 |
|
Marco Hague
|
| First Test Of Post-G20 Moves Higher |
11/12/2009 4:37 AM EST
|
Overnight equity trade was very negative from Japan, weak from Europe, and that sets up a short-sided challenge for Wall Street. For the first time this week we have a pattern of trade that tests the support areas on S&P futures from the get-go, rather than the resistance areas being in play, as has been the theme. The 1085 and 1078 areas are the swing points, that if broken may draw in buyers of the dollar, that will have oil testing 78.50 and possibly 76.00. Overall, there is still nothing more than a sideways crawl going on across the global market, but this is the first test of the post-G20 long moves from the weekend, and as such they will be closely monitored.
Position: Looking Long Dollars
|
|
Marco Hague
|
| Gold Bullion Technical Review |
11/12/2009 5:55 AM EST
|
four-hour chart trend: Long. Main price points: 1083, and 1115 - 1130. Looking for: Wave 5) top.Gold reached new highs recently, which means that the bulls in our blue wave V are not done yet. As such, bearish traders should wait on a break of the 1083 support zone, before any reversal can be confirmed. Until that happens, a move into the 1130 area may still be the case in the current blue wave V leg.The RSI indicator is showing a bearish divergence which indicates that the top may be near. See our gold charting.
Position: N/A
Global equity markets are mixed. Local news that Japanese consumer lender Aiful Corp. may be restructured weighed on the Nikkei, but other Asian bourses also slipped amid concerns about the global economy with Chinese Prime Minister Wen warning the global economy faces a slow and bumpy recovery and APEC members agreeing to maintain stimulus until a sustained recovery is underway. European markets have recouped early losses while U.S. S&P futures are paring back losses with earnings reports generally positive.
Position: none
|
|
Tom Graff
|
| Treasuries Higher, 30-Year Auction Looms |
11/12/2009 7:34 AM EST
|
Treasury bonds are higher this morning ahead of the $16 billion new 30-year auction at 1 p.m. today. The 10-year is up 1/4 point to 3.45% and the long bond is up 1/2 to 4.38%. Worth noting that long bond futures (which did trade during yesterday's holiday) closed at 119-12 on Wednesday, near the day's highs. It then traded back up to that level in Europe, but has come back down to 119-1 at the moment. Point is that the long-bond looks like it would have traded up 1 point had the market been open yesterday and would therefore be opening 1/2 point lower this morning.
This is relevant for anyone who trades in fixed income ETFs, which were open for trading yesterday. ProShares UltraShort 20+ Year Treasury Bond Fund (TBT), for example was down 63 cents to 47.30 yesterday. It will therefore actually open higher despite the green numbers on your Treasury bond screens.
As for the auction, worth noting what happened at the last 30-year auction (10/8). Long bond was up more than 1 point the day before the auction, but sold off 1-1/2 points as the auction performed poorly. It was down another 2-3/8 points the following day. Anything can happen, of course, but I'm not optimistic. I'm selling some rates risk ahead of the auction.
Position: Long TBT
There may be much back-slapping over the fact that Asian-Pacific finance ministers have endorsed market-oriented exchange rates, consistent with the op-ed piece in today's Wall Street Journal by the U.S. Treasury secretary and the finance ministers from Indonesia and Singapore. But there is much precedent for lofty platitudes to be followed up with little action. A survey of the currency regimes reflects a reluctance to embrace market driven foreign exchange rates. Managed regimes are the rule, not the exception. Although APEC seemed to largely sidestep the issue about the Chinese yuan peg, there is speculation that China is signaling a change in its stance.
The yuan has essentially been repegged to the dollar. In the PBOC's quarterly monetary report posted this week was a commitment to improve the management of the exchange rate by taking into account changes in major foreign currencies, not just the dollar. This sounds like a return to the basket approach, which it had opaquely said it used previously. At the same time, the PBOC dropped the official mantra that it desired to keep the yuan "basically stable at a reasonable and balanced level." The indicative pricing of the 12-month CNY non-deliverable forwards have been trending higher, suggesting larger anticipated appreciation, now about 3.3%. It does not appear that significant yuan appreciation is a likely near-term scenario.
Position: None
Weekly U.S. jobless claims (8:30 a.m. EST) are expected at 510,000, lowering the four-week moving average to 521,000 vs. 540,000 at the end of the third quarter and 607,000 at the end of the second quarter. Continuing claims are expected to slow to 5.700 million from 5.749 million.
Canadian new housing prices, due at the same time, are expected up 0.2% month over month in September vs. 0.1% the month before. The October U.S. budget statement (2 p.m. EST) is expected to widen in to -$162.5 billion from -$155.5 billion. No Fed speakers are scheduled.
Position: None
The Aiful case in Japan is fascinating: The company suspended payments, but a committee of dealers and investors are debating whether there is sufficient public information to determine whether a default has occurred. This is different from some of the other moral-hazard issues for credit default swap clearing I identified at the very end of 2008.
