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Tom Graff
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| Treasury market slightly higher |
11/20/2009 7:35 AM EST
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Treasury bonds are opening slightly higher with the 10-year up 3 ticks at a 3.32%. The curve is 1bps steeper as the 2-year is down 3bps in yield vs. 2bps for 10s.3.30% should prove to be significant resistance for the 10-year and assuming it holds, I'd look for it to trade back into the 3.45-3.48% area. Next week's Treasury auctions would be a good catalyst as the shortened holiday week could exaggerate any moves.
Position: Long TIP
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Tom Graff
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| Did Fisher just say "break 'em up?" |
11/20/2009 7:54 AM EST
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Great speech by Dallas Fed President Richard Fisher before the Cato Institute. But beware reading just the headline. Fisher seemed to echo Mervyn King's call to break up banks that are Too Big to Fail. In reality there is a very different conclusion to draw. Remember that the U.K. literally look over several large banks. Thus King has far more power to actually do the breaking up. King is also the head of the Bank of England. Fisher is just "one of 17" as he put it, at the Federal Reserve. While this speech is more pointed than other recent speeches by Fed officials on the Too Big to Fail topic, it isn't fundamentally different. Clearly one of the messages the Fed wants to communicate to the market is that Too Big to Fail is an unacceptable situation and must be resolved. Fisher starts talking about literally breaking up banks in his speech, but later moves into more centrist suggestions, like contingent capital and resolution authority. So read past the headline. No one is breaking anyone up.
Position: Long BAC, GS, JPM bonds
There are no US or Canadian data releases or Fed speakers today. The World Bank's Zoellick speaks at 2:30 EDT/17:30 GMT.
Position: NOne
Global equity markets are mixed on the day and week. In Asia, Japanese bank shares gained back some of the ground after selling off earlier in the week on concern about share sales. The Topix bank share index closed up 1.4% today, reducing the week's losses to 5.7%. The index came within less than 5% of the March lows. The Nikkei posted a modest 0.5% loss today on disappointing earnings from Sony, closing the week down 2.8%. The Hang Seng also softened for the fourth consecutive day, the longest string of losses in two months and closing the week down 0.4%. Most other Asian markets are higher on the week with the Shanghai Composite posting one of the largest gains, up 3.8% while the Kospi gained 3.1%. European bourses are narrowly mixed after giving up early gains. On the week, the DAX is the only major European bourse to remain in positive territory with the FTSE100 and CAC down 0.5% and 1.2%. Early indications suggest US markets will extend yesterday's losses.
Position: NOne
1102 = 110.70 S
1098 = 110.30 M
1095 = 110 M
1092 = 109.70 S
1086.75 = 109.20 M
1084 = 108.90 M
1082.50 = 108.75 S
1077.50 = 108.25 M
1074.50 = 107.95 S
Position: Short SPY...but less than 2 days ago.
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Bob Byrne
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| Morning Trade |
11/20/2009 8:25 AM EST
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For today--I have included a wide range of levels because we never know what silliness OPEX will produce. Expect any early morning fade (buying of current weakness) to run into a wall of sellers back at 1092. Continued weakness finds very strong support at 1082.50 and again at 1074.50.
The bulls may be rattled, but they are bloody sure not out of the game. Shorts are still for scalps at this point. Expect traders to defend 1082.50 with a Sherman tank and target moderate resistance at 1086.75 and strong resistance at 1092. The wall of sellers at 1092 is likely to be impressive, and with moderate resistance at 1095 I would expect a very nasty chop zone between those two levels. If Roubini's boys get trampled at 1095 expect a quick ramp to moderate resistance at 1098. Today's upside extreme is strong resistance at 1102.
The strangest thing happened yesterday...I saw little minus signs in front of a bunch of tickers. I'll have to call Goldman and see what the problem was. Anyway, the bears need to come out in force and push the Emini through moderate support at 1084 and strong support at 1082.50. Fake breaks at 1082.50 are very likely, but if the trade is sustained expect weakness to (and through) moderate support at 1077.50 and towards strong support at 1074.50.
