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Buzz on the Street: FOMC's Surprises on Expiration Week


Some of this week's most insightful and timely vibes.

All day and every day, some of the stock market's best and brightest traders and money managers share their ideas, insights and analysis in real-time on Minyanville's Buzz & Banter. Check out some of the best of the buzz and for those Minyans not currently subscribed, click here for a free two-week trial.

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Tuesday, February 16, 2010

Trader's Morning Blueprint
Kevin A. Tuttle

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Friday's trading gapped down the SPX to retest the ST downtrend but failed to change the technical picture.

The SPX still remains in a small bear flag.

If 1,080 can be breached it should send the sister toward the 1,092 gap and horizontal resistance at 1,104. This will most likely serve as formidable resistance for now.

Technical Setup for Today

Cliffs Natural Resources (CLF)

Potential Double Bottome with a handle


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60-min chart

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BA setting up for launch?
Smita Sadana

If you want to live a happy life, tie it to a goal, not to people or things.
–Albert Einstein

I had shared a potential long set up upon retracement, in Boeing (BA) a few days ago. It seems to me that BA still has the goal to accomplish!

In the first chart, notice that BA bounced off an important trendline support and is potentially running toward the Jan highs ($61.9).

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This level also serves as an important resistance zone. I like the price action going into this resistance but just like a space shuttle needs immense power to break the gravitational pull of the earth, similarly volume, to me, serves as a confirmation of any important breakout.

Click here to enlarge

Position in BA

Wednesday, February 17, 2010

Soros and that Bubble
Lance Lewis

As an update to my recent article, note that we had our question answered today as to whether Soros sold his Gold ETF(GLD) position in Q4 due to it being a "bubble."

In reality, it turns out that Soros more than doubled his position in GLD during Q4, which adds even more validity to my view that the "bubble" comment by Soros was taken totally out of context.

Rather than being a knock against gold, Soros was actually pointing out exactly what I have been suggesting for a long time, namely that when central banks around the world are printing money like they are now with interest rates near zero, it tends devalue paper money relative to all assets that are in shorter supply, with gold being the chief store of value against that "insidious process," otherwise known as "inflation".

Position in gold, gold stocks

What are those hedge fund managers thinking?
Peter Atwater

To guess why a fund manager purchases a specific stock is at best pure speculation, but from what I hear, there are two primary reasons managers are buying bank stocks.

One group seems to believe that the worst is in for the regional banks as far as loan loss reserve building is concerned and that during 2010 these banks will actually be able to release reserves.

Another group believes that serious inflation if not hyperinflation is all but inevitable and in that scenario banks represent a very levered bet.

My own view is that it is way too soon to call the top in credit losses, and as I have offered before the duration of a downturn is far more important than its depth. I also don't believe that smaller loan portfolios naturally translates to fewer loan losses. And a big reason loan portfolios are shrinking is because able borrowers are paying back their loans. For example, in January, Capital One's (COF) US credit card portfolio dropped at an annualized rate of almost 25% - 40% higher than in January 2009.

As far as inflation/hyperinflation, I don't see that happening yet. And I think debt aversion and low capacity utilization make it very difficult. This is not to say that it won't/can't in the future, but I do see it right away. My bigger immediate concern is deflation and its impact on asset values and in turn bank credit quality.

It's Not Easy Being Green
Jeffrey Cooper

The greenback is exploding today. Is the attempt to kick the Greece Can down the Street finding a road block?

Whatever the case, it is more than interesting that the dollar may have traced out an a b c correction over the last 7 days and if the dollar is in an impulsive move off the lows as opposed to a corrective move, then it is poised to begin a THIRD of a THIRD wave which is typically the fastest/sharpest move in the sequence.

This is occurring as the S&P is carving out a potential backtest and 50% Retrace.

Of course, stock bulls will describe the market as constructive today in the face of an exploding dollar, but the fact of the matter is that often there is a 'fuse' on correlations. For example, the Buck Stopped Here in December PRIOR to the stock market topping in January. So, drawing any conclusions from one day correlations or divergences may run out of color quickly with a price to pay.

Notable is today's outside up day in the dollar which may be a precursor to a Greek tragedy.

DXY 10 minute (left) and Daily (right) Charts

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Thursday, February 18, 2010

Don't even think of using that MasterCard!
David W. Weigman

Click here to enlarge

For those thinking MasterCard (MA) and VISA (V) are interchangeable, be forewarned: MA does not equal V.

Shares of MasterCard are trading below both important moving averages (the 65- and 140-day moving averages)

MA is a market stock, not a leader: it peaked with the S&P on January 19

After peaking around $270, the stock fell more than 50 points, or nearly 20% (V fell 11% from its peak)

While VISA bounced back 8 or 9%, MasterCard is only 3% off its January low

The chart of MA has an ugly downside gap that will likely provide stiff resistance on any rally attempt

The RSI is just not budging off the new lower lows that were set on that gap down and subsequent decline

Finally, MA has not yet even tested its uptrend line – which I think it will still do. MasterCard should probably be avoided for most investors at this level. Even if MA pulls back to its uptrend line, only the brave at heart should venture into this laggard. I would rather go with VISA at the right entry point as it is clearly the leader in the group.

Weekly TD Propulsion Up Exhaustion
Kevin Depew

The target mentioned earlier this week based on weekly TD Propulsion Up Exhaustion (1105.03) has now been met. Scaling down to the daily for other informative targets, note that the daily range projection high has also been broken so the expectations are for a close above the projected high (1103.30). Using SPX cash, TD Relative Retracement Up (.618) is 1109.98. 1114.78 is the TD Propulsion Up Momentum level; a rather large number of resistance levels between here and 1114, in other words.

Friday, February 19, 2010

Quick take on the Fed
Sean Udall

First, I may have to change my stance on being a net seller for the next couple weeks.

I think the Fed is doing this as much to help the Eurozone as a return to normalization. As we are still far far below any rate level that is normal and I would say immensely stimulative.

This echos back to my piece a couple weeks back where I outlined the fact that the Fed could raise rates 250 bps or so and still be in the zone of low rates during prior easing cycles. Currently, the market broadly discounts this but in the fullness of time this discount will unwind in a very meaningful way.

The most important tell will be the market reaction over 2-4 days. If we put on gains over that period of time, I'll certainly change my net seller tune as I think this will portend to higher stock prices earlier than I have anticipated.

Peter Atwater

When I was the Treasurer of Bank One, borrowing from the Discount Window at the Fed was about as public an admission of incompetence as there was. The Window was truly the lender of last resort and going there meant you did something wrong.

While all the pundits seem to be focused on the "tightening" message, I think the real message is the one from the Fed to the banks:

"We heard Congress loud and clear. No more Mr. Fed Nice Guy. You guys need to stand on your own."

At least for right now.

Shifting the burden of proof.
Rod David

Bears had everything they could want this morning in order to retake control. Like many others here, I noted the bullish consequences to bears not exploiting their setup.

Retesting overnight lows to some degree is all but required in this pattern. Rallying to new highs first reflects impatient buyers.

So, now the burden of proof has shifted to them. Their impatience may be well-deserved, but it makes them vulnerable nonetheless.

Closing above yesterday's S&P highs would be a bullish event. It would also require the confirmation of a higher close Monday, past the skewed influence of expiration.
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