Nothing can kill a market faster than legal uncertainty. While many of us have had wrestling matches with insurance companies over the years for various claims, I never recall one sufficient to make me wonder whether I was going to participate in medical or auto insurance markets in the future. I and most of us pretty much have to do so.
No participant in the CDS market has to be there. We lived without these things before and can do so again. Is the present situation peculiar to Japan, which I noted on Tuesday was facing rising sovereign CDS costs? Yes and no: The famously group-oriented Japanese may wish to say a default is not a default, and that is very Japanese, but we can match them and then some when it comes to lawyers and committees.
This case deserves careful watching as it unfolds.
Position: None
1106 = 111.10 M
1102 = 110.70 S
1097 = 110.20 M/S
1094.50 = 109.95 M
1091.50 = 109.65 M
1089 = 109.40 S
1086.50 = 109.15 M/S
1082.50 = 108.75 M
Position: none
|
|
Poilin Breathnach
|
| Jobless Claims for Week to November 7: 502,000 |
11/12/2009 8:31 AM EST
|
Jobless claims for the week to November 7 were 502,000, down 12,000 from a revised 514,000 the week before and below the consensus expectation of 512,000. Click here to read the report.
Position: nm
|
|
Bob Byrne
|
| Morning Trade |
11/12/2009 8:32 AM EST
|
Traders continue to be fixated on the Emini and the Dollar Index. I find myself staring at the dollar almost as much as the Emini during the day (but I do trade a lot of gold and energy stocks...which are most affected by a rising/falling dollar). I posted a chart of the Emini and the DX a couple days ago and they still look the same. Bulls need the Emini to surge through (and close above) 1100 with a dollar sell off under 75...reverse if bearish.
The number of doji candles out there is phenomenal (a doji represents indecision and relative equilibrium between supply and demand). For today--the bulls need to defend support strong support at 1089 and target moderate resistance at 1091.50 and 1094.50. The bulls are still in charge...no doubt about it. However, they need to sustain a trade above moderate/strong resistance at 1097 before traders wake up and prepare for an assault on strong resistance at 1102 and moderate resistance at 1106.
The bears need to push the Emini through strong support at 1089 and moderate/strong support at 1086.50. Until we see those two levels violated no one is going to give them the time of day. A failure by the bulls to support 1086.50 sends us to 1082.50...probably in a hurry.
Position: Long GDX Puts
|
|
Jim Cramer
|
| Jobless Claims at 502,000 -- 10-Month Low |
11/12/2009 8:32 AM EST
|
The false-tell futures are on display again now that we are seeing jobless claims continue to fall and the trajectory is obviously right...
Position: none
|
|
Ken Wolff
|
| Morning Prep |
11/12/2009 8:41 AM EST
|
Jobless claims came in a bit better than expected but we had an upward revision to previous figures and the market is not reacting. We had a pretty decent day for the bulls yesterday, with the early buying pattern repeating. I expected the top to be around $44.50 on the PowerShares QQQ Trust (QQQQ), which would be indicative of a strong market, but we only made it up to $44.18. Selling came in similar to the day before, going under the early low then doing the narrow uptrend thing. I will be looking for early buying and a retest of yesterdays high, then I will want to short again because it seems the market is stumbling and may fall. I am interested in Brocade (BRCD) off 8 bucks; should move to $8.50.
Position: none
|
|
Poilin Breathnach
|
| Mortgage Purchase Applications Hit Nine-Year Low |
11/12/2009 9:00 AM EST
|
The Mortgage Bankers Association (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 3.2% on a seasonally adjusted basis in the week to November 6 from one week earlier. On an unadjusted basis, the Index increased 2.8% compared with the previous week.
The Refinance Index increased 11.3% from the previous week and the seasonally adjusted Purchase Index decreased 11.7% from one week earlier. The seasonally adjusted Purchase Index is at its lowest level since December 2000. The unadjusted Purchase Index decreased 13.7% compared with the previous week and was 21.6% lower than the same week one year ago.
Click here to read the full report.
Position: nm
|
|
Jim Cramer
|
| Refinances at a Six-Month High |
11/12/2009 9:07 AM EST
|
The refinances are at a six-month high. But Poilin, I must admit these numbers confuse me, as sales are very strong...
Position: none
I have been very worried about the endless lawsuits between AMD (AMD) and Intel (INTC). They remind me of the Broadcom (BRCM) / Qualcomm (QCOM) battles and the Nokia (NOK) / Qualcomm battles. Both times the settlements produced pops in the stocks. Something to keep in mind as the Nasdaq futures bizarrely remain under pressure despite the 3Com (COMS) acquisition...
Position: Qualcomm
Jim -- next week the weekly filings could have a 4 in front of it, i.e., less than 500,000. This will counteract the negative psychology of the 10% unemployment print we had last week. Also, the weekly claims tend to lead rather than lag the monthly numbers. Not great, but moving in the right direction.
Position: n/a
Totally right, Scott. The market's continuing to factor this in...
