Buzz Bits: Dow, Nasdaq Slink Lower
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Ticking away the moments that make up a dull day...- Todd Harrison- 3:46 PM
The critters continue to fritter and waste the hours in an off-hand way as we ready to close the books on just another Monday. Random thoughts into the close? Other than the fact that the 4:00 AM wake-up was entirely unwarranted? Glad you asked...
- The net-net behind the recent rally? Net foreign purchases of US equities rose to a record $27.4 billion in April, up from $9 billion in March (the previous record was February 2000). That, in a nutshell, is the bull case. Wealth--and risk--transference.
- The question I'm wrestling with is, now that everyone is seeing this dynamic unfold, what inning are we in?
- More nutshells? Talking to high end brokers, they tell me there is NO inventory in upper-crust Park Avenue and the high end Hamptons. Speaking to friends in middle America, they inform me that "for sale" signs dominate the landscape.
- In Flow's Diner, we saw size sellers of SIRI calls and LOW puts.
- I'll ditto Television's JeffMacke® bullet. Crazy may be on the Bus, but the Bus is coming to the 'Ville. He's one of three (count 'em) fresh and snazzy professors coming your way. Brick by brick, Minyan by Minyan.
- Some days your gonna be the windshield, other days you're gonna be the bug. Some days, like today, we should take a deep breath and appreciate the good things in life. Tomorrow is promised to nobody and tonight should never be taken for granted.
- May peace be with you.
Back Under the Wire- Jeff Macke- 3:38 PM
Greetings from the NASDAQ where I'm back on the East Coast just in time to go to work. Some things I'm watching as I get myself back up to speed...
- United Airlines (UAUA): The airline stocks have been nothing but pain all year, related to fuel and the fact that no one has ever made money in the space. That said, the planes were PACKED to overflow in both directions. The airlines themselves are a disaster but it makes sense for companies like Boeing (BA) to be rocking.
- Speaking of industries where the front-line providers are doomed but the suppliers have life, Blockbuster (BBI) giving the greenlight to blu-ray is a spot of good news for Sony (SNE). One of the (many) major miscalculations of the PS3 was that customers wanted a hi-def DVD player with its game console. BBI's decision doesn't totally justify the $600 price tag of a PS3 but it doesn't hurt...
- [This space is so large you could park a "Bus" in it... stay tuned for a new, but familiar, face on a regular basis soon]
- Are we really going to be subject to "breaking news" like battery specs every day between now and the i-Phone release? Apple (AAPL) can manage its stock like no other company, Minyans. And I mean that in a good way.
Ags and Gas- Ryan Krueger- 3:19 PM
Citigroup (C) today takes up estimates on Monsanto (MON), which has been on a remarkable rip higher, while Agrium (AGU) guides higher as well. In related news, I actually enjoyed myself while dining recently with a table full of Aggies. The entire table. Ironically the 12th man at this table was a Longhorn. Somehow, I felt closer to them, the food tasted better, the wine smoother. I truly credit the Ag trade, not only as my favorite secular story, but in finally giving me something to talk about with my wife's friends.
If you don't get a major hurricane, natural gas prices may continue to trade heavy. The hurricane trade is a popular one, and the only thing more plentiful than bulls on natural gas is the inventory in storage. Long-term, I am very bullish natural gas. Short term, I am not. Why is this relevant here? Natural gas makes up over half of the input costs for most fertilizers. Keep that in mind when considering what has been estimated.
Speaking of heavy, I think the pressure is on another group of analysts this quarter. With each passing day that you do not see crack spreads in refining moving lower, you are likely inching closer to a few revisions. Assumptions were that hurricane level margins for refiners were going to be very temporary but they haven't been. Suggesting refiners are a great value in here, I am not. I am, however, trying to share an idea on why today, like the Ags, this group is ripping while the rest of the market is doing nothing. I have zero edge and speak to none of those analysts. I do my work, and let them do theirs. My hunch is they may be re-working.
Positions in MON, several Fertilizers and Refiners
What could lie on the other side of 1540?- Bennet Sedacca- 12:05 PM
Deep breath. deep breath...
OK. So let's say that 1540 is breached on SPX cash and we don't get a 'pop and drop,' 'false breakout', or 'upthrust.' Let's say it is a bona fide breakout led by foreign buying a la 2000 style.
I have two charts below. The first is a chart of the breakout of the DJIA from its all time high. There was an initial rejection, then a 16% ramp to where we are today.
Click to enlarge
The second chart is of the SPX cash. We had a similar rejection. This is followed by a pullback. But what is the target if we have a similar breakout? 1750 cash.
Click to enlarge
Considering the hedger's being as long as I have seen, the Lowry numbers, the shorts, the TIC data, valuations apparently don't matter.
So I hate to say it, but I have to give the breakout the benefit of the doubt and will buy it if it occurs.
While I don't like valuations much, I can't recall anyone ever calling me to ask me what the 'correct' level of a market was...
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