Buzz on the Street: Are We Seeing Signs of a Bear Market?

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Monday, February 21, 2011

Markets closed for President's Day.


Tuesday, February 22, 2011

Market Notes
Kevin Depew

Some brief market notes:
 

• Nothing surprising about what is happening this morning.
• Last week SPX recorded a WEEKLY TD Sequential 13 sell signal.
• As well, the D-Wave DAILY minimum wave 5 target was met at 1342.88.
• TD Reference Close levels to watch are 1328.01 on DAILY and 1276.34 on WEEKLY (also the WEEKLY price flip level).
• DAX confirmed DAILY TD Reference Close breaks with the close below yesterday and lower low today. An up close is important, could set up a qualified break of TD Prop Down with target of 7165.
• NKY DAILY recorded a bearish price flip following a 9-13-9. TD Reference Close down is 10605.

Position in Japan stocks

STT Short
Zev Spiro

State Street Corp. (STT): ended the intermediate up trend, in January, signaled by a break below the intermediate rising trend line. Recently, a bearish complex head and shoulders reversal pattern triggered, with time confirmation present. Further bearish evidence was presented on Friday, when the 20 day simple moving average (shorter) crossed below the 50 day sma (longer).

In the daily chart below, it outlines the complex head and shoulders reversal pattern in STT, which recently triggered. Also highlighted is the bearish moving average crossover. Target: minimum expected price objective is $42.35, Protective Stops: confirmed move above the neckline.


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Not an Opportunity to Buy the Dip
Yaron Sadan



Have the fundamentals changes? Is risk lower? Are margins going to expand? Are input prices falling? Is the consumer going to buy more? Are businesses going to hire more?

We have rallied 100% of our March 2009 lows. If you didn’t participate until now, is this really the point you want to get in? Is this blip (so far) really such a great buying opportunity?

I guess it partially depends on your time horizon. Sure, you could have bought the open, held for the bounce, waited for a little fill-in-the-gap, and then sell. Maybe if your a quant trader, over the weekend you were able to analyze statistical anomalies of 1% gaps. On the other hand, if you were able to identify risks and opportunities ahead of time, this is only the beginning.

When we started speaking about overweighting energy, I didn’t know that rolling revolutions would strike the Middle East and decades of relatively stable (albeit corrupt) leaderships would be toppled. But the risks of social unrest were obvious. The fiat currency devaluations across the world put pressure on food prices. (Does anyone remember the food riots in Mexico over a now-insignificant rise in corn as a result of US ethanol subsidies?)

What has been the most surprising is that the reaction is so muted. The Italian stock market is closed out of fear of cross-holdings by Libyan entities, while at the same time, German chancellor Merkel’s party just lost a provincial seat, marking a challenge to the continued support for euro bailouts from Germany, yet the euro is holding up. Go figure. Japan’s outlook moved from stable to negative, and some key companies have been downgraded, yet the yen is barely moving. Real estate in the US is showing continued weakness (Case-Shiller is down 2.4% yoy and 1% mom), yet REITs are holding up.

So what’s going on here? The risks and opportunities have not yet been realized. Either the market truly is right, and these risks are non-existent and valuations will continue ever-higher, or the market is inefficient and is misjudging both risks and valuation. I’ll save you the guesswork and let you know that I’m in the latter camp, and that’s why I’m not buying the dip, or changing my positions. Geo-political turmoil is still being undervalued. Social unrest can easily continue to roll to other dictatorships, including many investors’ favorite go-to emerging market, China. Oil and the energy complex still offer value and protection. The precious metals are still the global safe-haven currencies, along with the dollar relative to the yen and euro. And the emerging markets are still in bubble territory, as foreign direct investments will look for a way back home.

Buy the dip? Only if you’re looking for a bounce. But the real returns, the real money, is in the waiting. Waiting on your positions if they were bought at the right price for the right reasons, and waiting for an opportunity to get into new positions at the right price for the right reasons.

Relevant ETFs: GLD, PHYS, SLV, PSLV, UUP, DXJ, FXI, FXE, EUO, YCS, TbBT, TLT, VNQ, SPY, SH


Wednesday, February 23, 2011

Watching Dow Transports
Smita Sadana



People change and forget to tell each other.
~Lillian Hellman

Dow Transports are in a technically precarious position. Of course, one can always allude to ‘reasons’ related to oil, but this still signifies some level of conflict between Dow Industrials and Dow Transports.

Dow Transports have reached a pivotal support today. This average has breached the 50-day MA and is currently close to January lows.


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There might be some bounce close to these levels (support acting as support), but this is still a negative change in technical character.

Arguments, unless resolved quickly, often unleash more discord.

Earnings Reports
Steve Birenberg

More earnings reports from portfolio holdings and the general pullback in prices has triggered some trades in my TMT focused hedge fund.