Some believe that the strength in crude oil has more to do with the US dollar headed the way of the peso than some massive secular bull move. So with that in mind...has the relative weakness in the oil service sector been an indication that traders are already making their bets that the Dollar is about to spike against the other currencies? Just a thought---would love to hear reader's feedback on this one.
Position: none
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Ken Wolff
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| Morning Prep |
11/20/2009 8:40 AM EST
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We have a pattern of early selling then later day recovery.... Yesterday the QQQQ dropped a total of one dollar before beginning a slow uptrend... I have no reason to believe we will do anything different today so I will be looking for a repeat... I don't think we will see much of a recovery this afternoon so I won't be too excited about going long (scalps only)... It still appears like machines are running the show, where is Sarah Conner??
Position: NM
America's Car-Mart (CRMT) had one of the more impressive earning's reports that I've seen this season. Numbers all around are showing improvement. Here's a company that actually grew revenues and profits. The stock is bid up in the 24.70 area, and I will be happy to take some profits here; however, this is also one stock I'm sliding some shares over to a long term portfolio.
Gap (GPS) results seemed in line. Personally, I like what they've done with the Old Navy stores, and think that may be the key shorter term. The stock's reaction thus far is muted.
Dressbarn's (DBRN) numbers were strong. They were able to beat on revenues and EPS, as well as guiding higher, which is what I was looking for. The merger with Tween Brands (TWB) seems on track. The stock may push the 22.50 upside potential that I have targeted.
Dell (DELL) just plain disappointing. The stock is below the $15.00 area premarket. Goldman Sachs (GS) is out defending the name, which may help it get back to 15.00.
Position: Long DBRN, CRMT, GPS
Normally I will look at shorting front month straddles or strangles right off the open on expiration Friday, but I generally do not do it much during earning's season since I already have many plays open that I want to close out today.
I was thinking that Goldman Sachs (GS) would get pinned around 175, but it may be much closer to 170. I may do something more on this name, but I am going to watch the first 30 minutes.
American International Group (AIG) can offer some good premium, so I will look at shorting the Nov 36 straddle or a strangle with the Nov 37 calls and Nov 35 puts.
Bank of America (BAC) may get parked around 16, and is worth a look.
Google (GOOG) is one of my usual favorites, but takes patience and a LOT of nerve. Currently, 570 looks to be the plausible number.
I do not have any pin plays beyond GS at the moment.
Position: Slightly Long GS, but hedged
Another week of retail earnings reports and it's very obvious that the consumer hit a wall in the past four weeks. Retail sales faded fast in the last two weeks of October and the first half of November. Unemployment, lack of confidence and $3 per gallon gas are the major culprits. My favorite shorts are in the consumer discretionary sector like apparel, travel, luxury goods, housing-related, building materials and auto-related. The XRT ETF is an excellent proxy for shorting the retail space. I do like non-discretionary retail like discounters, staples and pharmacy retail companies. One can create a matched pair in the sector. Consumers will continue to spend where they must, but they will fade what they might only want.
Position: Short XRT
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Brian Gilmartin
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| Despite Dell, earnings performance still good |
11/20/2009 9:35 AM EST
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We counted 10 companies that reported earnings either last night or this morning from the Bespoke Morning Lineup, and of the 10, 7 beat the consensus estimates, and of those 7, 3 raised guidance for the coming quarter, which (in my opinion) seems pretty representative of what the earnings performance has been like since October 1. The fact that we have traded back below 1,100 on the S&P 500 is somewhat disconcerting. I've read a number of technicial pieces that talk about various Fibonacci levels that come into play around 1,100 but given the easy earnings compares versus '08, and Monday's market action, i thought we would have traded cleanly through the October '09 highs by now. Despite easy earnings compares and a seasonally-strong market period, (Nov, Dec, Jan), the market is trading heavy. Perhaps it is what is emanating from Washington that is scaring everyone ? We track the percentage of earnings revisions that are positive versus negative from the weekly earnings data, and the percentage of positive revisions continues between 60% - 70% following company's earnings reports. Finally, Michael Dell is no Brett Favre, that is for sure. After coming out of retirement and resuming the helm at Dell since Feb '07, Michael Dell has a QB rating of (maybe) a 5. We've been playing DELL as a turn-around story since Michael's return, and it has been a poor bet. Bob Faulkner has had Dell pegged correctly for some time.
