Buzz on the Street: QE Panic Goes Out Like a Lamb
A look back at the happenings on Wall Street this week, as seen by Minyanville's contributors.
Here is a small sampling of the 120+ posts seen on the Buzz & Banter this week:
Monday, March 17, 2014
I See Bubbles!
Sheesh, I know technology is becoming a major part of our culture, but look at what's happening:
1. Amazon (NASDAQ:AMZN) gave the green light to the comedy show Betas for its Prime Instant Video service. Here's the description:
"In Silicon Valley, the right algorithm can make you a king. And these four friends think they've finally cracked the code."
2. HBO will release a comedy show called Silicon Valley on April 6. Here's a quote from from IMDB:
"In the high-tech gold rush of modern Silicon Valley, the people most qualified to succeed are the least capable of handling success. A comedy partially inspired by Mike Judge's own experiences as a Silicon Valley engineer in the late 1980s."
3. A mountain of money is being thrown at Internet news sites. See the Upworthy clones, the emergence of a whole bunch of news start-ups, and Amazon's investments in Business Insider.
4. Last week, the Wall Street Journal ran a story about how people, including children, are flocking to coding classes.
Anecdotes like this are mostly useful for entertainment purposes, but this is an era when it's not that hard to justify Facebook (NASDAQ:FB) paying $19 billion for WhatsApp and when Internet companies can be valued on 1990s-style eyeballs.
Calling tops is just plain silly, but the trends today in tech are clearly not symptoms of a bottom!
Tuesday, March 18, 2014
China and Brazil Are Key
Michael A. Gayed
Emerging markets have had a volatile ride lately. Before Russia (NYSEARCA:RSX) went into Crimea, several inter-market trends suggested a high probability to come for a melt-up in what has effectively been the most hated area of the investable landscape. Putin delayed the move, but the setup remains high for a major advance so long as deflationary pressures abate. Consider the fact that emerging market debt (NYSEARCA:EMB) has been extremely strong, outperforming US junk debt so far in 2014. Stocks are so wildly disconnected from credit that it is not a question of if, but rather how soon markets will begin to realize the absurdity of equity movement relative to fixed income. India (NYSEARCA:EPI) and Indonesia (NYSEARCA:EIDO) are showing very strong movement; however, for broader emerging markets (NYSEARCA:EEM) to work, you really need to see China (NYSEARCA:FXI) and Brazil (NYSEARCA:EWZ) lead. As far as China goes, it may be near at an inflection point. Brazil looks like it can break out of its own base in the weeks ahead. If those two start working, there could be a ripper of a move to come.
Wednesday, March 19, 2014
"What" Just Happened
Jane Yellen said in an answer in the Q&A that a considerable time to keep accommodative policy (zero rate) would be six months after the end of QE. At the current pace, asset purchases will end in October ($10 billion per meeting), which implies the first rate hike will be in March 2015.
The market is not priced for that (personally, I think a rate hike in March is way too fast). The first rate hike was expected to be in September or October 2015.
There was a large amount of S&P (INDEXSP:.INX) futures dumped into the market on the rate-hike headline. The selling in the market doesn't appear to be single-stock based.
Aside from that, I am hearing that there is a 3x1 better buying skew in MBS land right now on this sell-off.
Thursday, March 20, 2014
Nothing devised by man can be as frustrating as the stock market... not duplicate bridge, not chess, not Sudoku, not even a slow Internet connection. And recently, the stock market has been pretty darn frustrating to bulls and bears alike. Last week, it was the bulls who were frustrated as the Dow Jones Industrial Average (INDEXDJX:.DJI) lost 2.35%. This week it has been the bears, at least until yesterday, as the senior index gained 1.7% from last Friday into Tuesday's close. Trying to build on that rally, the Dow held its poise yesterday until Fed head Janet Yellen's press conference. Indeed, the Fed's announcement that it would taper by another $10 billion was of no surprise, nor was the elimination of the 6.5% unemployment threshold. That threshold was dropped because, in the Fed's view, the employment situation is improving. To me, the Fed's language yesterday implies a move to more of a qualitative, rather than a quantitative approach, as the Fed looks past the recent slowing economic numbers, believing that underlying strength will return when the weather improves. However, the equity markets did not like the subsequent press conference where Yellen indicated that interest rates would be kept low for a considerable period of time -- and then added that to her a considerable period of time was about six months. With that, the yield on the 10-year Treasury note leapt from 2.71% to 2.77%, while the US dollar rose and stocks slid. The slide took the S&P 500 from the session's "flat-line" of around 1873 at 2:00 p.m. to around 1850 at 3:12 p.m. before firming into the close.