Position: none
The 4-hour reads are still very mixed across the global market, and as such a reduction in exposure (lots) and expectancy (targets) is required on anything taken. European markets are holding in the green after bouncing off support and following a negative Asian equity session. S&P futures have absorbed a slight drop in weekly jobless claim numbers, although they're still on the wrong side of 500,000, and it is from that relative equity market stability that forex pairs have stopped buying the dollar. Most major pairs are at or near their opening prices, as is gold, with the laggard being oil.We have a signal out that buys the aussie (Aud/Usd) if it pulls back to support around 0.9240, and may have to wait until the oil inventory numbers are out at 11:00 a.m. EST to really see the read on fair value on risk on Thursday. We will highlight further potential as momentum picks up, and are very much aware that the late oil inventory numbers (they are normally out at 10:00 a.m. EST) will coincide with the European close.
Position: n/a; looking at long Aud/Usd from a pullback to support if S&P holds higher
|
|
Brian Gilmartin
|
| WalMart -- a Case of Low Expectations |
11/12/2009 9:34 AM EST
|
If you want a perfect example of how expectations factor into an important earnings report, watch Wal-Mart (WMT) today. Yesterday's caution on the Christmas selling season on top of lackluster stock action this year has resulted in the stock being very out of favor but still a pretty good long-term value in our opinion if readers can look beyond the immediate action. It does look like WMT missed on revenues for the third consecutive quarter, but the company operates so efficiently that my guess is when we post the numbers to our spreadsheet we will see that margins added to the EPS beat. It is just my opinion, but WMT may be the best real-time economic barometer we have. With $400 billion in four-quarter trailing sales and as the largest U.S. employer, I really do believe that all you need to do is watch Wal-Mart to get a sense of not just the consumer but the macro-economy in general. (They sell just about everything but cars.) With 1% to 2% revenue growth and flat comps, WMT is telling us that consumption remains subdued, deflation is still a worry, and we probably don't have too much to worry about in terms of the Fed raising rates immediately.
Position: long WMT (and looking to add when the time is right)
The reaction for Computer Sciences (CSC) hasn't been as bad as I first feared. I am going to take some of the November 55 calls off the table at 60-65 cents, really nothing more than a very small gain vs. the cost of the butterfly. It will leave me with a naked call position, so I may look at trying to buy some November 60 calls cheap or buying the stock if it moves to $57.50.
On Advanced Auto Parts (AAP), I am taking half the November 40 puts off the table at a target of $2.45 or better. I don't think the stock will pierce $35, so I am leaving the puts naked. I will short if it falls to $35 -- that or buy December 35 puts. The original cost of the spread was $1.00.
Position: Long CSC, short AAP
Not all retail is alike. Nondiscretionary retail is good -- i.e., discounters, food, staples, health care. Discretionary retail is less attractive: electronics, cars, vacations, home repairs, jewelry, apparel. The adjustment to lower income/wealth levels is only beginning for the U.S. consumer. Optional purchases will be stressed in 2010.
Position: none
|
|
Howard Simons
|
| Real Czars Don't Express Concerns |
11/12/2009 9:55 AM EST
|
Ken Feinberg, Czar of TARPistan, pater patriae imperator maximus of the Loot, etc, is "very concerned" about the serfs, er, "talent," being driven away by his actions.
Read Machiavelli, now. 'Tis better to be feared than loved. As a real czar, Josef Stalin, once advised, "Beat, and beat again until you get the answer." Once the regulated smell weakness in the regulator, it's game over. They'll string you up like a marionette and take you to 6-year-olds' birthday parties to entertain the children.
The whole point of your existence is to signal to future Wall Street miscreants there will be a cost to their actions. Right now, the ones stuck in Citigroup (C) and AIG (AIG) are moaning, the ones who used to work at Lehman and Bear are scattered to the winds and the Bonus Bogarts of Broad Street are sizing up renting the International Space Station for executive retreats -- the closer to Heaven, the easier it is to perform God's work.
No, Ken, restore the Roman practice of decimation: Line 'em up and shoot every tenth one. The other nine won't give you any lip. And be sure to send their families a bill for the bullets. You're a czar, not a guest on Oprah.
Position: None, just like my tolerance for all of this nonsense
Exited the rest of my Computer Sciences (CSC) November 55 calls at 65 and 70 cents. I still now have a bearish ratio call spread where I am long 1 November 60 call while being short 2 November 57.5 calls.
The remainder of the earnings plays are shaping up favorably. A possible sweep is on the table, but I have to carefully look at adjustments. Things can turn just as quickly against you.
Position: Net short CSC
Exited the rest of the November 40 puts here at $2.45 and $2.30 (trailing stops). Just left with the naked November 35 puts.
Position: Long AAP via short puts
Ctrip.com International (CTRP) came through with a solid report last night, and the stock has popped this morning. I am selling the calendar spread, long December 75 calls, short November 75 calls for $1.55 or better. The purchase price was 95 cents here. I will look at adjustments on the other holdings in a bit.