Position: long S&P 500 index funds, SPY, DELL
US import prices rose 0.7% in October. The market was expecting an increase closer to 1%. However, the underlying trend is clear. Import prices have risen in all but two months thus far in 2009. The fact that imported prices are still off 5.7% from a year ago is reflecting the base effect of the collapse of import prices in the Aug-Dec period. Imported fuel costs are an important culprit. Excluding fuel (not just oil), imported prices rose 0.4% after a 0.5% rise in Sept.
The price of imported capital goods rose 0.2%. Consumer goods, excluding autos, rose 0.3%. The price of imported autos and parts rose 0.6%, the largest gain since late 2007. Expectations both headline and core PPI and CPI may increase based on today's import data. Both of these price indices will be reported next week.
Geographically, goods from China increase by 0.1% and goods from Japan increased by 0.2%. Goods purchased from the EU rose 0.6%. Goods from Canada rose 1.2% and while goods from Latam rose 1.4%.
One of the key channels by which a depreciating currency impacts an economy is often through imported inflation. There has been much work done on why what economists call "pass-through" is far from perfect. Three important ones are: 1) companies from Asia and Europe often compete in terms of market share rather than profit margin and therefore may be reluctant to pass on the full currency change; 2) 30-50% of the final price of an imported good may be derived from domestic costs--storage, transportation and marketing, 3) most goods the US imports are invoiced in dollars.
Position: None
I have exited 75% of my CRMT this morning. A nice gain on the shares, and today will be busy. I am going to try to limit my posts here a bit, so less play by play, and the moves will be plentiful, so hard to get up real time. If I have a profit, I'm taking it! If you have any stock specific questions on open plays, please feel free to email me. I will be closing ALL my November option plays today, from earnings or trades.
I sold off 2/3rds of my uncovered DBRN Dec 20 calls as well.
Position: Long CRMT, DBRN
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Marc Chandler
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| ECB to Boost ABS Credit Requirements |
11/20/2009 9:51 AM EST
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The euro got a boost from news the ECB is taking steps to enhance the credit quality of the ABS market. The steps suggest the ECB deems that financial institutions are in a more stable position to deal with low credit quality ABS's that remain on financial institutions' books and should also help boost confidence in the credit quality of the overall ABS market (as well as the ECB's balance sheet).
Under the new policy, the ECB will raise the ratings requirements for asset backed securities issued on or after March 1, 2010 and that it accepts from financial institutions in exchange for liquidity. Under the new policy, only ABS's with two ratings from an accepted external credit rating institution will qualify for the ECB's liquidity program. Both ratings must meet minimum credit requirements. The rule will be widened to include all ABS on March 1, 2011. The move is just one step toward removing some of the credit easing programs the ECB put in place during the crisis.
The ECB had been expected to lay out some details of how it plans to phase out Q/E at the Dec meeting, a positive for the euro. The single currency had already bounced off the $1.4800 area prior to the announcement and was able to recoup about half the day's losses after the announcement. But the euro remains vulnerable to overall dollar strength and unless the currency is able to break above the $1.4880 area the risk is for another test of the $1.4800 area.
Position: None
Some recommended reading on TheStreet.com this morning:
Analysts See Opportunity in I-Banks
Intel Charts: Upcoming Opportunity
Position: nm
In October, 29 states and the District of Columbia recorded over-the-month unemployment rate increases, 13 states registered decreases and eight states had no change, the Labor Department said today. Non-farm payroll employment increased in 28 states and the District of Columbia, decreased in 21 states and remained unchanged in one.
Click here to read the full area unemployment report.
Position: nm
How can a country fight rising inflation when subjected to massive capital inflows? Brazil and Taiwan are taxing or restricting those inflows; India has a separate problem.
Inflationary pressures are rising, and the OECD has recomended the Reserve Bank start raising interest rates to head it off at the pass. That's standard operating procedure.
However, the higher Indian short-term rates are, the wider the carry from the USD to the INR. The excess return on this carry trade since we went to quantitative easing in March has been 12.92%, not bad when our own T-bills are fighting to maintain positive yields.
