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Buzz Bits: Dow and Naz both close higher going into the weekend.


Your daily buzz highlights...


Editor's Note: This is a small sample of the content available on the Buzz and Banter.


Bell Buzz- Toddo- 3:29 PM

  • With all the bullish bullets in media circles, I can't help but wonder if this is a May redeux. I'm not making radical bets--other than on volatility, a battle I will lose in 36 minutes but a war I'm willing to wage.
  • I mean, they feel great but it "feels" like its taken a lot to get to this spot, right? A 20% spill in oil (still viewed as a positive in 99% of financial circles), good broker earnings, upticks, albeit marginal, in presidential approval ratings. And now, like then, stochastics are gettin toppy.
  • The ursine caveat? All eyes will soon shift to year-end and with that comes performance anxiety, the intangible metric. Joy, intangible metrics! 'Cause the tangible ones---fundies, technicals, structural--are a lay-up on the assimilation front!
  • Hmm, Monday is a snoozer according to the MV editorial squad. I wonder if they'd miss me if I played hooky. I won't--and don't--but the thought of a three day weekend (two to do 'stuff', one to watch football) sure sounds nice to these tired ol' bones.
  • I'm gonna chew through my plate of 'to do's', focus on the funerals, grab a quick meld with MV Events (to discuss Minyans in Manhattan), do a 4pm radio 'view, snag a 5pm haircut (I get charged by the follicle), grab Sarah (my lonely car) and head to Queens with the Queen for a family dinner. Hey, maybe I'll run into Prince Akeem while I'm there!

Have a fantastic weekend, Minyans---you deserve it.


Would it be possible for you to tell me if there is a Samantha Baker there and if so may I converse with her briefly? - Toddo - 2:49

The perky tape continues to flirt like a teenage crush, eyeing the multiyear highs in the S&P as the final closing bell of the week approaches. As I step to my turret between calls and melds, a few distinct questions come to mind. For instance...

  • The homies have been slithering sideways between HGX 190 and 217 for over three months. While they've been cut in half since the summer of 2005, is this "churning" (as they work off the oversold condition) or the akin to the Nazz in 2003?
  • We've spoken about the commodity cruch since they took out the five year trendline at CRB 330ish. Given that equites have yet to follow the asset class deflation theme, will Rotation Station (back to these beaten down sectors) or upside migration (with technical affirmation) greet the seemingly inevitiable Snapper in this space?
  • Just how much of this week's move is a function of the negative gamma in the marketplace (as a function of expiration) and is that ever known without the benefit of hindsight?
  • LL Cool J, RUN-DMC, Biggie, Tupac or Snoop?


Positions in metals, energy and financials


Pin Jamming - Adam Warner - 1:36 PM

Pin forces are just one factor on a stock. One factor often swamped by other factors. In the absense of anything else driving a stock, the pin Tracter Beam may dominate the day.

Or it may not. It's just something that's out there.

A lot of the sharper chartists take expiration day off, I assume because these pin forces can mess around with the risk/reward setup. And I would totally agree with that line of thinking. But beyond that, I just don't see it as that big of a deal.

Tomayto, tomahto... - David Miller - 1:10 PM

  • So now some Republicans want to halt Dr. von Eschenbach's nomination. It is time to handle the FDA Commissioner position the same way we handle the head of the FOMC. If you want to change the way drugs are approved, pass a bill.
  • Fulcrum day: The day formerly known as a tipping point
  • Back in the day when I was doing technical analysis trading, I used to take the last three days of expiration week off. There really was no point as the equity charts were usually trumped by the options players.
  • Make sure you read John Succo's article about short interest from yesterday. I'm not sure I agree 100%, but smart people always want to know the other side of the trade.
  • Was there any cooler album for the Class of 1985 than Purple Rain? (That's a rhetorical question, in case you are wondering.)

I'm calling the whole thing off early. After my Vail adventures, I think I've decided on a full suspension mountain bike. A local bike shop is having a sale on the GT model I have my eye on, so I'm going to go shopping to see if they have my size (and a more reasonable sticker price).

