Buzz Bits: Dow, Nasdaq Close in the Green
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Last Call - Kevin Depew - 3:39 PM
As we put the finishing touches on another slow summer session, I wonder if most decided to stay at the beach an extra day. Makes sense. At least here near the city where the sun hasn't been out for more than a half hour in the past 10 days. I think I may be coming down with Seasonal Affective Disorder. No, that's probably just my pervasive sense of bearishness talking.
Any way you slice it, Hoofy comes out the winner with today's action. The PnF buy/sell signal breadth was lopsided in favor of bulls and even in the areas that lagged today - Utilities, Homies, Drugs, Consumer Staples - there was little in the way of technical damage. The best thing that Boo has going for him is the progression toward potential DeMark sell signals for the Dow and SPX.
Macro Musings from Stephanie Pomboy - MV Respect - 1:45 PM
Last week Bill Poole whined that there is 'too much emphasis' being placed on housing. Today, despite the sharpest drop in the OFHEO home price index in 26 years, he assures that he's 'not particularly concerned.'
Welcome to the Jawboning Phase of Fed policy, folks. Having completed 'tightening,' the Fed's task is now to sustain investor confidence at a time when the fundamentals are deteriorating…rapidly. Everybody just 'remain calm.' No reason to fret that the very foundation upon which our credit-hungry economy rests is crumbling before our eyes.
Sarcasm aside, the market action of the last two years clearly reveals that nudging around the Fed Funds Rate is an increasingly irrelevant exercise in a world where the vast majority of credit is created outside the banking system…and the appetite for risk is high. Today, the most powerful instrument in the Fed's monetary toolbox is its thesaurus. And they know it. If they can shape market expectations…maybe, just maybe, they can orchestrate an 'orderly' response to the deflation of the housing bubble. Yeah, right.
While such efforts are surely doomed to fail, hubris is the one quality the Fed possesses in spades. So, fittingly, we kick off the back to school season with a class in verbal communication skills. Frantically, the Fed will search out the perfect words to keep the market moving past the bubble debris… 'nothing to see here, folks'…
Eventually, of course, all their gentle cooing will be drowned-out by the chorus of downbeat CEOs. But until then, prepare for a full-on verbal assault...
Wow, so much for a quiet short week. - David Miller - 1:07 PM
- The news alert service I use starts blaring at 4am. By 11am I've been on one conference call, read a FDA panel briefing document, written three notes to clients, and answered about three dozen e-mails. Whew!
- I wrote on Friday about Genta (GNTA) and whether its 2006 ODAC panel would be the kind of tipping point its 2004 panel was. The panel meeting starts 8am ET tomorrow.
- Biotech is doing OK this morning despite Wall Street being caught leaning heavily the wrong way on yet another stock. Adolor (ADLR) reported unexpectedly mixed news from a Phase III program this morning. The stock is getting clobbered in typical biotech knee-jerk reaction. We were leaning lightly the same way as everyone else, but an early entry and call sales allowed us to exit with a nice profit for our model portfolio.
Position in GNTA
Poppa Drop? - Kevin Depew - 11:56 AM
Position in SPX
Walgreens Reports August Comps - Brian Gilmartin - 9:33 AM
Walgreens (WAG) reported August comps of 10.6% this morning, slightly better than the Briefing.com consensus of 9.3%.
All comps continued their recent positive trends, but the front-end comp of 6.3% was the pleasant surprise of the report. (See attached spreadsheet).
Front-end is the higher margin part of WAG's business, and a comp of 6.3%, not only portends well for concerns about consumer spending, but could help margins when WAG reports their August quarter in the next four weeks.
Pre-market WAG has pushed to an all-time high over $50. The stock is now overbought and has had a nice run since the May 9th market top.
Position in WAG
What do these folks see that everyone else is missing? - Bennet Sedacca - 9:01 AM
According to recent COT data from the CFTC (reported on Friday as of Tuesday's positions), commercial, smart money accounts are getting VERY short the 10 year future. Just take a look at this chart. I do not recall a time in the past 5 or 6 years that commercials have made this big of a bet in stocks OR bonds and have not been proven correct. And they are REALLY GETTING SHORT the 10 year in here. And they are selling mostly to the 'large specs'--mostly hedge funds, I would imagine.
Someone is going to be very right and someone is going to be seriously wrong. I tend to side with the hedgers as the 107-16 to 107-24 area in futures (see chart here) looks like a brick wall to me. And, despite having been in the real estate induced slowdown/recession camp, 10's don't have any value to my firm in here so we are content to sit in a large position in the 1 to 3 year area of the curve.
Lastly, these numbers are subject to significant change as there was enormous volume in the 10 year futures last week, despite being a lazy, hazy week on the Street. According to data we grabbed off of Bloomberg, it looks to us like the average volume reported last week from Mon-Thurs was around 145,000 contracts per day. This is in direct contrast to much lower volume the 30 days prior. Whether this is a simple rolling from September to December trade as December becomes the most liquid contract or something more directional is yet to be seen.
In any case, their position bears watching and makes me wonder what is it they see? As the dollar looks like it wants to roll over and gold feels like it has bottomed in the near-term, it seems they see some sort of re-acceleration in inflation from economic activity or a potential buyer's strike on the part of foreigners. Stay tuned.
Position in various Treasury notes
Crude Update - Adam Michael - 8:31 AM
Crude has now fallen about $10 dollars off its highs and should find some support in the $68 range as the old resistance (now support) and the 200 day moving average come into play. Unfortunately, commercials are still leaning on the short side and open interest remains near all-time highs.
See the chart here.
Crude can certainly bounce here and I would be surprised if it didn't at least try to rally some this week, but I would sure like to see commercials go net long again to increase my confidence level that a bottom is in place.
What you need to know... - Jon Doctor J Najarian - 8:04 AM
Chevron (CVX) Jack #2 Strike Could Yield 15 Billion Barrels - The well, 270 miles southwest of New Orleans and 28,000 feet below the surface could hold between 3 billion and as much as 15 billion barrels worth of oil and gas reserves. At 15 billion barrels, it would boost the nation's current reserves of 29.3 billion barrels by 50%, the report said.
Panasonic Notebook Battery Recall -Matsushita Electric Industrial said it has begun recalling 6,000 lithium-ion batteries used in Panasonic-brand notebook computers in on concerns they might overheat. These batteries were not made by Sony (SNE), whose faulty batteries were involved in far larger recalls by Dell (DELL) and Apple (AAPL) last month.
AirTran Launches Fare sale – To fight the light loads that many air carriers are facing, AirTran has launched a fare sale for tix purchased through September 19, 2006, and are good for travel through February 1, 2007. The fares do not require a roundtrip purchase or a Saturday night stay, but do require a 10-day advance purchase.
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