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Buzz Bits: Dow, Nasdaq Slip to Red


Your daily Buzz & Banter highlights...


Editor's Note: This is a small sample of the content available on the Buzz and Banter.

Pucker up, Buttercup! - Todd Harrison - 3:22 PM

While expiration influences are ungameable (yeah, that's a word), we know that it exacerbates volatility in the days prior to the actual expiry. We "see" big open interest in the S&P 1525 line, which could conceivably act as a magnet if, and only if, we edge closer to that level between now and tomorrow's close.

As it stands, the laws of inertia remain in play as the financials drag and the semis sag. Metal and energy remain hiding spots, at least for the time being, with the drillers holding the uptrend life once again. The OSX remains 27% above its 200-day (read: extended) but bull markets, as they say, tend to remain overbought (and mea culpa, I'm not still there).

Deep breaths as we bring it home. It's been a busy day at MVHQ as Hoofy and Boo step out from behind the curtain. We're busting hump to bring the Critter mission to life and, as we pride ourselves on enjoying the journey, we're trying to practice what we preach (with "trying" being the operable word).

I'm standing pat with my current positions, so you know, with my rolled-down stop above S&P 1540. I have overnight gap risk (assuming Snapper stays in his shell) but given the action in the financials (watch BKX 111.70 please), it's a decent risk/reward. Famous last words, right?

Fare ye well into the bell.


Position in S&P

Sell Trigger Finger - Jay Shartsis - 1:25 PM

Elan (ELN) has had a big run from its $3 low recorded in April 2005. The rally has emboldened the bulls, who have driven its 21-day volume based put/call ratio to a recent 19 puts for every 100 calls.That's the most option trader optimism since January of 2005, as the stock was making an important top.

Then yesterday, the stock appeared in my expensive far out of the money put study. Those puts elevated above theoretical value were the 16s of October and January. An explanation I favor is that they expanded in anticipation of a coming decline in the stock.

Further observation on the stock: The big bull move from its $3 low to $23.11 earlier this month still left the shares well below the $30.45 top seen in November of 2004. So when viewed from that perspective, one has license, I suppose, to downgrade its price performance somewhat. In sum, a break of its upside momentum might be a good sell trigger and that seems to be happening now.

Blue Skies Are Here Again... - Jeffrey Cooper - 11:53 AM

  • The S&P undercut the old high, 1440, incrementally, in a whoosh. Now, the index is trying to stabilize at that level as old resistance is supposed to become new support... However, when the market doesn't do what it is expected to do; heads up.

  • Another push down projects to low 1530's while staying red suggests an ominous outcome, based on the number of outstanding 155 SPY puts. (See today's column for more information) Be that as it may, the bulls know they must defend 1540, and so they are...

  • The metals complex acts firm: Cleveland-Cliffs (CLF) over 85 strike again. It gains some blue sky, the name has been acting firm lately. Allegheny Technologies (ATI) is green, and Cameco (CCJ) sets up Soup buy.

  • In the financial sector, Greenhill & Co (GHL) has broken down again while Affiliated Managers Group (AMG) looks like its traced out a top. It's just beginning its descent.

Position in AMG

Indexes Show Drops - Lance Lewis - 10:30 AM

After trading down overnight in the wake of the Bear Stearns (BSC) news (Its two alphabet soup subprime funds were goose eggs) to as low as 80.227 and a new multiyear low, the US dollar index has bounced sharply off the 80-ish level and is back into positive territory by just a freckle. The next levels of importance on this particular measure of the dollar is the 1995 low at 80.05 and then the 1992 low at 78.19.

Click here to enlarge.

As we've discussed before, the US dollar index (given that it's almost 60% euro) is not exactly a great measure of the dollar, but it may have important psychological value if it cracks below 80 (which I suspect it will this week or shortly thereafter if not). The other two indexed measures of the dollar: 1) the major currency trade-weighted dollar is already making new all-time lows, and 2) the trade-weighted dollar has obviously been making new multiyear lows for several weeks now (see the 2 monthly charts below of these two measures as of the end of June… they're obviously even lower since during the month of July).

Click here to enlarge.

Click here to enlarge.

The even more interesting thing is that gold and its shares are higher on the day despite weakness in the stock market and the intraday bounce in the dollar. Is Helicopter Ben going to coo like a dove today in front of Congress and send the dollar lower and gold higher? I don't know, but the resilience of the yellow metal and its shares this morning is rather interesting... and quite bullish in my view.

Position in gold

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No positions in stocks mentioned.

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