Buzz of the Street: Sentiment Fizzles After Good Earnings
Some of this week's most insightful and timely vibes.
Note: Some links may require Buzz subscriptions.
Monday, October 19 2009
Russia Shortsightedness Last year
By Vitaliy Katsenelson
Russia shot itself in a foot last year when in dispute with Ukraine, it shut off natural gas supplies to Europe. That experienced was very unpleasant for Europe and underlined its dependence on a single nation.
Now it is paying the price for it for its shortsightedness. Germany was going to phase out use of nuclear power plants by 2022. Nuclear power is a source of 23% of German electricity. However, Chancellor Merkel promised to extend the use of nuclear power. Though you won't find this in an official announcement, you'll have to read between the lines, Germany doesn't want to be held hostage by Russia. Unfortunately Russia will be paying the price for last year's actions for a long, long time as more European nations will be looking for different (more stable) suppliers of natural gas and for alternative energy sources.
Leadership's Lagging Indicator
By Rod David
Following-up on this morning's comments... S&P is now resolving the unfinished business that I had noted. The NDX is being dragged along for the ride, underperforming all the way. Nothing surprising.
Of interest now is that the Dow is outperforming both the S&P and the NDX. This 30-component average is presumably the bluest of blue chips. It is where bullish money goes when it has reservations, but it's still bullish.
The NDX is starting to lag the S&P which was already warned that the next high would be in tenuous. This new relationship at the next high is confirmation.
This isn't in itself a sell signal, and there's still some room above. But the evidence of toppiness is mounting.
Tuesday, October 20, 2009
By Smita Sadana
Prof. Rife's musings are so in line with my Weekend Updates. Here's a short excerpt from this weekend's piece.
"The S&P500 has now gained 60% since the March low. It is important to pause and revisit where we stand in terms of meeting some of our intermediate-term objectives for the index which we have repeatedly articulated since August. Here is an updated chart:
Click to enlarge
This chart shows that we have made significant progress towards the trendline resistance which converges with the 3rd Fibonacci retracement level around the 1120 level, since the last time we showed this chart. This level continues to be the one to watch, so see if any signs of internal weakness materialize close to that level. In all fairness, we are in the vicinity of this level already (as the index peaked at 1096.6).
The primary trend does not show any signs of weakness, but I am starting to see some early signs that this rally is getting tired. A few divergences are starting to crop up again, and in the past, these have resulted in a quick, sharp correction, after which the market has continued its advance.
The percent of stocks above their 40-day moving average as well as the McClellan Summation Index are starting to show negative divergences from the market trend and have been unable to confirm the new highs in the S&P500 index. This indicates that the rally is getting narrower, which is often a precursor to additional selling pressure.
While I remain cautious on the short-term trend and are on the lookout for any additional signs of near-term weakness, I need to emphasize that the intermediate term trend of the market remains up, unchanged from last week."
And on an unrelated note, just when you thought nothing interesting happened in our world of technical analysis, I wanted to share information about a special auction taking place on eBay (EBAY). Several world-class technical analysts are putting themselves up for auction. I was invited to participate in this auction as well and the entire proceeds from the auction go for education.
Granny Smith, I Presume?
By Todd Harrison
This is one wild ride, eh? If I told you that Caterpillar (CAT) and Apple (AAPL) would blow out earnings--and both stocks would react to the upside--what would your take on the tape have been? Similar to what one would have said on the heels of Google (GOOG), I would imagine (although as I was traversing through multiple airports at the time, I can only offer that thought with the benefit of hindsight).
A quick little anecdote, consistent with my A.D.D.-ness...
A member of my family bought Apple at $94 and has enjoyed the reverse Newton ever since. As we were talking about life earlier today, he told me he didn't want to sell because the Tablet is coming and "it's gonna be sick."
After the obligatory "awesome trade cookie," I reminded him that stocks are a leading indicator and reflect what will be, not what was. I also suggested he toss a $10 trailing stop on his position so he can participate on the upside while defining his risk. Either that, I said, or take the trade as "nobody ever went poor ringing the register."
Some other, random vibes as we edge toward the Hump:
- When I say Raider football is fowl...
I offered yesterday that while fundamentals are dominating the news flow, we must be on the lookout for our other primary metrics to flank the tape. That--and the notion that if the camera adds ten pounds, I need to lose 30 lbs!--is what's flickering behind my eyes as I watch that video.
Breadth has been 2:1 negative wire-to-wire yet the tape still trades begrudgingly lower (read: with an underlying bid).
In terms of potential support, I'm eyeing S&P 1073 and S&P 1040 (which happens to be the 50-day, where we last bounced).
For the four-letter freaks--and while it's too early to tell--a trade lower could establish the dreaded double top.
- MVHQ will be at the Little Kids Rock "Right to Rock" celebration in force this Thursday. Space is filling up quickly so if any of ye faithful would like to join us and party with the Big Man (Clarence Clemons, not Kevin Wassong), lettuce know!
Editor's note: Todd had positions in NDX and S&P at the time this Buzz was published.
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