Position: Long CTRP
In looking over the unemployment numbers, I don't see anything vaguely resembling a green shoot. If you back out all the seasonal adjustments and look at the nonadjusted numbers, claims were actually up almost 10%. For the prior week, the nonadjusted numbers were also up about two-tenths. There is no way for me to determine if the slight decline in the four-week moving average is people finding jobs or just running out of their benefit period.
Then there is the fact that I find it impossible to see how more than 500,000 people filing new claims for unemployment benefits is a sign of better times ahead. The number is going down because there were so many layoffs the last two years. So many people have already been laid off that the pace has to decline. That doesn't meant anyone has gone back to work.
Position: n/a
Jim -- it could be that we're seeing a post-stimulus drop. People had expected the homebuyer tax credit to expire, so had rushed to take advantage of it, applying for several mortgages at the same time, boosting the numbers. Now, they either have mortgages or can afford to wait, because the program has been extended.
Position: nm
Buying STEC, Inc (STEC) with a buy-write. The stock looks like it has finally formed a bottom. Buying the stock here at 14.05 and selling the Nov 15 call for 40 cents. If the stock gets called next week, then I will just take the profits. If not, then I will look to write another call again in December or possibly collar it.
Position: Long STEC, short STEC calls
The much-maligned U.S. dollar made front-page headlines in The Wall Street Journal today. Is that what is propelling it higher today? Perhaps. But the Dollar Index cash index is also up as it yesterday got a TD Combo -13 count (typically seen as a downside exhaustion signal), and also has a Daily Sentiment Index reading of just 12% bulls. The last time this Combo signal showed up, the Dollar Index rallied 150 "pips" (or 1.5 points) in the subsequent two weeks. So don't be surprised to see a similar move up, which would not help the newest of gold buyers. We would love to see gold break back under $1,100 and give us the chance to get in near the $1,075-$1,065 area.
Position: n/a
There has indeed been a surge in the number of mortgage applications over the last few months because of the wave of people wanting to take advantage of the credit, not anticipating that it would be extended. Now most of those people planning to purchase have already done so, regardless of the extension. And those people looking to buy had probably applied for numerous mortgages. Those people are now out of the market (they already own homes), so we no longer have a wave of people looking to buy homes and applying for multiple mortgages -- hence the recent decline. This number should recover somewhat over the coming weeks as more people begin to take advantage of the extension.
Position: n/a
I took this picture while driving to work today. Somehow, I'm guessing this isn't what investors had in mind for shovel-ready infrastructure projects, but all over southeastern Pennsylvania we are installing red brick inlays into roads without sidewalks. So much for productivity enhancements. And the feds want to nationalize health care? Gimme a break.
Your Stimulus Money Hard at Work |
Position: n/a
|
|
Poilin Breathnach
|
| EIA: Crude Oil Inventories Up 1.8 Million Barrels |
11/12/2009 11:04 AM EST
|
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.8 million barrels in the week to 6 November from the previous week, the EIA said. At 337.7 million barrels, U.S. crude oil inventories are slightly above the upper limit of the average range for this time of year. Click here to read the full report.
Position: nm
Exited two-thirds of my November 65-70 call spreads for $3.25. I am having some computer software update issues today, so I may get slightly delayed in getting my posts in here, and do apologize. I have a separate computer for emails up and running, so feel free to email with any questions, thoughts, concerns, anecdotes, jokes, etc. This isn't much of a profit, as I paid $3.00 for the November 65-70 call spread in combination with the November 60-55 put spread ($1.90 and $1.10, respectively). However, along with the calendar spread, it isn't bad. The stock is stalling a bit below where I thought it may, so I am going to play it more conservative here.
Position: Long a very small amount of CTRP call spreads
The two litmus tests for intraday dollar strength or weakness (in relative terms, of course), are USD/JPY and USD/CHF, both of which are moving with the dollar more today than we have seen in a while. Add in short crude off the 5.8 million barrels that showed up this week and the dollar may not need the gold bugs to lighten up! We are on the way to the $76 target from yesterday's posts.These equity futures charts look weak today, and short oil is getting help from them.
Position: Looking to see oil hit $76 support and hold.
Hey Dr. Bob, what have you got against nice brick crosswalks?
The State of Pennsylvania's Department of Transportation (PennDOT) has a 22-page document on its Web site that outlines its plan to spend the $1.026 billion in stimulus funds the state received.
In addition to the stimulus projects, PennDOT is also proceeding with a projected $1.8 billion worth of transportation work.
By the way, depending on how much work is needed, the sidewalk, curb cuts, lighting and brick crosswalk can cost well over $20,000 per intersection.
Position: Just sayin'
Not that I had many left, but sold the last handful of my Nov 18 calls on Direxion 3x Daily Financial Bear (FAZ) for $1.79. These were bought yesterday at $1.18, but over 90% were sold at my lower target price. This certainly exceeded the level I thought we would get to in the short term.
My 7-year-old dubbed them Fazzy the Financial Bear. I am trying to teach him early how to trade these leveraged ETFs.