Reducing equity exposure to underweight. - Bennet Sedacca - 11:42 AM

While all of the stars haven't aligned perfectly, they are beginning to. As you may know, my firm has called ourselves 'invested bears'. Well, we still are but now to a much lesser extent in selling much of our IVW (large cap ETF) position at the yearly highs.

Can the market go higher? Of course it can. To me, the risk/reward ratio is simply deteriorating to the extent that the downside risk now feels much greater than the upside potential.

I would note the following:

  • Sentiment is now heading towards 'extreme optimism'.
  • The seasonal pattern that everyone was positioned for and got wiped out with is now the pain trade but in reverse. In other words, people have seemingly given up hope on the
  • September low theory.
  • We think this pushes seasonality out to the future once everyone closes out the losing positions
  • Inflationary forces are being replaced with deflationary forces.
  • Valuations are silly again.

Volatility at ridiculous levels.

Etc etc etc etc etc. I could ramble on for 5 pages but will resist the temptation.

Lastly I will note that sentiment towards gold and oil are heading for extremes too. So we will add to our GLD position as a deflationary hedge.

Lastly, buy low sell high! What the market knows is not worth knowing and of course, sell when you can not when you have to! I hope that sums it up. Not advice, just what what we see.

Position in GLD and IVW
Hit Me with Your Best Shot - Ryan Krueger - 11:22 AM

Thanks for the notes wondering where I have been. You wouldn't believe the answer unless it was the truth. I have been busy on the other side of a trade that is universally opposed to my notion. I'll scribble an article this weekend explaining the whole sordid story. I Un-Vailed a hint recently, but had absolutely no idea I would be personally involved. It took me away for a bit, but it's good to be back. In my absence I wondered about a few things…Anybody wanna take a shot at the answers – send me an email, first prize is a shout out in the Buzz, second prize is a set of steak knives, third prize is you get to read my answers in a few hours.

I spent some "alone time" with the S&P 1500 this week, slicing it thinner than my barber's #2. What do you guess the top 20 year-to-date performers have in common?(again)

How many petrochemical engineers graduated from U.S. Universities last year?

What did Harrison's Raiders' new offensive coordinator say during his interview to get the job?

While the world has focused on the price of crude the past few years, how has the rally in the price of uranium compared?

The CME now trades housing futures, what is this market calling for one year from now from the top 10 metropolitan areas on average? And do you notice any Texas-sized mistakes?

Does anyone know what trade Greg "Catman" Good just helped me with?

Back in a few with the answers…

Huge - Kevin Depew - 10:58 AM

Just wanted to point out a couple of things as the giddiness continues.

1) The Russell 2000 is underperforming the S&P 500 this morning.
2) The Dow is almost at the same level it was on May 10, and a DeMark TD-Sequential sell signal is registering. Same for S&P 500.
3) On May 10 the Dow closed at 11,642. The SPX closed at 1322.

Sure feels like it's been a long, hard road between then and now, no?

Positions in RUT/SPX equivalents

Basic Materials Earnings Growth - Brian Gilmartin - 9:31 AM

According to First Call's "This week in Earnings" (which was actually released last Friday, but I'm just getting around to digesting it) the estimated 3Q '06 earnings for the S&P 500 is 14.4%, marking the 13th consecutive quarter of double-digit earnings growth for the S&P 500, the longest streak of consecutive double-digit eps growth for the large-cap benchmark since the period from Q4 '92 - Q4 '95.

This stat is pretty well known, but what I found interesting while reading the report this week is that "basic materials", of which about 15% is precious metals, is now the S&P 500 sector with the fastest year-over-year earnings growth, surpassing energy's streak. (In q2 '06 energy grew at 41% y/y growth rate, while basic materials grew at a 23% rate.) Basic materials which is only about 3% of the S&P 500 by earnings weight and market cap, is expecting 47% y/y earnings growth in the 3rd quarter.

The healthcare sector is expecting just 2% y/y growth in Q3 '06, the lowest rate of y/y growth amongst all the sectors.

My firm uses this top-down data to aid in our sector weightings and portfolio construction within client portfolios.

Positions in S&P 500 index fund, NEM, PAAS


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