This is how inflationary pressures and financial bubbles are transmitted from countries such as the U.S. to countries such as India.
Position: None
That was a really unpleasant earnings report from ADCT Telecom last night. The broadband infrastructure company reported that revenues fell 37% and it continued to lose money. The company also said that it expected business to be weak in the final quarter as the large telecom providers cut back year-end spending further than they have in the past. If the company posts a loss for the fourth quarter, it will be its sixth losing quarter in a row. It lowered expectations below estimates and predicted a break even to $0.10 a share loss in the quarter.
The company's cash position is just about equal to long-term debt so the balance sheet is reasonable. Eventually, this company will benefit from broadband buildout, especially in China, where it has a strong presence. For now, business remains slow and the stock is getting hit hard today -- down 14.6% so far.
Position: None
Mother Merrill/Brother Bank of America (BAC) adds Prudential (PRU) to its U.S. 1 List and removes Seaspan (SSW), Texas Instruments (TXN) and Torchmark (TMK).
Position: Long BAC
Admittedly, we are weaker than I anticipated this morning. Here are some quick position updates:
I am looking to short shares of Autodesk (ADSK) around the 23.60 area. Assuming this one stays under 24, this will close out my initial earnings position, plus the later additions. Timing for this wasn't perfect as my total profit picture was higher, but the initial trade and all subsequent adjustments should close in the black.
I am going to sell my Abercrombie & Fitch (ANF) Nov 40 calls in this .35 to .40 area. The adjustment helped stem the loss, but a loss is still a loss.
I've been busy with Goldman Sachs (GS) this morning, but have very little left other than short Nov 175 calls. Yesterday was the optimal day to exit all the positions.
I sold my Dec 65 puts and Dec 70 calls on Salesforce.com (CRM) for 13.80. I still am left with naked Novembers which should expire today. The original cost was 13.05.
I sold the remaining Sears Holdings (SHLD) Nov 65 puts, but only walked away even from the trade.
Network Appliance (NTAP) - I have shorted the stock and sold the Dec strangles to lock in a profit.
Lastly, sold FAZ Nov 20 puts for .20 and FAS Nov 77 calls for a quarter.
Position: looking to be out/neutral on all positions
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Marc Chandler
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| Watch $1.4880 in the Euro for Dollar Direction |
11/20/2009 11:36 AM EST
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There is much talk in the markets about a double-no-touch structure between $1.48 and $1.51. However, more immediately we think the $1.4880 area is a key pivot. A move above $1.4880 would take neutralize the downside pressure on the euro and point to a retest on the $1.4960-$1.5000 that has capped upticks over the past few sessions.
In conversations with clients, two things continue to be noteworthy. First is the extent of the negative dollar sentiment. The dollar bears are numerous and with the dollar falling since the start of Q2, it continues to seem to be a crowded trade.
Second, the market is nervous. It has not embraced the euro in its own right, but rather has moved toward the euro because it is not the dollar and is the liquid alternative. The nervousness of the long euro holders is evident in the options market where the premium being paid for euro puts over euro calls (equidistant from the forward strike) made a new high for the year today at 1.19%. In contrast, in early June when the euro was just getting above the $1.40 level, the market was paying a similar premium but for euro calls not puts.
Interest rate differentials continue to move against the US. This week alone the 2-year note spread moved almost 25 bp in Germany's favor over the US. The June 2010 Euribor-Eurodollar spread is making new highs (in Europe's favor) today. This is not the stuff that is usually associated with a dollar bottom. On the other hand, the technical condition points to the vulnerability of the euro (and other foreign currencies by extension). More talk of a double dip in the main economies, disappointing economic data, some increased concerns about the financial fragility are serving to slow the risk-on trades and give the dollar a sense of stability.
Position: NOne
I love the comments from John Mack last night. At a financial forum last night when asked about increased regulation for large banks the JPO Morgan executive said something that is laugh out loud funny. "The regulators need to be more involved. We cannot control ourselves." He told the panel of journalists that he liked the fact that regulators were in the JPO Morgan offices full time because it forces them to practice risk management.