On the earnings, we heard from Central European Media Enterprises (CETV) and HSN, Inc. (HSNI) reported this morning. CETV was mostly inline but still no real sign of an upturn. I think the stock is rallying because it looks like the fundamental bottom may be in after a long succession of missed quarters and lowered guidance and estimates. I see meaningful upside as unlikely in the near-term so I reduced my small position near the open, close to the day's highs. Operating leverage here is very high so I am keeping a position in case the Eastern European ad market rebound sooner than I expect.

HSNI beat estimates but there remain some issues with margins. After an ugly 3Q report I had puts against the position. I sold them early in the trading day on what I thought was a good enough report as the catalyst for the protection was the earnings. When the stock headed sharply lower, I added to my long position bringing it up from 1% to 2% of the portfolio. Downside is protected by QVC acquisition rumors and the quarter was not as bad as feared suggesting fundamentals are stable.

I used recent weakness in Ancestry.com (ACOM) to take an initial small position this morning. Earnings are due after the close on Thursday. I am hearing that NBC has picked up the company's TV show for next season, possibly for a fall and spring run. The first two runs were spring only. Ratings are solid again this year.

Liberty Media Corp. (LCAPA), by far my largest holding, has been very weak the last few days. The stock has lagged Sirius XM Radio (SIRI), of which LCAPA owns 40% and which makes up about 50% of LCAPA's NAV. I used the weakness to add a trading position that I would gladly flip out for a couple of bucks.

I also began to build positions in two stocks that been laggards before the market pulled back. I took a small long in Broadcom (BRCM) which has been weak since reporting its latest earnings. I like the company's growth profile given its exposure to tablets, smartphones and communications technology in general. As a fundamental investor, I am happy to buy weakness when I like the long-term story. I'll add to the position at $38 all else equal.

In a similar vein, I added a starter position in CenturyLink (CTL). This is a defensive stock with a hefty dividend yield of 6.90%. Organic growth prospects are nil but the upcoming closing of the merger with Q will likely drive greater cost synergies than expected. The stock has been quite weak since the company issued standalone 2011 guidance below expectations. I think that has cleared the deck for the Q deal closing to set up a bottom in the stock. I plan to add under $40 and again near $38.

Positions in CETV,HSNI, ACOM, LCAPA, SIRI, BRCM, and CTL.

Sign of The Bear
Jeffrey Cooper



Last week, after a month of non-confirmation, the Transports confirmed the DJIA with a new closing high.

However, as I offered in my report, one day of confirmation apparently does not wipe out a month of non-confirmation.

The Transports have turned down a big wheel of time, the Monthly Swing Chart on trade below the January low and in so doing have wiped out the whole year of gains in short order.

From a new high for the move the Transports have waterfalled and extended convincingly below their 50 dma and are set to turn down their Quarterly Swing Chart. The Quarterly Swing Chart low is October low near 4400. Whether it will turn in a spike mirroring last years flash crash or wait until the second quarter and turn on a break of whatever low is installed this quarter remains to be seen but the action following the turn down of the Monthly Swing Chart is the sign of the bear.

See the daily Transports chart below.


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Thursday, February 24, 2011

A Reason To Hate NEM
Lance Lewis



It appears people are flipping out because Newmont (NEM) is guiding gold production to 5.1 mln to 5.3 mln ounces in 2011 vs. 5.4 mln ounces in 2010 and 2011 copper production to 190 to 220 mln pounds from 327 mln pounds in 2010. Costs were also guided up to $560-$590 an ounce vs. $485 in 2010

So, if you want a reason to hate NEM, the 4% decline in production and the higher costs are it. What nobody seems to appreciate though is that if the price of gold is rising faster than those costs, it doesn’t really matter, especially when NEM is already trading near a single digit multiple of its earnings.

In fact, NEM experienced the exact same 18% increase in costs applicable to sales LAST YEAR too. Yet, earnings still rose 76% in 2010 thanks to the higher gold price.

Nobody seems to care at the moment, but I doubt this will stick for long once people sober up.

Position in NEM, gold, gold stocks

Quick Note on China
Yaron Sadan



I have been hearing about intermittent shutoffs in Twitter for a while, but now it looks as if LinkedIn is being blocked in China. Looks like the Chinese are afraid that the same social networks that are helping overthrow decades of dictatorships in the Middle East will also be used to overthrow decades of authoritarian rule in their backyard. See the story on TechCrunch.


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As I mentioned yesterday and prior, Asia is the marginal buyer that I am keeping my eye on for the next pressure point for world markets. There’s a good chance the Middle East is only a precursor.

Expecting a Relief Bounce
Smita Sadana



November correction sliced about 4% in 2 weeks. S&P-500 has shed about 3.5% (1343 to intraday 1296) in 3 days.