Position: none
|
|
Howard Simons
|
| Infrastructure Stimulus, the Really Old-Fashioned Way |
11/12/2009 12:12 PM EST
|
Chris/Bob, back when Japan was trying to public-spend its way out of oblivion during the first 10 years of its 20-year Lost Decade, I proposed they build pyramids instead of more bridges with $40-equivalent tolls.
Consider these Top Ten reasons:
- They are a proven tourist attraction.
- They last a long time
- They attract whack-jobs seeking to prove astrological theories ... who then have to stay in hotels and buy dinners, thereby stimulating the local service economy.
- Unlike most mistresses, they are low-maintenance.
- They can be used for geometry lessons.
- They employ a lot of people: Estimates are the Great Pyramid involved 8,000-10,000 laborers over 23 years.
- Try importing one from China.
- You could cover them with Chia-fuzz and get a Green Pyramid.
- You could use union stonemasons, Democrats all, I'm sure.
- It's denial of economic logic without de-Nile River.
Compare it to "Cash for Clunkers" and the longer you look at it, the better it looks.
Position: Beats brick sidewalks in an icy climate
|
|
Tom Graff
|
| Credit Speads Soft |
11/12/2009 12:33 PM EST
|
Corporate bond spreads are mostly weaker today, especially in finance and other high-beta names. Citigroup (C) 300/293, +10. Bank of America (BAC) +210/201 +6, American Express (AXP) 210/200 +5, Capital One (COF) 285/280 +3. General Electric (GE) in the news for selling its security unit to United Technologies (UTX). GE 10-year bonds 187-181 +5. UTX 2019 bonds 6.125 2019's 100/95, +8.Hewlett-Packard (HPQ) bonds maybe 5 wider after announcing its puchase of 3Com. HPQ 5.5 18 +95/85. The rest of the tech space is better offered, as we've now had several significant mergers in this space, and bond buyers are figuring more is to come. Cisco's (CSCO) new 2020 issue now 100/95, came at +100. Call it 3 wider on the day. IBM (IBM) 5 wider, Oracle (ORCL) 2 wider, Dell (DELL) unchanged.Retailers performing OK after Kohl's (KSS) earnings. KSS 130/120, unchanged. Wal-Mart (WMT) also reported, bonds unchanged.
Position: Long BAC, JPM, GS, AXP, CSCO, ORCL bonds.
|
|
Poilin Breathnach
|
| With Only 43 Shopping Days Left to Christmas... |
11/12/2009 1:01 PM EST
|
What retailer do you buy for the investor who has everything? Answers on a CC post, please.
Among our commentators showing consumer confidence:
Brian Gilmartin is long WMT. Click here for his view.
Vince Farrell likes JAS and TJX - read his commentary here.
Position: None
I have said many times that I think infrastructure will eventually be a growth area, with bubble potential for stocks in the sector. I keep a list of infrastructure stocks and their tangible book values on my desk all the time to stay on top of potential opportunities in the group.
However, it is not going to come from federal stimulus programs. The vast majority of spending is going to have to come from municipal and private spending. The only way that this will happen is for a robust economy to provide higher municipal tax receipts and higher cash flow to support increased capital spending by industry.
That will not happen until someone figures out that to create the jobs that are the basis of a robust economy, we have to stimulate small business instead of confiscating their cash flow.
Although pyramids would be kind of cool.
Position: nm
|
|
Tom Graff
|
| Long bond auction ugly |
11/12/2009 1:12 PM EST
|
This morning I warned that it wasn't setting up well for the long bond auction today. Now the auction is over and ugly doesn't begin to describe it. Expectations were for a 4.42% yield. Came at 4.469%. Almost 5bps on a long bond auction! That's worth almost 3/4 of a point. Obviously a very big miss. As I write, the old bond is down 1 point at 4.46% and the 10-year is down 10 ticks at 3.51%.The secondary statistics weren't so bad. 44% of the auction went to indirect bidders, about equal to the average of the last five auctions (44.7%). Bid to cover was a little light at 2.26x, below the recent average of 2.49x. But you'd still have to put that in perspective, that we had willing buyers for 2.26x the auction amount. I'd like to see where 10s go from here. I think 3.72% is in play in the near term.
Position: Long TIP, TBT
|
|
Howard Simons
|
| How Steep Can The Yield Curve Get? |
11/12/2009 1:45 PM EST
|
Tom, the last answer you ever want to hear for the rhetorical question, "How stupid can you get?" is "How stupid do you need?" We seem to be pushing this conversation in this direction for the steepness of the yield curve.
Compared to a month ago, the yields are lower out through five years, with the largest changes occurring at the two- and three-year maturities. They are higher for seven years and longer, with the largest change in the 30-year.
Restated, the curve is steepening from both directions. The artificial push lower at the short end is attracting buyers who seem to feel invulnerable to decreased carry at two- and three years. Rising inflation risk and the prospects for rising currency volatility are pushing the long end higher.