This is why we will always go from fiasco to fiasco on Wall Street. No one is accountable. Shareholders get dazzled by quarterly numbers and executive strive to maximize bonuses. No seems to take responsibility for their actions because they cannot help themselves. That sounds a lot like a junkie blaming the system for his addiction.
Position: nm
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Howard Simons
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| No Coulda, Shoulda For Wood-a |
11/20/2009 11:44 AM EST
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There was a momentary burst of excitement a few days ago about a spike in lumber futures prices. As veteran sportscaster Hawk Harrelson might say, "you can cancel the post-game show."
Prices have retreated in the three days since, and from levels reached first in 1979. The forward curve of lumber futures remains in a quiet carry. The nation's homebuilders may want to solve the housing supply overhang by building more houses - hey, we live in such a world, - but don't look for this to squeeze short-term lumber deliverability.
I'll have more on this subject Tuesday.
Position: None
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Tim Melvin
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| Transaction Tax |
11/20/2009 11:50 AM EST
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Those who think that there is a little chance a financial transaction tax will ever pass should pay attention to Nancy Pelosi's recent comments. She describes the proposal as one of the many ideas under discussion. The Speaker said that while it is not YET a high priority the idea has substantial currency on our caucus. This idea is gaining support and I can see it becoming a reality sometime in the next year or so if we are not careful.
Given the current Wall Street-Main Street disconnect, an amateur politician could funnel the anger and resentment into popular support for this idea. I am with Rev on this one. The time to speak up is now, not later.
Position: nm
This is generally the time of the day where I will close any pinning plays that are showing a nice profit, or that don't have much time decay left. The decay seems to slow from now until about one hour left in the day, so for me, the risk-reward just isn't there. AAPL, GOOG, BAC, AIG, etc should all be sitting at profitable junctures if they were jumped on near the open.
Position: nm
Tim,
You left out the part where she says she clearly opposes the plan because it won't work unless applied internationally, which goes back to the Merkel/Brown push, which was rejected outright at the last G20 meeting.
It's the House's job to represent small constituencies, not international policy. The tax won't happen internationally and it won't happen here.
Position: nm
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Rev Shark
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| Tax on Trading |
11/20/2009 12:08 PM EST
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There was yet another debate on CNBC about a tax on trading with another academic telling us how everyone should be investing for the long term and how short term speculation is a useless waste of time. Is CNBC incapable of finding someone who can express what a horrible idea this is?
Kendall Harmon, a trader I have worked with for many years expressed one extremely important aspect of the problem very well:
This kind of a tax changes the playing field as a result of which all sorts of people and participants will change their behavior. ALL of these behavioral changes have to be taken into consideration in order to fully understand the overall tax revenue implications of such a proposal.
If you understand the way markets work, and especially what has happened due to the technological and information revolutions since the 1980s, then you know that an entire culture and related multiple additional subcultures have arisen all around the markets as individuals have participated in many ways as never before. If you understand that then you can see that the collateral damage will be MASSIVE. This MASSIVE change will have significant tax implications which almost all advocates do not even think of, much less mention.
The issue they ignore is the OVERALL tax revenue implications of the proposal given all of the subsequent changes it will cause. The result will be much less corporate revenue, less individual revenue, job loss, small business loss, website and pay site implications, computer, phone and internet implications, and the list gets very long very quickly. All of those additional changes will result in more revenue loss for the government."
Position: None
I absolutely agree with all that, which is why it isn't going to happen. I did hear one interesting variation, in which only transactions over 100k would be taxed. Now that was hilarious, considering that everything is subdivided into tiny units now, as a result of Reg NMS. Just shows the proposal is part of a left wing dreamland.
I think you only lose sleep at night if you believe we have a leftist administration, ready to promote this trash legislation. I don't. I think we have a generic, plain vanilla centrist administration, all dressed up in progressive clothes. At least we knew exactly what we got with Jimmy Carter.
Position: m,
Perhaps against my better judgement, I am going to ride most of my Abercrombie & Fitch (ANF) puts into the close. I had intended to sell them, but got caught up closing out most of my other positions. Had I sold them, then I would simply being shorting the stock here (based on the pricing, its the same thing, so as not to make any reader's feel like they missed out on some gain they could have had if they'd done a similar trade).