Much like the rush hour traffic in CA, this is only the second time in 6 months that any one looking for a entry would be getting an opportunity. Given that people's behavior rarely changes, I would be looking for a bounce at these 1296 levels on SP-500

But the intensity and longevity of this potential bounce will define the further trajectory of the market.

Position in S&P

I Don't Hear Any Cannons Quite Yet!
Sean Udall



The juxtaposition here is I'm also not seeing evidence that the "shoe shine boy" is on margin yet. If this is confusing anyone... sorry. Bottom-line, if bullets start flying or a military is engaged, you get a better lay low. On the other hand, the bulls haven't gotten anywhere close to overly ebullient yet (save a few names I like to point out on occasion) so we should have a lot of ultimate upside left.

I'm circling Zions Bancorp (ZION) here again as I'm doing more list building than anything else today.

The semi's have stabilized today. As well, I do like the market action a lot better today. We're seeing a fair amount differentiation.  As opposed to a one size fits all sell everything according to Beta based market. I'm still finding it telling that the overbought radiance on multitudes of stocks has come in so quickly.

Bank of America (BAC) also looks interesting here as well. And BB&T (BBT) ... and Citigroup (C).

I guess the central theme here is banks are looking as good (to me) as the have in a number of weeks.

General Motors (GM) is getting slaughtered. I am not on the trigger yet but this is a huge gift.

Sometimes it pays to be Roland/Clint Eastwood-like and have a blistering trigger finger while trading. Other times it pays to be very patient. So far i think patience is winning the week and I'm still employing it. But that may change within hours.

Is it just me or do OTM upside call spreads on Apple (AAPL) looks pretty darn good again.

Position in BAC, GM, C, AAPL


Friday, February 25, 2011

Planes, Trains and Banks!
Todd Harrison

The transportation stocks earned their way on this page as TRAN 5K is an important level—and one that is far less crowded than their big board brother, and that deserves as mention as we edge towards a Knick-filled weekend.


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Ditto the banks, which are long-held favorites as forward-looking tells. BKX 52 is the next stair-step support, and it’s thus far been tested seven times. Technical analysts will correctly mention that a level weakens with each subsequent test, either way, so keep those poking piggies on ye radar. 


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R.P.

It's All About Trust!
Smita Sadana



Trust only movement. Life happens at the level of events, not of words. Trust movement.
~Alfred Adler

The bounce that was expected yesterday is here today (See here). But it’s often, more profitable to objectively assess movement in various indexes, rather than counting the green! Once trust has been betrayed, it is often quite difficult to trust immediately.

Dow Transports remain the most important index to watch on my radar. After all, as I shared on Feb 23rd. Dow Transports proved to be quite prescient on the way down.

I would be on the lookout to see the reaction around the 20 and 50-day SMA, currently around 5120. It is also important to see its relative performance versus other indexes today. And finally, silence often speaks more than words; an inability to reach these levels would be even more telling.

Major Results Strike a Miner Chord
William Fleckenstein



Yamana's (AUY) results were very solid and its stock price held up better than most of the gold stocks that I follow. Golden Star Resources (GSS), a stock I had recently taken a small position in after its big hiccup, reported disappointing production estimates for next year and the stock was pounded. (I exited my small position on the open, as it has too many problems.) Lastly, Newmont (NEM) reported strong earnings, which would have been even higher had it not built inventories. However, it lowered its production forecast slightly for next year and said that its expenses would likely increase about 18% due to energy and other costs. (2010 saw a similar hike in costs, but earnings still grew 70-plus percent.) I personally did not think that was a big deal, but the stock was hammered for about 8% at one point, which struck me as absurd. After all, Newmont is generating about $7 to $8 per share in cash, which it can use to find or acquire more gold. In addition, for all the hand-wringing over Newmont's production profile, it reported reserves of 93 million ounces, up from 90 million eight years ago. It continues to be an inexpensive gold stock, in my opinion.

Goldcorp (GG) reported last night after the bell, which more or less rounds out the sector as far as major miners go. Thus far, only Barrick Gold's (ABX) and Yamana's results have been well-received by the market.

I don't know what it will take to change psychology regarding gold mining equities, but when it comes to the big-cap stocks, folks really do love to hate them (which is rather amazing compared to how expensive so many silver miners are). I expect that will change at some point, but I can't say when. I continue to trade around my positions in the majors as a consequence of the way they behave, as it continues to be the case that only the smaller ones are investible.

Positions in AUY, NEM, GG

POT Update
Scott Redler



The Agricultural Group trades great.

Two days ago I put Potash (POT) on the radar for a Red Dog Reversal after a nice correction.

Most in our community bought it before the trade ignited Pre-split.

The price was 55.80 and now we are at my target of 60 (About 10% higher).

I would consider taking some profits.


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