Buzz on the Street: Apple Crosses $500, and That Means War!

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. Below are some excerpts from this week's Buzz. Click here for a 14 day free trial.

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Monday February 13, 2012

Short-Term Treasury Bills Diverge From Long-Term
Michael Sedacca

The front end of the Treasury curve has been steadily moving lower, with yields steadily increasing (from zero) at auctions nearly every week since the first of the year. On the other end of the spectrum, longer-maturity bonds have only had a minor rise in yields and have stayed relatively flat. At face value, a flattening curve signals deflation. However, I think the reason for the move is twofold:

The Fed's Operation Twist of selling shorter-maturity bills and buying longer-dated bonds has sought to create this move for the past 6 months, so the fact that it is finally happening has likely exacerbated the move.

The other reason -- which I find to be more important -- is likely due to the lack of investor demand to pay-up for the liquidity premium that these bills offer, for a return of zero. Professor Atwater and Professor Gayed expertly covered this cycle out of safe haven assets to riskier assets and the potential side-effects. This is easily corroborated by the decline in global CDS prices (especially financial) after the central bank liquidity pump was cranked up to full volume. The potential for a systemic event is largely gone, for now.

To put this move in perspective, a 3-month bill (0.095%) is now yielding the same as a 1-year note did in the fall and early winter, but in the grand scheme it's just a rounding error.

I'm still hanging out in TBT, but I can see a short-term play in PST (7-10 Year Double Short, duration is roughly 8-9 years).


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NTAP Now, Then, and Later
Fil Zucchi

"EMC (EMC) and NetApp (NTAP): I know I’m going to eat my words, but these look like “gifts” at current prices, particularly if one has a 6- to12-month time frame. Shorting a wee bit of VMware (VMW) or some out-of-the-money calls against EMC’s 80% stake in VMware might work as a hedge. If either get hit on their reports – barring something totally out of left field – I could easily make these major stakes."  When I wrote this on Jan. 5, NTAP stock was trading at $35; the company reports Wednesday night, and nothing has changed my view that, 6-12 months out, passing on the current $39 price will feel like a "what was I thinking" moment. 

But as to how it may trade come Thursday morning, the pop from $35 to $39 has obviously changed the risk/reward quite a bit.  From $35, a bad report could have meant $32.  From $39 a bad report could still mean $32.  If your P/L is marked-to-market like mine, that's too much of a drop to ignore.  Is it likely that NTAP will disappoint? I say it is possible.  NTAP is quite a bit behind EMC on new products utilizing Solid State Drives, and at risk of getting geeky, does not seem to have yet (they are working on it) the adequate controllers to satisfy the requirements for enterprise class SSD solutions.  Couple that with the continuing unknowns around HDD shortages, and a lousy quarter is certainly possible.

I've paid up for near term protection between $39-34, but I continue to look for the low $30's to get longer.

VIX Divergence Ahead
Andrew Nyquist

Keep an eye on the VIX should the market print new near-term highs. If the VIX can remain above last week's lows and print a higher low, we may have a divergence.


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The Chase is On
Peter Prudden

Money is flowing into the Nasdaq like there's no end in site and the beta chase is firmly on. The NYSE advance/decline line and its 10 day moving average has diverged from the index and is headed lower. Toss in the S&P 500 put/call 10 day moving average of .85% and the market is ripe for a short-term pullback. We have exuberance over a deal in Greece. It is likely short-term in nature.

Maybe investors will use the action as an excuse to book partial profits or not? We had an investment community that was caught with their pants down and they have spent the first quarter catching up. Sentiment indicators, which I highlighted in my article last week, have turned bullish, although the market does not feel euphoric.

The technical take says S&P 1365 area fulfills the move. I see resistance at 1363, 1371, and 1380. There is a lot of headwinds into the $137 in the SPY. We have a tug of war here -- bears badly want a top to be put in here -- and the bulls are starting to pound the pavement when they can step in and buy the dip without questioning the macro conditions. I am reducing risk here.


Tuesday February 14, 2012

The Legend of Turnaround Tuesday
Todd Harrison

S&P 1342 is right here, right now, and if Snapper is gonna make a go of it, he'll need to hold this line or risk a flush, as everyone and their sister is staring at this technical support.

For my part, I've used this slippage to peel out of another layer of my S&P put "overage" from late yesterday, as trading in-between is a super-smart strategy with so many unknowns.  I've yet to touch the N's, but at a point it makes sense, despite my growing sense that NDX 2400 will be tagged before any (potential) resumption of the uptrend.

For purposes of my metaphorical posture, let's call it 25% short (vs. 50% to start the day) as the easy Turnaround Tuesday trade is behind us.

As always, I hope this finds you well.

R.P.


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Retail Sales Disappoint, But...
Michael A. Gayed

Generally speaking, I notice a lot of people commenting on news as a way of confirming their existing beliefs about what markets should be doing, or what the state of the economy is. I firmly believe that the news does not matter.

What matters is the reaction to the news.

Futures took a dip following weaker than expected retail sales driven (pun intended) primarily by the auto side. But wait a minute -- the Retail ETF (XRT) is strongly outperforming (up more/down less) the S&P 500. Ford (F) is barely underperforming, and General Motors (GM) is not falling apart by any means. As I referenced in a MarketWatch article titled "Clint Eastwood is Right, Autos Just Getting Started", if anything, autos appear to be recovering relatively well.

It could be another opportunity to consider buying the dip on days like this if I'm right about the continuation of the Winter Resolution and 2012 reflation theme.

Largest Market Cap Stock Has Gone Parabolic
Peter Boockvar

Putting aside its incredible product line and pipeline of more, its still attractive valuation relative to earnings, and its $100 per share of cash that may be used for a dividend soon, Apple's (AAPL) stock has gone parabolic. And, parabolic moves always end one way, back to the place where the parabolic move began. Now, AAPL can of course power higher to who knows where in this move but the largest market cap stock in the world has now entered a tenuous phase, strictly technically speaking.