I find it incredible investors are chasing yield at the short end and fleeing risk at the long end. Plant and equipment are financed at the long end, so all of this nonsense at the short end is doing wonders for speculators and nothing for people out there in the real world.
Position: None
Lauren Tara LaCapra looks at market chatter that's spurring more debate today on who might be the next CEO at Bank of America (BAC).
Position: n/a
|
|
Poilin Breathnach
|
| US Federal Budget Deficit Was $176.36 Billion in October |
11/12/2009 2:09 PM EST
|
Click here to read the Treasury's monthly statement.
Position: nm
The lunchtime Wall Street session has seen profit taking in commodity and equity markets, and by default that has started a bout of Usd buying, but as we noted earlier, the near-term reads have created slightly disjointed chart views, that look as though they need a reversal. However, the path of least resistance on oil, (we are still looking for a $76.00 test), and gold, (a kiss of $1100 maybe, just to test resolve), looks to be short.Moving up to the 4 hour charts we have global market drivers all reading completely flat (as in ironing board) momentum and sentiment reads. The order flows are sporadic, and in general, this is turning into an ugly pm session.Anybody fancy a quick nine holes? After golf, we can look to see where Nikkei and Dax futures are, because that will be the key to how well Friday Wall Street trade stacks up. Fore!!
Position: No Stocks
|
|
Glenn Hall
|
| Too much debt to sell |
11/12/2009 2:33 PM EST
|
With so much deficit spending by the government, the appetite for new bond issues seems to be waning. Reports indicate lackluster demand for the record $16 billion sale of 30-year Treasuries today.
Position: none
I just read a fascinating Bloomberg article that does not bode well for the muni market. It seems big institutional such as Allstate, Guardian and evens the Tisch brothers over ot Lowes are actively selling municipal bonds. There are very real concerns about state and municipal budgets and after the rally this year they are simply getting out of the muni market. Even as the pros were selling individuals were pumping billions into tax exempt bond funds in a desperate search for yield. According to a recent Morningstar report over $62 billion has gone into tax exempt mutual funds.
I have seen this before in many asset classes over the years. It never ends happily for retail
Position: nm
|
|
Tom Graff
|
| So much for that |
11/12/2009 2:42 PM EST
|
Treasury bonds have completely reversed course post 30-year auction, with 10s now up 1/4 point and near the highs for the day at 99-14+ (3.44%). The long bond isn't quite there, but close, now 3/8 higher in price and 4.39% yield. As for Howard and the curve steepener, its inevitable that the curve will be extremely steep with Fed Funds at zero. Plus the bank carry trade is conducted in the short end. Plus central banks buy in the short end. Glenn, there is plenty of demand for Treasuries. Treasury had orders for 2.25x the bonds they wanted to sell. Its a question of price.
Position: Long TIP
Yes, the same company that Jim Cramer once referred to as a "walking heart attack". By the way, Jim, that stands as my all time favorite Cramer company description!
Position: Long Cabela's
|
|
Timothy Collins
|
| Earning plays out a bit earlier than usual |
11/12/2009 2:55 PM EST
|
I'm gonna get the plays out and follow with analysis:
ANF - long Nov 39 put, short 3x Nov 34 put, long 2x Nov 32.50 put for 2.07
A - long Nov 25 calls for 2.63. A small play
JCP - long Nov 29 call, short Nov 31 for .95
MBT - Call butterfly long Nov 50 call, short 2x Nov 52.5 calls, long Nov 55 call for .55 or better
YGE - Long Nov 12-11 put spread for .35
Position: see above
|
|
Glenn Hall
|
| Seesawing Continues |
11/12/2009 3:05 PM EST
|
Tom - I saw the bonds turn as the stock market eased back.
Classic market seesawing -- but if the stock market rebound resumes long term, we could see less of the safety appeal in fixed income.
That makes me wonder about the benefit some of the big banks derived from fixed income so far.
Do you think there will be continued big bond trading gains to be had by Goldman, Morgan and others?
Position: None
The breakdown of many small cap and low quality stocks has me more concerned than I have been in a while. I am starting to think like Kass. An overbought, double top S&P 500 with few new highs, and a rolling over in the Russell 2000 has me pressing my matched pair trade, long high quality, large cap and short low quality, small cap. I continue to add to defensive names and have been selling the offensive, cyclical sectors of the market. By far, retail is my top sale, as Walmart is setting up for a hyper aggressive holiday selling season. They will cause profit margin problems for many retailers in many categories. Long the 800 pound gorilla, short the monkeys.
Position: long wmt, short retail etf
|
|
Gary Morrow
|
| Debt Reduction Sparks Dow Chemical
|
11/12/2009 3:07 PM EST
|
Dow Chemical (DOW) is up more than 6% today on heavy trade. The stock is now at new highs for the year after blowing past multiweek resistance just above $27. Investors are reacting positively to comments the company made earlier today about cutting its heavy debt load as well as meeting its financial targets ahead of schedule. The news sparked a powerful breakaway opening gap that lifted DOW well above the double top left behind at the September/October highs.
|
 |
|
Source: TradeStation |
|
|
This surge is leaving behind a solid band of support between $26.80 to $27.40. Considering the size of the move off last week's lows, which is now nearing 20% with today's jump, I expect a bit of profit-taking soon. A low-volume pullback to support would be a low-risk buying opportunity. I expect Dow to continue to work higher through year-end.
