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Buzz on the Street: What Traders Are Saying About Bonds, Biotech, and the Nasdaq Composite


A look back at the happenings on Wall Street this week, as seen by Minyanville's contributors.

These articles were originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

Here is a small sampling of the 120+ posts seen on the Buzz & Banter this week:

Monday, April 7, 2014

The Call for the Week: The Russians Are Coming
Jeff Saut

I am in New York City seeing accounts and doing media, and if past is prelude, something BIG will occur in the stock market in my absence. There is a full charge of energy in my proprietary indicators, so if a move starts, in either direction, it has enough energy to become meaningful. This morning, the Russian rumors, which swamped stocks,on Friday (April 4), indeed proved fallacious. Nevertheless, the pre-opening futures are down about six points (at 5:00 a.m. EDT), begging the question, "Are we going to get another immediate upside reversal like investors and traders have seen every other time it looked like stocks were geared for the downside?" Still, as can be seen in chart two, Sotheby's (NYSE:BID) has tended to "call" bubbles in the past. If that holds, the market is NOT currently in a bubble.
Click to enlarge

Click to enlarge

Tuesday, April 8, 2014

,Fun Factoids: Nasdaq Composite
Michael Comeau

I just downloaded a Nasdaq white paper via Factset (registration required) that outlines changes in the Nasdaq Composite (INDEXNASDAQ:.IXIC) since 1999, the heyday of the tech bubble.

Some things to note:
  • At 12/31/1999, the Nasdaq Composite had a P/E of 152, Price/Book of 6.7, and a Dividend Yield of 0.11%.
  • As 12/31/2013, P/E was 31, P/B was 3.9, and dividend yield was 1.22%.
  • Index earnings were $27 in 1999, and at the end of 2013, they were $133. (I wonder how much of this is Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG)).
  • In 1999, the average company was 15.1 years old. In 2013, the average company was 25.0 years old.
  • By market cap, the NASDAQ Composite is currently only 46% pure tech, while 20% is consumer discretionary, (names like Lululemon (NASDAQ:LULU)) and 15% is health care (especially biotech).
Clearly, the market is not in 1999-2000-style bubble territory.

The Nasdaq is expensive, and the IPO market is booming. People with long memories understand just how crazed things were back then. Stocks are not even close to that level of headiness.

High-beta tech recently got hit really, really bad, but many market cap heavyweights like Apple, Google, and Microsoft (NASDAQ:MSFT) are trading at fairly cheap valuations and are holding pretty steady.

The selling hasn't spread... yet.

It may feel like the market is down quite a bit, but the Nasdaq is still just 6% off its highs. All things considered, that's not awful, and I think some cooling off is healthy ahead of earnings season.

But, the bull camp likely wants to see the index head back up to the 50-day moving average, in keeping with the recent pattern during the uptrend.
Click to enlarge

Wednesday, April 9, 2014

Bond Rally Likely Complete
Michael Sedacca

An exact replay [subscription required] of what happened in May and June of 2013 has now been finally been completed in the rates complex. Then and now, the market freaked over a single sentence, and then retraced all of said freak-out. A combination of dovish speaking Federal Open Market Committee (FOMC) members, such as Richard W. Fisher and Charles Plosser (who are fiscal policy hawks), and an FOMC minutes that is being shopped as dovish accomplished the mission of walking back the market.

So, overwhelmingly, I think that the bond rally is now complete. Now that the Fed has succeeded in monkeying the curve back to where it was, I do not think it will be able to move rate expectations any further out in the spectrum. The chart below is of the December 15 Eurodollar, which has now retraced its post-FOMC sell-off in its entirety.

Please note that even though I am talking my book, this is not sour grapes as I am currently making money in my bond "shorts." I feel certain in my view of the outcome -- but it's one that does make me nervous.

Thursday, April 10, 2014

Bonds Laugh at Yellen
Michael Gayed

The environment for investing now has become laughable. Everything that was so deeply believed in 2013 has been flipped on its head. Rising rate environment with Fed tapering? Not so much. Emerging market (iShares MSCI Emerging Markets Index ETF (NYSEARCA:EEM)) crisis? Not so much. Reflation? Not so much. Small-cap (iShares Russell 2000 Index (NYSEARCA:IWM)) momentum persistence? Not so much. There are some massive unwinds in mentality, and I believe this is far from over. While emerging markets are suddenly gaining attention, there is a real risk that volatility in high beta sectors will filter through to all equities. We at my firm (Pension Partners) remain in defense mode in our mutual funds and separate accounts. There is a time to get aggressive -- this is not one of those times.

Friday, April 11, 2014

200 DMA, No Cure?
Jeff Cooper

Gilead Sciences (NASDAQ:GILD) was the culprit in the biotech space; the first one to sneak out of the uptrend.

Gilead snapped its 200 DMA presumed support like a knife through butter yesterday, and a weekly chart shows the potential to extend.

Does the action in Gilead suggest that the iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB), is set to plunge through its 200 DMA as well?

Below, see a daily Gilead chart for 2014 with its 200 DMA, a weekly Gilead chart from 2012, and a daily IBB chart with its 200 DMA.
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