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1. Watch the Small Banks Next Week

By Tim Melvin
3:41 p.m. EST

Next week should be interesting. We have Bank of America ( BAC - Get Report), Citigroup ( C - Get Report) and Goldman Sachs ( GS - Get Report), among others, reporting earnings. A lot of the smaller banks begin to report as well. As interesting as the big bank reports may be, I suspect they will all look a lot like JP Morgan's ( JPM - Get Report) this morning, with credit losses and trading gains of outsized proportions. It is in the banks without large trading operations where I suspect there may be some real damage from loan losses. I am hoping the carnage among small banks this earnings season is sufficient to push the whole group lower, thus setting up the trade of the decade. If we can get the market to throw the baby out with the bathwater, we will be able to start buying banks with strong balance sheets and excess capital well below tangible book value, with an eye on owning them for a decade, or until they are acquired.

Enjoy the three day weekend and the predicted-here-first Baltimore Ravens win over the Colts.

Position: Long a Baltimore upset of Indy

2. Retail Fade Begins?

By Robert Marcin
2:56 p.m. EST

The excellent researchers at ISI have a weekly company/sector poll they publish on Friday. It shows a material fade in the retail survey, including pricing power for retailers. My favorite sale is the big, high P/E discretionary-retail sector. I capture this by using equal-weighted retail ETFs. One swallow does not spring make, but it's a materially negative data point, nonetheless.

Position: None

3. Flying Junk

By Tim Melvin
2:44 p.m. EST

High Yield Bonds are flying off the shelf in the first few weeks of the year. According to an article from Reuters companies raised a little more than $11 billion by issuing lower rated bonds last week. That is the most ever according to the report. So far this month, we have seen more than $14 billion of newly minted junk bonds issued and snapped up by yield-hungry investors. In the face of strong demand many issuers have enlarged their offerings. Virgin Media ( VMED) tripled the size of its intended issue and Ford ( F - Get Report) tacked on an additional $500 million to take advantage of the feeding frenzy. The average rate on junk bonds right now is just 8.69% according to the Merrill Lynch indexes.

Given my view on the economy, the low yields and the amount of new supply being pumped into the market, I don't see how this ends well for the buyers of junk at these levels.

Position: none

4. UNH May Be Ready to Make a Move

By Robert Moreno
2:13 p.m. EST

The technical picture for UnitedHealth Group ( UNH - Get Report) may be making an important shift. The stock has been consolidating in a contracting range for over a year, with a clearly delineated resistance level at $30.00. It has recently, moved through that level and the $32.22 area, which marks a 38.2% Fibonacci retracement of the December 2007 high/ December 2008 low. The RSI shows positive momentum and there is solid buying volume.

UnitedHealth (UNH) -- Weekly
UNH Chart

The Average Directional Index indicator (below price) is used to identify trends and their strength. The dark thick line is the ADX. When it is moving up, a trend is in place, and the higher it moves, the stronger the trend. That trend can be either up or down; the ADX does not make that distinction. The red and green lines are two smoothed moving averages that indicate the direction of the trend when they cross over.

After a full year of consolidation and a move through long-term resistance, it would seem that this stock is preparing for an extended move. The ADX advancing past the 20 level and maintaining an upward slope would be confirmation.

Position: None

5. CF Abandons Terra Bid

By Sham Gad
10:35 a.m. EST

CF Industries ( CF - Get Report) announced it had dropped its interest in acquiring fellow fertilizer-sector rival Terra Industries ( TRA), having sold all of its Terra stake. This removes a key obstacle for Agrium ( AGU), which has been wooing CF for nearly a year. While CF still finds Agrium's bid too low, CF shares are up over 4%, while Agrium's shares are down nearly 4%, typical market behavior in an M&A deal. The current Agrium offer values CF at nearly $110, with CF still trading at $96. You can follow this entire saga by reading my article from last week. Stay tuned.

Position: Long CF

This article was written by a staff member of