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Buzz on the Street: S&P Climbs Wall of Worry


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.

Note: Some links may require Buzz subscriptions.

Monday, March 1, 2010

Relatively speaking....
Smita Sadana

In a display of good relative strength, Russell is enticingly close to its Jan highs, and compared to other major indexes, quite far above its 50-day SMA.

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And Dow Transports are also among the best relative performers on my screen.

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If the Jan highs can be taken out on a closing basis, that should bode well for the market's internal health. It's important however to remember that there is often 'a scuffle' in the vicinity of recent highs, so we are at an interesting juncture in the markets.

Position in Russell

Falling Dollar, Buoyant Equities
Michael Paulenoff

While the e-mini S&P 500 appears to be consolidating at the top of its upmove from last Thursday's pivot low at 1084.59, the DXY (cash dollar index) is in the process of giving back most of its upmove from earlier today. As of this moment, the combination of a falling dollar and buoyant equity indices argues for continued upside in the commodity-related names and indices into the closing bell – especially in the metals and mining names, including ETFs such as the GDX and GLD.

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Tuesday, March 2, 2010

Jungle boogie
Jeffrey Cooper

Turn the chart of Amazon (AMZN) upside down and tell me you would want to be short?

See daily chart with 50 dma below.

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AMZN exploded out of a line formation yesterday tuning its Monthly Swing Chart up in the process on trade over the Feb high.

At the same time it offset the stab down from Feb 1, the high of which was 124.86 with a low of 113.82.

In hindsight, that low was a short term climax low. AMZN never went lower, although it certainly never did much from that point other that a sideways slither.

That snaking action looked like a bear flag. But yesterday the flag was thrown on the bears and a violation was called.

Drilling up to the weekly chart (seen below) was the tip off to the bullish resolution: notable was the double down inside pattern on the weeklies on the week ending 2/19. A bullish 'crouch' pattern.

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AMZN looks like it has eyes for a minimum of 130 which is approximately half the range of the December/February decline.

An early op-ex squeeze to the 130 strike?

Yesterday I traded AMZN from the long side. I entered the position as a day trade selling ½ on a big pop and the balance near the close.

After the dust had settled with the benefit of looking at the big picture AMZN it became apparent AMZN was ripe to extend.

When a stock validates itself by trading away, it is not a sin to pay up and pay higher than where you sold. The stock after all doesn't know where you got in or out.

Position in AMZN

GS- Daring to dream?
Smita Sadana

Look at a stone cutter hammering away at his rock, perhaps a hundred times without as much as a crack showing in it. Yet at the hundred-and-first blow it will split in two, and I know it was not the last blow that did it, but all that had gone before.
~Jacob A. Riis

Goldman Sachs (GS) has a well-defined resistance zone between $158 and $161 that it is attempting to crack with higher lows. That is usually an optimistic sign, especially if it is accompanied by robust volume.

If it does manage to breach this line in the sand, the first target might be at the 200-day SMA ($163) and the second will be at the downtrend line, just around 169.

As I often say, keep your friends close but keep your stops closer! In this case a breach of 20-day SMA at 155 should work as a decent stop.

Click to enlarge

Position in GS

Wednesday, March 3, 2010

Technical Setup for Today
Kevin A. Tuttle

International Flavors and Fragrances (IFF) (Potential Long)

Traders may want to look for long entries through yesterday's high at $42.85 and the horizontal resistance.

Look to potentially add to the position through the $43.00 whole number


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60 min

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Thursday, March 4, 2010

Provenge data excellent
David Miller

Late yesterday, Dendreon (DNDN) released part of the data that will be presented Friday at the ASCO GU conference in San Francisco. These are updated data on Provenge, the company's drug for prostate cancer. The bottom line is the data got better with age, which is one more positive for the story. It makes even more likely the FDA approves Provenge on or before the May 1 response date. Dendreon was up almost $2 after hours on the news.

Sanofi Aventis (SNY) released news on their new chemotherapy drug cabazitaxel, with data to be presented at the same meeting. Their trial was in third-line prostate cancer, a different patient population than Provenge. They showed a nice survival advantage, which had never been done before in this third-line population. Side effects were heavy, typical of most chemotherapies. Sanofi indicated they will file for approval later in 2010. They hope this drug will replace their blockbuster Taxotere, whose first patent expires in May. It's worth noting Sanofi hopes to take cabazitaxel into earlier-stage prostate cancer. Its harsh side effect profile means it won't be competitive with Provenge.

Position in DNDN

Gold Rush?
Jeffrey Cooper

Since 1979, there are more turning points historically in gold in February and March than any other months.

Drilling down, the shorter term cycles suggest a turning point in gold into March 5th and a another on March 12th.

If March 5th is a low, a rally from the 5th to the 12th could be the best of the month.

If gold spikes into Friday, the set up may be reversed.

Note the triple tops on Agnico Eagle Mines (AEM) near 61 and yesterday's tail.

A pullback here could pull the rubberband back mustering strength for an attack and extension above 61.

See daily below.

