Buzz on the Street: Earnings, Baby
A look back at the happenings on Wall Street this week, as seen through the Buzz & Banter.
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 January 16, 2012
Markets closed for MLK Holiday
Tuesday January 17, 2012
Euro Funding Continues to Improve
The short-term EURUSD basis swaps, or a good indicator of the ability for European companies to obtain loans in dollars, has continued to improve again today. As well, the Euribor and LIBOR spreads have also continued to improve over the past few weeks. Undeniably this is a result of the various easing measures enacted by the ECB and Fed, but the continued improvement in the swaps in-line with the Eurodollar futures indicates a few things. Either:
A- the Euro will continue to fall against the dollar,
B - the February LTRO takeup will be enormous, or
C - the ECB (or Fed in some form) will cut rates in their early February meeting.
There is also D - all of the above, that all of these things can happen.
Note that the above contracts expire in Mid-March, which is after all of these events, so it is also likely helping things as well.
(click to enlarge)
Copper Rallies in Response to China Data
Today's strength in the risk-on markets in general and in the industrial commodity markets in particular likely reflects a collective sigh of relief that China Q4 growth came in a touch better than expected -- at 8.9% versus 8.7%.
This has triggered some short-covering and perhaps optimistic new buying interest ahead of renewed optimism about forthcoming China economic stimulus, as noted in the charts on copper, silver, and oil.
Copper, in particular, as viewed on the daily globex chart, has emerged from its Oct-Jan sideways congestion area, leaving behind a base-like structure that has the potential to propel prices above key resistance at 3.77-3.90.
Such a thrust will trigger near-term buy signals that will point copper towards a test of its Feb 2011 to Jan 2012 resistance line, now at 4.12.
We must focus increasingly on the industrial commodity markets as a gauge of perceptions of Chinese demand for goods and materials, which could have a significant impact on the global economy going forward ... provided the China data are not smoke and mirrors ahead of a hard economic landing.
ETF traders may want to keep an eye on the iPath Dow Jones-UBS Total Return ETN (JJC), iShares Silver Trust (SLV) and US Oil Fund ETF (USO).
(click to enlarge)
I don't know if I'm channeling too much History of the World, but there's suddenly a lot of gamesmanship in Research in Motion (RIMM). While I've been in this name for a month, which is a long-term investment in my trading account, the Chatter Mill is suddenly en fuego, citing potential (unconfirmed) suitors such as Samsung, Google (GOOG) and Microsoft (MSFT).
Do I think they get bought? I haven't the slightest idea, nor was that central to my trade thesis.
Is there a slew of fast money in the name now -- folks who bought it for the quick hit? Absolutely.
Could they be right? I suppose but again, I've never made money buying takeover targets (although I've made a lot of money buying strong companies that happen to get taken over).
Either way and anyway, I'm using this 10% lift as an opportunity to scale out of additional stock and lock in some well-earned gains. I'm keeping a placeholder in hand -- about 15% of the common stock position I entered the day with -- and will either add additional exposure on a pullback, if and when, or will punt the leaves into additional strength.
Either way, I will remind myself that it was a pure trade and trades are made to be taken.
As always, I hope this finds you well.
Wednesday January 18, 2012
FFIV Tarot Cards
Option volatilities in F5 Networks (FFIV) suggest a very large move either way post earnings release. Of course it'd be nicer to have an idea of which way the move might go. For hints slightly more reliable than "tarot cards" or "shapes in a cup of turkish coffee", we can look at the intraday behavior of volatility in puts and calls equally out of the money.
Through the day the Jan 120 calls have started to fade a bit, while the Jan 100 puts keep going strong. Notch it up to the natural "fear" of bad earnings being more powerful than the "hope" for great earnings, or whatever other psychological dynamic you prefer. Any bit of additional information might not help, but it certainly can't hurt.
Breakout in SOX
There is a big breakout in the SOX above the 200 dma.
It's solidly above its 200 for the first time since July 2011, which is opposite January on the calendar.
So follow-through is key. This natural 180 degree periodicity could represent a buying climax or a point of acceleration.
The SOX typically leads so the move in the semis may be foreshadowing an attempt to convert 1310/1311 resistance on the S&P.
See the daily SOX chart with its 200 dma, from last May:
(click to enlarge)
Homebuilder Sentiment Continues to Improve
Homebuilder sentiment continued to improve in January, rising to 25 from 21, above expectations of 22 and the best number seen since June 2007. Present conditions rose 3 points to 25 and the future outlook was up 3 points to 29. Prospective Buyers Traffic also gained 3 points to 21.
The NAHB chief economist said "builders are seeing greater interest among potential buyers as employment and consumer confidence slowly improve in a growing number of markets, and this has helped to move the confidence gauge up from near historic lows."
That said, caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for affordable mortgages, appraisals coming through below construction cost, and the continuing flow of foreclosed properties hitting the market." Bottom line, the first part of the NAHB comments is why the number is now at 25, up from 16 one year ago, and from 8 at the historic low 3 years ago. However, the latter part of his comments is why at 25, the index is still half the break-even level of expansion and contraction in home building.
A Time to Emerge
Michael A. Gayed
Consistent with the latest edition of the Lead-Lag Report on Minyanville and the Winter Resolution idea I've been addressing following the Summer Crash and Fall Melt-Up, I do not believe this is the year of the U.S. No, this is not because I am unpatriotic. Rather, I am realistic about where money is likely to flow.
I did a CNNRadio interview yesterday which can be heard around the 1 hour 43 minute mark at in which I make the case for a big move in China, and the coming wave of interest rate declines by emerging economy central banks. I also wrote about this in an article I published today on Minyanville. I believe we are entering an environment where the BRICs (Brazil, Russia, India, and China) can substantially outperform on the up and downside U.S. markets given how severely they underperformed last year. Looking at Russia's markets today (RSX) and the broader emerging markets ETF (VWO) shows how on a decent up day for the S&P 500, it can be one helluva day for emerging markets. So don't focus on chasing performance - focus on those areas everyone else will chase in the near-future.
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