Also, I've shorted the November 20 straddle on the Direxion 3x Daily Financial Bear (FAZ) at 46 cents.
Position: short FAZ straddles, ANF
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Tim Melvin
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| Natural Gas Prices |
11/20/2009 12:46 PM EST
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Natural gas just keeps falling. Prices are down 15% this month as industrial demand dries up. We are using a lot less electricity, especially to industrial consumers, and we have more of the stuff in storage than at any other time in history. We have added to reserves every week for months now and the storage facilities are over capacity.
At some point we will wake up and realize that much of the green energy projects we are throwing money are not feasible and start looking at gas as a primary fuel source. When that will happen is anybody's guess, but if this stuff keeps falling in price, it is going to be necessary to start looking for ways to play the long-term future of natural gas prices.
Position: nm yet
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Sham Gad
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| The Fertilizer Love/Hate Triangle |
11/20/2009 12:47 PM EST
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It's been nearly a year since the Agrium-CF Industries-Terra love saga began. CF made a bid for Terra, which was followed by Agrium making a bid for CF contingent on CF abandoning its Terra bid. Over that peroid, Agrium has sweetened it offer for CF a couple of times, the most recent being $45 in cash plus one AGU share, or ~ $100 a share. We got a lot of news this week. First a majority of CF shareholders voiced support for the AGU/CF deal. Then last night at the Terra meeting, TRA voted to elect 3 CF reps to TRA's board which certainly helps CF/TRA marriage. Over the long-run I think CF is well worth over $100, but I cant help lean towards CF/AGU. I think CF shareholders would do very well long term in getting a little cash a share of stock, as I think AGU is an excellent long-term bet. CF shares are down today despite a rise for the other fertilizer plays. And at $82, it's a 20% uspide if AGU prevails. I think CF has great management and they are right to say the offer is too low, but with 65% of CF's shareholders thinking otherwise, this saga continues.
Position: na for now....
I don't follow P/C or VIX as some do, but I noticed that the VIX is down hard today. Why?
Position: None
Looks like Bloomberg mispriced a VIX quote as it's right back up. Odd.
Position: None
Jim G., this looks to be something along the lines of a bad tick. First, the VIX is at 22.77, up 0.14, as I write. That, by definition, is not down hard.
I just put up an intraday chart, and from 12:44 to 12:48 EST there is a big drop followed by a big rise back to where it started. As the mechanics of VIX construction involve weighting various options across their moneyness, the likelihood of a single bad options price creating this distortion is pretty low.
I would just let this pass for now; we will probably get an explanation later.
Position: None
Shorted some ProShares UltraShort S&P 500 (SDS) Nov 37 straddles for .37 My target is to close these at .20 before the end of the day.
Position: Short SDS straddles
Hewlett Packard (HPQ) has earnings next week, and it may get a little run here. As I will probably being bullish into the call, I've picked up some Nov 50 calls at .18 and .19 If it runs, great. If it falls below 50, then I limited my risk, and can buy again Monday.
Position: Long HPQ
For those that want the high risk/high reward play, I picked up a few Nov 180 calls at 1.35 and 1.40 on regulatory approval in Japan for Intuitive Surgical.
Dec options would be far less risky!!
Position: Long ISRG
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Tom Graff
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| Credit slightly wider, buyers showing up |
11/20/2009 1:17 PM EST
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Corporate bond spreads opened wider, but now its much more mixed. Buyers are definately emerging. Its the back bid all over again. The basic reality of PMs having more cash than there are bonds to buy remains in place. As long as that holds, any credit widening will be mild.Notable movers today include Dell. The 5.875% of 19 opened with a +150 bid, about 10 wider from pre-earnings levels. Now seems to be more like +145. Other tech names are slightly tighter. Cisco '20's are 107/104, -1. HP '18's are 84/75, -3 on the day. ORCL 19's 99/94, +1.Energy also opened up weak, now most names are 1-3 tighter. Finance opened 3-4 wider, seems to be holding there. Pharma looks 1-2 tighter. Consumer names performing well. Home Depot 2016's +91 bid, 4 tighter today. Darden 2017's 180/175, 3 tighter.