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Jon Markman

I don't want to really scare you, but in the interest of full disclosure I do want you to know that some top hedge funds that I talk with believe that the market is setting up right now much as it did in early October 1987, just before the largest single-day crash in the post-Depression era.

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If you look at the chart above of the S&P 500 in the fall of 1987 above, their view is that we are currently at the equivalent of around Oct. 3. You'll have to use your imagination now, but the idea is that the August top equates to the recent January top. The decline to the 100-day average in September is the equivalent of the recent decline to the 200-day average in early February. The advance to the lower high in October is equivalent to the recent advance to 1,123 on Wednesday.

Now these managers think the next set of steps would be a sharp decline on Thursday or Friday, a series of 0.5% to 1% single-day declines next week, followed by a plunge, let's say, next Friday and a crash around March 15.

I gather that some big players are betting on this to happen, and the idea is making the rounds of prop trading desks. The adherents say that there are many fundamental, structural and economic factors today that parallel those seen in 1987 -- not just the chart analog. These include legislation that could cause investors to dramatically lower their estimates of stock values, a lack of liquidity, a sense of overvaluation after a steady recent advance, revelations of a massive budget deficit, an expectations of a sharp fall in the value of the dollar and an expectation of higher interest rates.

Anything is possible, though for now I wouldn't give this scenario more than a 40% chance of playing out. Valuations are not extreme, interest rates are low, sentiment is still largely poor and governments are much more highly attuned to, and experienced in, dealing quickly with markets that threaten to unravel.

Minyan Mailbag: 1987
Jeffrey Cooper

Professor Cooper,

Jon Markman made some interesting comments about 1987 in his Buzz from this morning. I'm wondering what you think of this argument?

-Minyan LC


I have been looking at this analogue since early Feb. I have written two pieces about it one this week and the other a few weeks ago for my subscribers.

There was a 28 trading day count which defined the retracement high after the initial sell-off in 1987 prior to the rollover which picked up speed like a snowball from hell eventually. Ditto 1929. The same analogue played out then with the crash window occurring in what is called the Gann Death Zone 49 to 55 days high and sometimes the climatic low occurring just outside that window.

Oct 19, 1987 approximates March 15th this year. 3/15 happens to be a new moon that ties to other more esoteric cycles, the new moon often acting as a triggering mechanism.

While the crash from 1929 and 1987 came from lower highs after record highs if the current waterfall set up resolves the same way is it more bearish potentially because it would be occurring substantially below record highs in both time and price?

Is it more bearish that the pattern may be playing out at a 50% retrace of the prior bear market OR if the pattern plays out does it mean the shakeout will have less amplitude due to the fact that the market is not perched just off a record high?

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With Regards,

Friday, March 5, 2010

Fil Zucchi

I mentioned General Moly (GMO) a few months back as a back-door play on China's nuclear power plant development. Today GMO announced a huge deal with a subsidiary of the Chinese government. You can read about the details, but the bottom line is that the Chinese bought 25% of GMO for a 100% premium to yesterday's price; and that may only be the beginning of the story.

Over the next few days analysts will slice and dice their models and tell us where we can rightfully expect the stock to go (tic!!). I suggest Minyans do their own math and look at the big picture on this one, because because by NOT ADDING to my position today, I think I am gonna dearly regret it.

Position in GMO

Seeing Both Sides
Quint Tatro

Bulls like…

  • Jobs, jobs, jobs, no not Steve, well ya him too, but you know.
  • SPY back above weekly 10 MA
  • New highs 9-1 over new lows
  • The taste of bear jerky, dried and cured.

Bears like…

  • Cocky bulls, but that's getting old, in that 'denial' sort of way.
  • Less than inspiring volume for the week as a whole.
  • Nat Gas ETF (UNG) red -- ya, we know its red every day but still, give the fury guys something to hang onto.

There is no doubt that the bulls ran the table this week, and I tip my hat to those traders who made it thru the early days this week without over trading from boredom. I flipped my retail (XRT) into some Novagold (NG) and am eyeing many other miners for moves over their day highs. If this bullish run is to be sustained, we will see multi year breakouts from all the indices, and that will be my confirmation that this run has legs. Until then, I will wade into the shallow end and be ready to swim or sunbath.

Position in NG

Vacation Buzzin'
Sean Udall

Hello Minyans, from the poolside in Puerta Vallarta. I had a chance to glance at some ticks and noticed Apple (AAPL) up huge on the day making a new high.

The Wall Street Journal reports that it's scheduled to release the iPad on April 3rd, slightly later than expected. So it's really up on no news at all which make the best kinds of rallies.

As I've said, this could be AAPL's biggest product yet. The company is simply extending the iPhone platform and the reach is simply huge. People will simply yearn for the iPad.

As for Ciena (CIEN), the report looked great to me due to the fact that revenues are ramping so quickly. Recognition issues are noise, and I like the guide given the next quarter usually has very heavy seasonality and it's obvious the company is sandbagging the numbers just like most other top firms in tech now.

See Qualcomm (QCOM) as a case in point. They already announced a guidance bump this early in the quarter.

The first stock I'm buying when I get back is QCOM. Have a great weekend everybody!

Position in AAPL, CIEN, QCOM

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