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Buzz Bits: Dow, Nasdaq Take a Dip


Your daily Buzz & Banter highlights...


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

Auntie Em, Auntie Em!!! - Todd Harrison - 3:57 PM

Well, it only took 9 hours and 47 minutes for my systems to work properly, just in time for...the close? Thy bell that tolls couldn't come fast enough as far as Hoofy is concerned as Turnaround Tuesday has been beaten with an ugly stick.

By now, you know the drill. From a macro standpoint, credit rating and mark-to-market concerns, coupled with fundamental slippage, trumped rate relaxation (although an equity rally would most certainly have highlighted that fact). From the inside out, day-to-day nuance stuff, the nosty breadth and piggie (downside) pokage was the tell, once again.

On that latter matter, and not to beat a dead critter, the BKX is dripping into the red zone, hanging onto ten month lows by the skin of its teeth. As go the piggies, so goes the poke as we say and while tomorrow is promised to no bear, the structural smoke shows no signs of abatement. That doesn't mean they can't rally, of course, it just begs the risk vs. reward question.

I'm gonna jump so I get this to ye faithful before the bell. Stay cool and don't let your P&L define your evening mood. I've been there and, truth be told, it's no way to churn through life.


Turning Around on Tuesday... - Jason Goepfert - 2:59 PM

Todd mentioned Turnaround Tuesdays earlier, and here's one reason why:

When the previous day was negative, buying at the close and holding for one day netted, by far, the most points on Tuesdays, using SPY since 1994. In fact, it doubled the points gained on any other day.

When the previous day was positive, the day that showed the worst performance the following day? Tuesday.

Here's the breakdown:

If the previous day was negative, then buying at the close and holding for one day, net points gained (lost):

Mon: +13
Tue: +33
Wed: +17
Thu: (8)
Fri: +17

If the previous day was positive, then buying at the close and holding for one day, net points gained (lost):

Mon: +37
Tue: (24)
Wed: +21
Thu: +27
Fri: (22)

Another interesting side fact - buying after a down day netted you 65% of buy-and-hold's return, and it doubled the return from buying after an up day. That highlights the mean reverting nature of the equity averages.

I'm Melting - Jeff Macke - 1:40 PM

Greetings from New Jersey where my plan to "exercise then head into the Ville" changed to "exercise then beg CNBC to let me film tonight's show from my living room" shortly after I went outside. Suffice it to say that by the middle of my run I was actually looking for a pit-bull to fight, just so I could cut things short guilt-free. You native east coasters do realize that you can't actually chew the air in other parts of the country, don't you?

In other news...
  • Retailers in general are getting slobber-knocked after Sears (SHLD) and Home Depot's (HD) warning parade. Sears added to the others' pain by blaming its miss on "the same problems being faced by other retailers".

    Of course, not many of the "other retailers" missed by 50%. Same Store Sales are coming this Thursday. It's not a Big month but we'll have a better idea if Sears has company then.

  • Regarding Chuck Prince and Mr. Practical's metaphorical bridge... you suppose this guy in Tacoma thought he was "dancing", too?

  • Does anyone know where I go to buy those scam "Carbon Credits"? I'm cranking the air condition up to 12 out here; so much so that I'm thinking of starting a crackling fire to take the chill out of my house. I just want to be sure I'm ok with Al Gore before I do.

    In the meantime, my man Admiral Bolling mentioned buying the utility dip a couple weeks back; still sounds like a good idea to me.

A Speech About Nothing - Kevin Depew - 1:31 PM

Seeing the bullet points roll by on Bloomberg and the wire services as Federal Reserve Chairman Ben Bernanke speaks, just wanted to note what traders should take away from his speech today, namely, nothing.

When Bernanke says inflation expectations are "imperfectly anchored" and that the inflation rate the Fed prefers "is not fully known by private agents,'' it is not a statement about what the FOMC will do next as media reports are implying. This is an academic speech advocating inflation targeting. It is not a statement on current Fed policy.

If you are interested in what the speech means, then read on, otherwise, ignore and go back to trading.

  • The content of Bernanke's speech today has nothing to do with current Fed policy, or especially changes to FOMC decisions in the near term, so as far as markets are concerned it is simply a meaningless academic speech.
  • The speech is simply a chance for Bernanke to make a case for explicit inflation-targeting as a framework for monetary policy.
  • Explicit inflation targeting is currently practiced by a number of central banks around the world, including the European Central Bank, Australia, Canada and New Zealand.
  • Inflation targeting sets specific numerical goals for inflation and a timetable for achieving those goals, and also places some constraints on what monetary policy a central bank can conduct.
  • Former Fed Chairman Alan Greenspan (as well as a number of current Fed members) has always been against inflation targeting.
  • This is what Greenspan means when he says he believes monetary policy should remain "flexible."
  • On the flip side, whenever Bernanke (or other members of the Fed) mentions central bank "credibility" he is making a veiled reference to the adoption of inflation-targeting by the Federal Reserve.
  • Similarly, his concern over "transparency" and inflation "anchors" are specifically expressions of his goal to move the Fed toward adopting inflation-targeting.

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