Position: none
|
|
Marco Hague
|
| Oil: We Were Looking for $76 Yesterday... Are We There Yet? |
11/12/2009 3:10 PM EST
|
Four-hour chart trend: Long. Main price points: 76.47 and 82. Looking for: TriangleOil prices are trapped between 81.95 highs and 76.47 support, which suggests that the wave IV) structure is a little more complex than first thought.Oil Charting:
Recently, the wave d leg was completed around the upper triangle line, which means that the final triangle leg, wave e, is in progress. The wave e leg should find support somewhere above the critical 76.47 area for a valid wave-count formation. Once wave e completes, a move towards the 82 resistance area should follow, where a break-out will put the 84.00 target area in play.
Position: N/A
|
|
Harry Schiller
|
| The Important Patterns Are in the Dow and Russell 2000
|
11/12/2009 3:11 PM EST
|
In my column yesterday I highlighted the Dow's 50% retracement at the 10,334 level as well as that upper trend line of the wedge pattern that has contained prices since the March lows. Yesterday's high of 10,342 was right at the intersection of those two lines, and this has turned prices back, as it should. As noted, over recent months, whenever the Dow has gotten back up to the upper trend line -- and it's done so six times -- it has led to a pretty good selloff in each case, ranging from 300 to 800 points.
It was also no coincidence that this morning, the Russell 2000 again stalled just shy of its 50-day moving average. It has now sold off more than 2% from the morning highs.
And yet this morning had all that bullish premarket chatter on CNBC, as most traders interviewed were confident that today would be the day the S&P busted through the 1100 level. Of course that's what I've heard for the past few days as well. Apparently they haven't been paying attention to these important patterns in the Russell 2000 and Dow.
Position: 10-20% long mutual funds at Rydex; 80% cash.
|
|
Sham Gad
|
| Funds Betting on Kraft Getting Cadbury |
11/12/2009 3:13 PM EST
|
With the recent news that John Paulson, among others, has doubled his holding in Cadbury, it suggests that he, among others, has conviction that this deal will go through. Kraft's original offer was around 760 pence, but now around 720 pence when you factor in the reduced bid along with the slight decline in Kraft stock since the deal was first announced. Paulson's recent purchases were made around the 740-760 price. It's obvious that Cadbury's price is being supported by the Kraft bid - if Kraft abandons its bid for Cadbury, it's likely the price will go down somewhat since no one else is making a play for this company. The more folks like Paulson step up and own Cadbury - he owns about 2.5% - the more shares that Kraft can sway to approve a deal, although it may mean a slightly higer offer. Kraft doesn't need to steal Cadbury to create value - a fair offer would create tremendous value for Kraft over the long-run. Among other things, Kraft would get enormous exposure to the instant purchase market like convenience stores, gas stations, and smaller retailers.
Position: long KFT
|
|
Marco Hague
|
| S&P Technical Update- Short Leg Done? |
11/12/2009 3:21 PM EST
|
Four-hour chart trend: Long. Main price points: 1025 and 1098.50. Looking for: Wave C S&P futures have reversed lower after a break of the 1098 highs shown on Wednesday that failed to hold. The black wave III) discussed yesterday may already be completed, and as such the current prices in the wave IV) pull-back may fall down to the 38.2% support level in the near-term, around 1083, before the market can trade higher again. Click here.
Overall, an expanding diagonal pattern in the black wave 5, or C, position is not done yet. Each leg of our expanding diagonal pattern should be structured by three waves, labeled as wave A, B and C. On the four hour chart below, the market is trading in the last leg of our pattern, wave 5), with an extended red wave C in process.
Position: None
Agilent (A) has held up well over the past several earnings announcements. It seems as if they still have some cost cutting room, and with the integration of Varian I think they sneak in a small EPS beat here.
Yingli Green Energy (YGE)seems to be in a bit of a tough spot right now. The solars have been struggling a bit here. The chart is not really appealing either. The play here is small. The stock could easily see 11 or 14 after earnings.
Abercrombie & Fitch (ANF) - Yes, there monthly sales have been besting expectations, but when I'm just beating a -15.4% or -21% estimate, that isn't a business going in the right direction. The chart looks a bit extended. I think they fill the gap and see 34 to 35 post earnings. My worry is the big short position with this one.