"Frustrating?" You bet, at least on a short-term basis, because Wednesday's Wilt potentially implies the start of a decline. While Down Volume was 70% of total Up and Down Volume, and the Advance and Decline line was negative, the troubling trend was the increase in volume to 3.1 billion shares on the NY Composite. Recall in the Morning Tack on Tuesday [subscription required], I mentioned the fact total volume was below average, but yesterday volume moved closer to its 30-day average (read: negatively). Still, I would expect a pullback to again be contained by the often mentioned 1835 to 1840 support zone, and even if the market accelerates to the downside on increased volume, I doubt any trading top will result in much more than a temporary correction since, according to Dow Theory, the primary trend of the market remains up. This morning, there seems to be a downside follow-through with the S&P futures off about six points at 6 a.m. On the economic docket today are the following reports: Weekly Jobless Claims (325,000 estimate), Philadelphia Fed Survey (3.0 estimate), and Existing Home Sales (4.6 million estimate). None of these is considered to be market moving.
Friday, March 21, 2014
The final phase of our five-session set is upon us as the lack of negative news, continued momentum, and the specter of quarter-end
combined to give the bulls the ball out of the gate.
I scripted the road map over the last week or so and the banks remain the primary driver, with KBW Bank Index (INDEXSP:BKX) 71.50 the technical backstop.
The collective focus now shifts to the transports for a move through TRAN INDEXDJX:DJT) 7600, which will provide yet another technical blessing of the breakout through S&P (INDEXSP:.INX) 1850, NDX (INDEXNASDAQ:NDX) 3640, and RUT (INDEXRUSSELL:RUT) 1182. Those levels have been tested a few times and held like a champ; upside targets include S&P 1960 and BKX 77, if and when.
Of course, every day is a new day, or that's what I've been told, and high-beta is getting hit hard on this Freaky Friday, with LinkedIn (NYSE:LNKD), Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA), Amazon (NASDAQ:AMZN) and Priceline (NASDAQ:PCLN) currently dancing in red dye. Biotech is also getting smacked, and as that sector led the tape higher, we should note that it's trading well under IBB (NASDAQ:IBB) 260 support.
The bulls maintain this is shaping up to be the same type of sector rotation that we saw yesterday (into semis (INDEXNASDAQ:SOX), telecom (NYSEARCA:IYZ) and banks (BKX), and away from biotech (IBB), REITS (NYSEARCA:IYR), Utilities (INDEXNASDAQ:UTY) and Health Care (NYSEARCA:IYH) but that remains to be seen. As we know, sector rotation is a lot healthier than outright migration, unless of course you're on the wrong side of it.
Continue to watch the banks. If they break rather than bend -- and especially if they give up the level attained yesterday -- that would be cause for pause. The S&P, of it's part, has a good 30 handles before it tests the will of the bulls anew, but there's a lot of room between here and there.
While Russian and Chinese news flow is relatively light, I remain of the view that traders are in the earlier innings of both, in terms of potential market catalysts. There seems to be a lot more "there" there as it pertains to Mr. Putin's grand plan. Keep an ear to the ground while remembering that active traders should attempt to filter out big picture noise.
China and Japan will end the week above their respective technical support levels, so they've got that going for them.
So has Germany, for that matter.
Twitter (NYSE:TWTR) is trading funky again. Either a big seller is leaning on the stock or there is distribution for another reason. I don't know, but you can learn a lot just by watching.
GW Pharmaceuticals (NASDAQ:GWPH) is a stock I've been IN-N-OUT of for over a year, and it got a lot of press during its 875% run since last summer. The stock has pulled back 20% since the March high and will test one trend line into $64 and another into $52ish. I will look to revisit the stock, but it's got some time (and price) before I do.
There's a lot going on so let me get this to you. Good luck today, and may peace be with you.
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