Position: Long DELL, ORCL, CSCO bonds
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Geoff Johnson
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| Cold Weather Could Help Apparel |
11/20/2009 1:22 PM EST
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Some of the consumer weakness in apparel (and other cold weather related goods) has been due to unusually warm weather in much of the northern part of the country. Unusually cold weather aided September, but took away from October. Kohl's management noted that consumers are buying closer to need and without the chill there's no need to bundle up. Here in Minnesota we're usually solidly into hat/scarf/mitten weather by now, but one of the warmest Novembers on record has made bundling up unnecessary. I heard a weather report say we're due for a serious winter blast by end of November, early December. It may only be a marginal benefit, but it could firm up sales a bit.
Position: none
Well there went a quick 90 cents as ISRG reversed hard and I was stopped out of my position at .50. Not a huge position, but I hate losses none-the-less. OK, back to weaving or something other than watching the markets for a few minutes.
Position: nm
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Brian Gilmartin
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| Watching the close for a change in market character |
11/20/2009 1:31 PM EST
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Rev Shark occasionally writes about the "character" of the market and watching how it changes, so we are watching the close today. Since the March '09 low, the market openings have been generally weak with rallies into the close, which we think is a classic symptom of a healthy bull market. (In the early 2000's particularly the Nasdaq meltdown, we'd come in in the morning and see higher Nasdaq futures with a higher open, and then an afternoon fade with a close at the lows, which was sickening to watch.) Even yesterday, we saw a little rally in the 90 minutes, only to give part of it back in the last 30 minutes. With the market seemingly trading heavy, and the inability to hold 1,100 on the S&P 500, we'll watch for a heavy volume close at the lows, which we havent seen very much of all year, and that will be our tell for a near-term top being in place. Next week is Thankgiving week and likely lighter volume. Monday's action is all the more important. Our big up or down days this year have seem to come on Monday's starting with Asia markets in overnight, pre-USA action.
Position: long S&P 500 index funds, SPY
Flipped out of HPQ after the ISRG debacle. Sold at .24 and .25 on the Nov 50 calls
Position: nm
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Alan Farley
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| Oil Services HOLDRs Trust (OIH) |
11/20/2009 1:36 PM EST
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OIH broke a 3-month trendline and the 50-say EMA this morning. The message seems to be a loss of conviction that crude oil going to rally above 80. That breakdown also ties in, thematically, with the EUR/USD failures at 1.50.
Position: nm
Not surprising, but most listed alternative funds fail to deliver any value whatsoever. Even though we have a chapter on the foreign listed hedge funds in my book, I gave up talking about them a long time ago.
Position: None
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Don Dion
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| TIBB/BOFL |
11/20/2009 1:44 PM EST
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The stock prices of Bank of Florida (BOFL) and TIB Bank (TIBB) continue to decline and these two banks continue to report losses. My observations of the real estate market over the past two weeks in SouthWest Florida is that only the very strong banks will survive. I would not be surprised if these two banks are history by year end. Be very careful with BOFL and TIBB. Both actively trade but now have small market caps.
Position: none
Alan, some of the components of the Oil Services HOLDRS (OIH) are in shoot-first, ask-questions-later mode. All it took was a story about Mexico canceling some capital spending for a firm such as Noble (NE) to sell off hard this morning.
Scan through the components of OIH and you won't find anything to get enthusiastic about. Many of the firms wound up in excess capacity situations by mid-2008; after all, the bull market in energy had been under way for nine years at that point and order books were full.
This is one more industry where low interest rates have done what they can do.
Position: None
Shorted some Gap (GPS) shares at 21.90. These are to cover the long Nov 21 calls, but it does leave me open the short Nov 22 calls (although those are technically covered with the long Dec 21 calls, but that would not be profitable). The original spread was open at .70, so trying to realize .90 instead of .80 here. The spread can be sold for .80, which wouldn't be bad either.