Position: Long A, short YGE ANF
|
|
Sham Gad
|
| Forecasts Tell You More About The Forecaster |
11/12/2009 3:30 PM EST
|
Just read over Doug's post "Market Ignorance Is Bliss" where he mentions a UBS report forecasting $80 a share for the S&P 500 next year. Talk about a change in mood. Far be it from me to judge the merits of that number, but that's an awfully rosy forecast. At a 15 multiple that's 1200 for the S&P; at a 20 multiple which is possible given the unchecked optimism today, you get 1600 for the S&P. I'd love to know how much of that number hinges on Uncle Sam doing what he's doing now. I'll play fortune teller for a minute. If that earnings number is close to the actual number, I would venture to say that the quality names - Wal-Mart, Caterpillar, Procter and Gamble, Johnson & Johnson, Pfizer, Microsoft, etc. - will represent a skewed amonunt of the index earnings. If that's the case, you could see a strong outperformance in quality over the next 12 months - a viewpoint I support for various other reasons at current market valuations.
Position: long quality always
Bought some CF Industries (CF) dec 80 calls at 6.80 and 6.90
Position: long CF
On CF, it is acting like the Agrium (AGU) buyout make happen. Added a bit more to the Dec 80 calls at 6.0 to bring my avg cost to 6.35. I am selling Nov 90 calls for .40 against it.
Position: Long CF
For Nordstrom's (JWN), I am going long a November 34 straddle while simulaneously shorting 2 Nov 31 put and short 2 Nov 37 calls (so shorting 2x Nov 31p/Nov 37c strangle) at a target of 1.55.
Position: JWN
As I go through the days fed filings I see that Bruce Berkowitz at Fairholme has raised his stake in the Saint Joe Company. He now owns 28% of the outstanding shares of the Florida based real estate developer. Fairholme has trounced the markets throughout their history and runs a very concentrated portfolio so their buying and selling is worth tracking for long term investors. JOE owns enormous acreage in Florida and along the Gulf Coast and could represent a tremendous opportunity when the beleaguered real estate market rebounds.
The company has a strong balance sheet with over 156 million of cash and has been paying down debt in the last quarter. 70% of its land holdings are within 15 miles of the Gulf of Mexico and should substantial value over the next decade. It may be a very bumpy ride but this stock is worth considering
Position: nm
|
|
Jim Cramer
|
| JWN and M and DIS |
11/12/2009 4:13 PM EST
|
Nordstrom's is a bit like Macy's meaning it isn't enough. These stocks have all run so much that they would most likely sell off no matter what. Walmart, which is down 5% for the year, had no profit-taking to take. Meanwhile the market's taking up Disney on the better-than-expected which may be a little wrong here given the tone of the market and the importance of the DIS conference call..
Position: none
|
|
Geoff Johnson
|
| Nothing Wrong With Retail But Valuations |
11/12/2009 4:30 PM EST
|
M, KSS and JWN show we've baked in a slow boat recovery for now. The quarters were fine and really all we could ask for given the economy. It continues to smack of 2004 to me in which the market baked in a good chunk of recovery and needed to mark time while the fundamentals catch up. Unless the economy re-breaks down this is not the end of the world, but it isn't much fun either. JCP in the morning.
Position: none
|
|
Tom Graff
|
| Glenn on big bank fixed income desks |
11/12/2009 4:45 PM EST
|
Depends on what you mean by fixed income gains. I think the mark-to-market gains on CMBS/RMBS aren't going to repeat. But I think that Goldman's ability to make money in fixed income trading is as strong as ever. I don't think these guys care about interest rate direction so much as they care about activity and spread. Right now bid/ask spreads are very favorable for trading desks, and activity is robust.
Position: Long GS bonds
As I wrote yesterday, I have reduced the long exposure of my trading portfolio dramatically. I have closed out my semi and biotech baskets at a loss. The hedges I purchased in mid October and sold last Monday helped buffer the losses, but they were losses nonetheless. I'm sorry if anyone else lost money on these trades. I have also closed out my TEVA trade at a loss. I want to get ahead of any tax selling that may begin in a few weeks. Lastly, the junk financial trades (SNV and C) will likely expire worthless. My philosophy on the spec trades is to allocate a small amount of capital--enough that would make a difference if the stock popped, but not enough to make a difference if the trade went to zero--and walk away instead of trying to trade around. The one time I violated my own rule, I ended up selling DDUP calls right before its acquisition. Brilliant. With all my recent sales, my (much smaller) trading portfolio is now fully hedged instead of being half hedged. Today, I also purchased TLT calls (January $93 strike) for about $2. I apologize for the late post. It was a very busy trading day.
Position: TLT calls
Run, don't walk, to see RealMoney Silver's very own Doug Kass on CNBC's Fast Money any moment now...
Position: nm
|
|
Marco Hague
|
| All Quiet In Asian Trade |
11/12/2009 10:53 PM EST
|
A very quiet overnight Asian session has not been able to easily draw in buyer or seller into the global futures market. S&P futures are at their swing point of 1090, oil is the at the same swing point, at 77.50, while gold trades five bucks below its swing point of 1110. Currency pairs have moved sideways, literally, and taken no cues at all from global trade as to whether fair value will hold through Friday trade.
Position: N/A
|
RSS FEEDS
PODCASTS
