Buzz Bits: Dow, Nasdaq Shoot Higher
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Heavy Close in Crude - Adam Michael - 2:42 PM
Please notice the heavy close in crude today (and natural gas). Also note that crude appeared to be dragging down gold/silver earlier in the day, but about mid-day, the metals began to positively diverge. Perhaps gold/silver were sensing that the Fed may be more apt to cut if we get a drop in crude? Makes sense to me.
I would also note that several weather forecasters are predicting a very warm winter (one forecast was for the 2nd warmest since 1990). This will not be good for crude or natural gas.
The question then becomes, "what underlying price is baked into the equities?". If stocks have $70 oil baked in, and we are on our way back to $80, how much downside do the energy stocks really have? This is the key question I am asking myself right now. My best guess is maybe "not so much".
Randoms - Fil Zucchi - 1:03 PM
- There continues to be a wide disconnect between the price of Cypress Semi (CY) and its monster-child SunPower (SPWR). As you can tell from this chart, the market is currently attributing a negative value to CY's semiconductor business. I continue to be involved very aggressively on the long side of CY while selling out of the money calls in SPWR.
- The oddest things on my screen given today's Fed chatter: first, the strength in the long bond. If the market bought the idea that all is well as long as the Fed continues to cut, then the long bond should be getting killed here, especially considering how far it has come so far. Second, the modest reaction in gold, up slightly from the overnight lows.
- Countrywide (CFC) in red dye?
- I put in scale orders for February S&P 500 (SPX) puts as the VIX dropped through 24. These are trading positions. For the purpose of reloading longer term short exposure, I am using these Fibonacci levels as guidelines.
Positions in CY, SPWR, gold and SPX.
Marvell-ous - Sean Udall - 11:43 AM
Is Marvell Technology (MRVL) today's version of what we saw out of VMWare (VMW) on Monday?
I'm pressing some MRVL long here today as I think the selling is far overdone based on what looked to me like a very strong quarter and guidance from the company. Again, I'm still in Vegas and missing many of my computer screens. Additionally, I did not listen to their call yet, however, what I had for MRVL's quarter rev's and guidance were not anywhere close to what I read from some briefings (and I was well above consensus).
I'm not surprised MRVL is experiencing a sell the news reaction to its quarter -- as it has only risen after a quarterly report 1-2 times in the last year and a half or more. But I am surprised at the magnitude of the selling based on how strong the results were.
Bottom line MRVL's broad product depth appears to be providing a good set of chip assets and their purchase of Intel's (INTC) Xscale business (Research in Motion (RIMM) channel), seems to also be looking like a better purchase every quarter now. Also, many chip stocks have hit new 52 week lows of late and I guess MRVL has to take their turn behind the woodshed. MRVL's mid-quarter reporting date may also be magnifying the move as there are not many stocks that shorts are pressing on today.
Longer term I think fair value for MRVL is in the low to mid $20's. If profitability ramps notably then that number may be proven conservative.
Position in MRVL.
Gate Sniffage - Todd Harrison - 9:59 AM
- Don Kohn, you know, the Vice-Chairman of the Board of Governors of the Federal Reserve System, made comments this morning that are fueling hopes of further rate cuts at the December 11 meeting. "We will act as needed to foster both price stability and full employment," he said in a statement.
- It's interesting to note, however, that the dollar is higher on this news, which is precisely the opposite of what one would expect if rates are heading lower.
- That's not stopping equities out of the gate. Hey, there's my 5% rally in Citigroup, nor is it denting internals (which are 5:1 positive). Heck, even the homies are rallying: It must be real, right?
- Perhaps, but I'm happy to slap trailing stops on my (admittedly small, tertiary, non-financial oriented) longs and begin to sniff around defined risk levels on the short side.
- I'm looking at some short-sighted gold plays in that arena (haven't pulled any triggers) as well as financials if and when they trade back to resistance. My sense, however, is that this financial complex is gonna stay dicey, crowded and frustrating as we weigh the specter of rate cuts versus the looming shoes that are sure to drop. Perhaps there are better battles to fight.
- Light grips and tight lips as we edge ahead. DJIA 13K and S&P 1450 are levels to watch as the first half hour drips by the wayside.
- Good luck, kid.
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