpick Buzz - Todd Harrison - 3:49 PM
- Man, if "pre-Wednesday" is supposed to be the busy side of the week, Magda's gonna need some help getting to Labor Day.
- In like a lamb, out like a chop? The bears are making some noise as we trickle towards the close. S&P 1300 is an obvious level and, as it stands, I've still got my bear costume on (two legs, 50% conviction on the short side).
- Over on the "other" technical inflection point, CRB 330 is (thus far) overhead as we settle in to settle down. Keep in mind that many of the underlying commodities have already closed.
- Given the action, perhaps this should be today's market anthem?
- It's nice to see Minyans taking some time to help the Special Olympics. It just goes to show you, a little love can go a mighty long way.
- The mainstream media is resolute on their bent that higher oil is "bad" and lower crude would be "good." I'll humbly offer the other side of that ride on Wednesday afternoon proving, once and for all, that I've got a face for radio.
- Fare ye well into the bell, Minyans, and thanks for coming to play today.
Sellers conserving their energy, buyers aren't. - Rod David 1:54 PM
Today's opening loss repeated the success of Friday's close, holding SPX 1294 (ESu 1296'50) as support, to avoid signaling that sellers were making a serious attempt at trending. S&Ps reversed up and rallied 9 points into noon.
But simply absorbing sellers wasn't enough to prove that buyers were making their own serious trending attempt; the open needed to gap above Thursday and Friday's highs. And failing that, any serious effort needed to be above prior highs by the 10:15am ET opening sequence exit; this morning's higher highs began 10 minutes too late.
It's still just noise within the range. Admittedly, it's the upper-end of the range - in fact, S&Ps are above prior cash session highs, within a point of the week-old futures contract high.
None of which precludes yet higher highs. But while last week's sellers barely tested any critical levels intraday, today's buyers are wearing their hearts on their sleeves. They're vulnerable, and reversing today's post-open gains would be fatal to the rally from June's lows.
Bullets Over Broadway - Jason Roney - 12:29 PM
Some bullets for the week:
- Since the inception of S&P futures, there have been 5 years in which the S&P finished higher for the month of July and August. In each year, the S&P finished September in the red by -1% or worse.
- There's no bias to the September payrolls report (close to 50/50).
- What if the first day of September occurs on payroll Friday? This happened three times since the inception of S&P futures and the S&P and bond futures closed higher each time.
- The German DAX closes higher 73.33% of the time on labor day by an average +0.43%.
It's only a flesh wound. - Kevin Depew - 11:57 AM
Natural gas down 10%? No big deal. Weather-related. Crude off 2.3%? Slick! Silver down 2.5%? Just a correction. Sugar down another 1.4%? Sweet! Grains down nearly 10% across the board? Oh wait, that was over a week ago.
The suggestion of the day is that the commodities correction is almost all energy-related as a result of pre-weather bidding last week. This, of course, conveniently ignores the fact that commodities virtually across the board have been selling off in recent weeks. The CRB Index peaked in May - more than three months ago.
No one has really talked much yet about what a secular trend change for commodities combined with a housing slowdown - not a collapse, just a slowdown- means for U.S. economic conditions. I have a hard time assembling a positive scenario from those puzzle pieces.
If a picture tells a thousand words, then this chart says 10,000! - Bennet Sedacca - 9:35 AM
It is a chart of the net position of smart money hedgers in the 10 year treasury note futures - see it here. And they are getting short. Real short as you can see. This is occurring as the number of contracts outstanding keeps rising. I am sure you see the spike up in longs last year and that was immediately greeted with a rally. So yes, they ARE smart.
It also fits well with the sell signal Pepe was talking about the other day on the Buzz. My firm doesn't find much value in 10's either, as we have been saying, but maybe we are just cheapskates?
What is interesting is that the hedgers remain net long 30 year contracts in pretty good size. See that chart here.
Position in various Treasuries
Brokerage Stocks - Brian Gilmartin - 9:10 AM
This weekend's Barron's article will no doubt lead to a little weakness in the sector this morning, but I'd caution interested parties that the group looks to be in good shape technically, having bottomed on June 13th, and from looking at the attached chart appears to be consolidating between its April high and June lows.
With the equity market correction ending in mid-June, the brunt of the correction was included in the broker's May quarter, and Treasuries have had a favorable market tailwind since early July.
In addition, according to Thomson Financial's market week report, August, 2006 stands as the best ever August for investment grade bond issuance, with $12 bln in high grade corporate pricing. Also, per the same report, the 22 August IPO's were the heaviest since last May's 35. (The investment grade bond issuance will benefit Lehman Brothers (LEH) and Bear Stearns (BSC) somewhat more than the other firms, given their fixed-income tilt.) M&A activity has slowed which is why we are seeing estimate reductions for Goldman (GS). August's $51 bln in M&A activity month to date, is below April's low of $59 bln, per Thomson.
Finally, the valuations are pretty reasonable for the white shoe-brokers, since both Goldman and Lehman, our two biggest brokerage positions trade around 10(x) - 12(x) 4Q trailing earnings.
Goldman, Lehman, Bear Stearns and Morgan Stanley will all report quarterly earnings sometime between Sept 15th-Sept 30th.
Positions in GS, LEH, SCHW
What you need to know... - Jon Doctor J Najarian - 8:12 AM
Gas Prices Tumble! Yes!! That's not a mirage, the prices of gas, all grades have dropped dramatically over the past two weeks, falling 15 cents a gallon according to the Lundberg Survey of 7,000 gas stations across the country.
Kinder Morgan (KMI) Bought For $22 Billion – 3 months ago, Richard Kinder made public his intension to buy the company that bore his name and today, he's made that a reality. Together with the Carlyle Group, AIG and GS Capital Partners he's paying $107.50 for KMI and assuming $7 billion in debt for the pipeline giant.
Wal-Mart (WMT) Sales At High-End of Projections - Same-store sales at the world's largest retailer rose about 2.7% in August. WMT had predicted a sales gain of 1% to 3% for its August period, which extended from July 29 through Aug. 25.
Position in WMT
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