It's time to take a good chunk of the Bunge (BG) Nov 60 calls off the table with very little time left. I should be able to sell these here at 2.95 and I will put in an order to buy back the short Nov 65 calls for a nickel. Given the M&A in the space, I do NOT want to be short the 65's at the close. Remember, options don't expire until tomorrow night, so news after the close today could still impact a holding. If BG were to get bought at say $75 per share, you better believe those "worthless" short 65 calls that I thought "worthless" would be called away from me in a hurry. This is a case where that is a nickel well spent due to the current sector environment.
Position: Long GPS, BG
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Don Dion
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| Position Oversight |
11/20/2009 2:43 PM EST
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I forgot to disclose a position in this post; Dion Money Management is also long SPDR KBW Insurance (KIE).
Position: KIE
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Timothy Collins
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| JOBS...the stock cause I don't see any others |
11/20/2009 3:04 PM EST
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I'm taking a small stock and options position in 51job, Inc (JOBS) over the weekend. The Dec 17.50 calls are .60/.65 and the stock is currently 16.30. This one has earnings Monday morning before the market opens. On good numbers, the stock could push 18 pretty quickly. On a miss, I think the 15.25 area becomes support. 14 would be on the table with an abysmal report, but I don't see that here.
Position: If you can't find a job, then buy some JOBS
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Doug Kass
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| Memo to John "The Candy Man" Reese |
11/20/2009 3:10 PM EST
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The Oracle is spent-up, not pent up!
Position: None
In case you missed it, Dan Freed writes on the banks' holding pattern due to looming regulation about capital requirements.
Position: n/a
Flipped a few of the Dec 17.50 calls on 51job, Inc (JOBS) as they are pushing .85/1.00 already.
Closed the short Nov 22 calls on Gap (GAP). I will hold the Dec 21 calls going into Monday, but the rest will wash out.
Closing the ProShares UltraShort S&P 500 (SDS) short Nov 37 straddles for .22 or better, decent, although it may be just short of my target.
Closing the Direxion 3x Daily Financial Bear (FAZ) short Nov 20 straddles at .18 (these were sold for .46). Much happier with these than the SDS. Also, sold my long Nov 21 puts for 1.07
Selling the remainder of my Bunge (BG) Nov 60 calls (just a smattering left) and was filled on all the short Nov 65 calls at a nickel.
Position: Long JOBS, GPS
Greenspan and Bernake have gotten it soooo wrong, I am in favor of the Fed audit. Failure cannot be rewarded with smoke and mirrors. Audit the Fed.
Position: none
I know there are many doubters and lots of articles that point to the fact that pinning is just a myth and doesn't exist. I disagree. I present Apple (AAPL), Google (GOOG), Goldman Sachs, and Hewlett Packard (HPQ) as my evidence today. No, it won't happen with every stock, but there are at least another dozen I could add to this list.
Position: nm
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Howard Simons
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| Pin To Win And Plaudits For Audits |
11/20/2009 4:16 PM EST
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Tim C., I agree. While not every market pins at every expiration, the mechanics of how insurance changes behavior will create a situation at many expirations where price will converge on a defended strike. It is not a rule, but once the game starts in that direction, it tends to finish there. Moreover, I have seen commodity markets lurch from one strike to another during the course of a day. Greatest pain to greatest number and all that.
Bob, I agree on the audits. I cannot imagine a division manager in a widget company telling the EVP of Finance that his widgets are too important to face an internal audit. He'd be fitted for thumbscrews until his attitude improved somewhat. Honest people with nothing to hide covet the seal of approval an audit conveys.
Position: None
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Tom Graff
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| Bond market errata |
11/20/2009 4:34 PM EST
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Long-term Treasury bonds had a wild day. Despite stock market weakness, the long bond was flat at 8AM, down 3/4 of a point at 10AM, up 1/8 of a point at 11:30, down 5/8 at 2:30, and finished down 1/4. Take this as a bit of a preview of what light holiday volume can do to prices. Then remember that we have $118 billion in Treasury auctions. Could be very volatile.Municipals were very firm today in the face of Treasury market weakness. The two markets seem to have completely decoupled.Swaps spreads were mildly wider again today, by about 1bps in most parts of the curve. Interesting then that agency MBS and agency debt were both tighter vs. Treasuries. Like munis and corps, its all about too much cash chasing not enough bonds. Next year we might see some crowding out, but not this year.
Position: Long TBT
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