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Buzz Bits: Dow Slips, Nasdaq Gains

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Your daily Buzz & Banter highlights...

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



Earnings Report - MV News

  • Hovnanian (HOV) reports 2Q EPS of ($0.49) vs. ($0.49) cons on revs of $1.11 bln vs. $1.13 bln cons.
  • Activision (ATVI) reports 4Q EPS of ($0.04) vs. ($0.03) cons on revs of $312.5 mln, may not be comparable to $218.5 mln cons.
  • J. Crew (JCG) reports 1Q EPS of $0.39 vs. $0.30 cons on revs of $297.3 mln vs. $270.4 mln cons.
  • Dell (DELL) reports 1Q EPS of $0.34 vs. 40.26 cons on revs of $14.6 bln vs. $13.93 bln cons.
  • Brocade (BRCD) reports 2Q EPS of $0.12 vs. $0.09 cons on revs of $345.3 mln vs. $345.36 mln cons.



We have an old saying in Delta House: don't get mad, get even. - Todd Harrison - 3:55 PM

I hear ya D-Day, it's flat and flatter as we edge our way to the closing fray. With a conscious nod to the metals (XAU +2.5% and at the fitty day) and trannies (getting railed), the mainstay proxies are huggin' the flat line. And yes, I left out the brokers on purpose as AG Edwards has heavily skewed the XBD (albeit right through resistance).

Given the recent acne, this morning's retest and the subsequent basing (above support), this action has to be considered healthy. There are both flies (the non-confirmation in the piggies) and unknowns in our midst (Beeks has a huge breakfast tomorrow) but hey, if there wasn't risk, they'd call it winning--not trading.

I am, for my part, light and tight and trading smaller than I historically have. It's part caution and part time management as I juggle a litany of Minyan initiatives. I've always laid my cards on the table and share this in that vein. I had a somewhat chilly April expiration and haven't played my normalized size since. Hey, there's nothing wrong with taking a step back at times, particularly when your attention is fragmented.

With that, and stickin' with the Animal House analogies, I'm calling for a road trip and heading to Penn Station. Baltimore and my brother await, along with a 24-hour schnitzel to the Dewey Cowboy Mouth show. Again, I've never heard this music but the purpose of this trip is vibe time with my only bro and quality time with the kids before they head to camp. Everything else, in my eyes, is pure gravy.

May peace be with you, Minyans, and I'll see you on the other side of our respite with fresh zest and lotsa rest.

R.P.


Tells of the Tape: "Sell Cleverness, Buy Wonder" - Jess Thompson - 11:19 AM

When a buy side order flow imbalance is in effect (as it has been for several weeks) one of my firm's guiding strategies is to press clients to monitor for support levels to add at low risk price levels instead of obsessing where and when the next top will occur because when the buy side (or sell side) is dominant, price tends to move to extremes beyond where we think price should go.

This strategy has psychological implications as well as technical. I tell clients (and myself) to try to resist being too clever -- that if we're obsessing over picking tops in a tight uptrend before the bids have broken, we won't be psychologically prepared to add longs on quick violent reactions, or be able to capitalize on the strong tendency for price extension and overreaction.

For the most part, retracements to bid lines continue to hold offering low risk entry levels to add longs as bids continue to support the market. Here are a couple of charts (QQQQ and XLF) illustrating that the buy side continues to be generally dominant

So as long as bids continue to hold in major indices and key sectors, the optimal tactic is go long wonderment, to continue to increase inventory on retracements to bid lines and offer part of that long inventory back out on strong days like today. The market, like all markets, will form a top and when that occurs bids will eventually break and sellers become dominant --- but that day has not come yet.

To paraphrase Rumi, "Sell Cleverness, Buy Wonder"


Rally Cap Randoms - Jeff Macke - 10:40 AM

  • Costco (COST) is grinding towards the upper 50's, an area that has represented a stopping point for any rallies in the shares for the last year or more. The company reported in-line numbers this morning, assuaging fears that higher gas prices would hurt earnings. The numbers weren't spectacular but expectations were low.

  • Sears et al (SHLD), on the other hand, has opened lower after missing estimates and blaming gas prices for creating a harder market for retailers. A curious assertion since it's questionable whether or not any SHLD executive has actually spoken to a customer since the company became a hedge fund.

  • Viral Marketing? Great stuff on last night's Fast Money from Admiral Bolling who pointed out that both A-Rod and his "Toronto Wife" were wearing TrueReligion (TRLG) jeans during their much publicized night on the town. TRLG shares are up over 15% since the pictures were published. It's unclear (but highly doubtful) that A-Rod had a David Wright-esque ownership share of TRLG in exchange for his promotional efforts.

  • Where on earth could you safely put new money to work in a tape at all-time, giddy-gas highs? I don't know either but I'm certainly looking as I come into a "liquidity event" related to my cross country move.

  • Tripping down memory lane, Minyan Collins asks what I think of J Crew (JCG) going into tonight's earnings. He notes that the chart looks good. I responded that I'd rather have the chart look weak into reporting... the high-flying retailers have been getting smacked after reporting, almost regardless of what they say. The Coldwater Creek (CWTR) model, where expectations were low, is much more appealing as a trade, from where I'm sitting.



Luna Ticks - Jeffrey Cooper - 9:11 AM

Rumors of the hike in the trading stamp fee by Chinese officials were prevalent on Tuesday. Consequently, the decline in China was not exactly a bolt out of the blue.

Expectations for a decline that would infect the US market were wide-spread and traders were poised for a sell off. So were trading desks, Boom Boom, and the President's Working Group (Miss Piggy). In other words, it was crowded trade in the face of unsurprised regulators and the staunchest of bulls, the horniest of Hoofy's. That doesn't mean that the hike couldn't have easily played out with downside follow through, I'm just sayin'... After all, the really crowded trade at the moment seems to be the corral of bulls.

Appropriately enough, emotionalism is spiking into Thursday's full moon.

Symptomatic of the frenzy, the bulls are flaunting the Fed's statement about a weaker economy, dismissing their fear of inflation and, based on their action, interpreting and demanding a rate cut.

As the bulls need lower rates and thereby a P/E multiple expansion, any revival of rate cut hopes unleashes buy programs. No matter what the bulls say, this shows their nervousness about current valuations. In order to justify their narrative, they still cling to expansion in multiples. A rate cut may or may not come but if it does, it is doubtful stocks will benefit because of a hard landing. It is important to remember that every housing downturn has ended in a hard landing and this is a serious housing downturn.

Hey, nobody said we had to understand denial in order to profit from it.

I think the majority of traders were surprised by Wednesday's action. I think many traders, thinking a second shoe would drop, shorted into the market on the first bounce; at least I know I did.

The surprise? The second shoe was a boot in Boo's butt. If world markets don't follow through on the reversal in the U.S. and/or China happens to see a second day of selling, it should cool Hoofy's heels. The first hour should be the key. I am thinking that we will get either another big runaway day or a complete retracement of Wednesday's move, nothing in between these luna ticks.

No positions in stocks mentioned.

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