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Buzz Bits: Dow, Nasdaq Take a Spill


Your daily Buzz & Banter highlights...

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

"I don't wanna puke!" -Marie Johnson Kimble - Todd Harrison - 3:35 PM

I hear ya, missy---they sure do hate those cans today! As the tape jerks lower, there seems to be alotta pain in today's drain. Talking to my bovine buddies, I almost forgot that the S&P is a mere 2.5% away from fresh highs. 2.5%. Heck, that's a stiff lift.

Context is everything and perspective is key, both in trading and in life. Indeed, looking at the S&P an udder way, we've simply seeped back into the previous range of S&P 1490-1540. It just seems more violent as psychology had shifted as a function of the perceived acne.

Yeah, 2.5% off the highs--it's really not that bad. What is worrisome, however, is something we've been all over like a cheap (law) suit. I don't think I've gotta say it again but, well, I will. The financials. They are the purest encapsulation of the finance-based economy, the largest weighting in the S&P and the holder of all things smoky. So when E.F. Hutton---or Citi (C), or Goldman (GS), or Bear Stearns (BSC)---speaks, we best be listening.

For my part, I'm still trading around my short bias and will exit the session with 2/3 of my S&P puts. I sold a snippet into the opening swoon and another schnitzel into S&P 1520. Why? I wanted to book some, Dano, and my stop (S&P 1540) was fading in the rear-view. I'm rolling down my stop on the leaves to above the 50-day (1521), so you know, just to tighten up and trade with a credit.

It's been a while, I know, but even a broken clock is right twice a day.

Fare ye well into the bell, Minyans, and trade smart. The definition of an investment should never be a trade gone awry.


Position in S&P

10-Year Update - Bennet Sedacca - 2:00 PM

The 10-year has bounced a bit as corporates and credit get re-priced a bit.

It seems to me, given this chart, that an awful lot of energy has been spent on a not-so-great move.

Click here to enlarge.

Again, this is secular bear market behavior. The MACD is getting a bit overbought as we enter resistance.

So I will lean a little harder on LQD and IEF in here with defined risk of the downward sloping trend line.

We are also entering a not-so-great time of year for bonds (until November) and mutual fund managers are "long their bogey" and have little cash.

Position in LQD and IEF

Lots to note, folks... - Jeffrey Cooper - 12:58 PM

The S&P is coming up on what, for me, is the Maginot line in the Bull/Bear battle: 1521.

The S&P satisfied the requirement of an incremental new high by the slightest of margins but it did do the nasty deed, much like the undercut in October '02 of the July '02 low.

Hmmm... Aren't we 60 months out from that turning point? A mirror image fold back could see a quick 20-25% waterfall.

Do you know of anyone expecting that?

Would that put in a handle of a big picture cup and handle for the brave new leg up to new highs in the new Global Growth Paradigm?

Trading back below the June 1 S&P high and staying there put the defense team back on the field. For example, I mentioned Affiliated Managers Group (AMG) last week -- back below the old high put it in a weak position.

False breakouts may be buying climaxes. Breakouts, if there is no follow-through, can lead to fast moves in the opposite direction.

Take a look at the spike on CF Industries Holdings (CF), an Expansion Breakout and a Volume Expansion Breakout Signal. CF is trading back below that July 13 bar, which puts it in a weak position. See the daily chart here.

Position in CF

Drilling Down - Ryan Krueger - 10:46 AM

Conspicuously flickering red on my screens yesterday, next to the big deal between Globalsantafe (GSF) and Transocean (RIG) (now the ultimate deepwater global set of rigs), sat a group of land-based drilling and natural gas producers greeting the monster deal in a monster tape with down days. Refiners were flat to down as well.

As I buzzed earlier this month, I think domestic consumption of gasoline and natural gas is much weaker than many analysts suggest. Unlike crude oil, this is a slowing U.S. consumption story that may be disguised inside the overall energy markets. From my perch, there is a big difference between a global trade that is secular and domestic trade that is more cyclical. I have paired trades accordingly.

Overall, as Toddo reminded Minyans yesterday with a terrific dose of perspective, the market still under-owns energy equities compared to where both he and I happen to think we are headed. When I triple-weighted Energy at my firm, it represented 6% of the S&P 500. It has now "soared" to 11.4. In 1980, you may recall it took up 28% of the index. Underneath a lot of noise and some tremendous trading opportunities in both directions, I still happen to think we are in the middle of a multi-year move. New owners are bidding for shares that just shrank again, just a bit, yesterday.
No positions in stocks mentioned.

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