All day and every day, some of the stock market's best and
brightest traders and money managers share their ideas, insights,
and analysis in real-time on Minyanville's Buzz & Banter.
Here is a small sampling of this week's activity in the
Badger Moves Overseas
With the risk of a hawkish Summers now in the rearview mirror,
and new focus on US and Germany hitting new highs, the honey
badger seems to be moving overseas. Note that as of this Buzz
(NYSEARCA:IWM) is lagging the
Money is favoring the global growth trade again, and emerging
markets continuing their rip higher seems to suggest a big
repricing may be under way. Our ATAC models used for managing our
mutual fund and separate accounts rotated into the fat pitch last
week, and it finally does look like momentum is strongly taking
Alpha potential remains rather large, and I suspect
(NYSEARCA:EWZ) will in particular begin to accelerate in a
meaningful way. This is such an underinvested area of the market
that an alpha spike can easily occur. In many ways, if the move
is here, it must be fast to resolve crisis pricing.
Badger on. Batter up!
Take away the hype, and we basically have a standard Monday run
to weekly R1 for both
(1696.25 and 3196.75). This often signals a high for the week if
we get failure, and the weakness in
(INDEXNASDAQ:NDX) could be pointing that way. NYSE
advance/decline opened just under +2500, an extreme, that has
since retraced to +1865 as I type.
What is bit troubling for bulls is NQ trading back under the
September 11 high of 3183, a negative divergence that has yet to
affect ES. NDX year-to-date gains are less than that of the
, a continued negative divergence that could signal a major top
under way for the Nasdaq. Bulls need to wake up and get NQ back
above that level and hold it, or risk a gap and crap and drag
down the rest of the market. In fact, it would be much more
healthy to see some fear ahead of the Feds.
is back at 124'180, Summers has nothing to do with what will be
decided this week or the debt ceiling at the end of the month.
Time for the Easy Bake Portfolio?
It is easy to get excited as the market starts acting like this.
It seems like things are just going to go up forever, and we can
just put the Ron Popeil portfolio in place and
set it and forget it
! Up cycles like this usually have about a 20-day life cycle, so
keep that in the back of your head as you could argue that the
up-cycle started on August 21 in most indices and on August 28
So, from August 21, we are 18 trading days in here. RSI is up at
66. The McClellan Oscillator is somewhere over 60 right now after
today's move, and if it closes strongly, we could see the dreaded
+70! Momentum needs to slow down fairly soon and give us a nice
trend and a higher low.
Other things we can consider would be the "measured move" of the
island reversal mentioned on September 10 that would give us a
move to around 173 on the
. This would be a pretty nice reversal area to come back and fill
today's gap. Additionally, our
Natural Gas ETF
(NYSEARCA:UNG) from 9/11 trade is going to run into heavy
resistance at around 20. At that point, I plan to take off
one-half and measure the action around that resistance. Now is
certainly not the time to get complacent, but it is time to look
at areas of profit taking and have a plan. When we get
complacent, we tend to become reactionary rather than prepared.
That can be a recipe for disaster.
Try not to let the highs get too high or the lows get too low.
Remember, it is not a profit until there is a buy AND a sell.
Click to enlarge
Best Products was a Richmond, Virginia-based company that had a
revolutionary business model in the retailing industry.
Originally founded in 1958, Sydney Lewis began a highly
successful showroom catalog business. The idea was to walk around
the store and examine the products, deciding which of them you
wanted. Then, you filled out a form for said products and took it
to a clerk. In turn, the clerk submitted that form to a warehouse
worker who "pulled" those products from the upstairs storeroom
and placed them on a conveyor belt that took them down to the
cash register. At its peak, Best Products had over 200 showrooms
in 27 states. Mr. Lewis was a master merchandiser. In later life,
he decided to turn the business over to his son and pursue his
passion of collecting/donating art. With that selection of a new
CEO, the stock cratered and the company eventually went bankrupt.
I recalled that story thinking about how badly Andy Lewis must
have felt as he assumed his father's role, only to see the stock
price swoon. Similarly, Larry Summers must have wanted to "kick
his dog" yesterday as the stock market exploded on the withdrawal
of his name for consideration as the new Fed head. I have long
stated that I doubted if Mr. Summers would be nominated, and that
even if he was, he might get up in the middle of the Senate
confirmation hearings and say, "You guys are a bunch of idiots",
and walk out. There is no doubt Larry Summers is the smartest guy
in the room, but that doesn't necessarily mean he has the right
temperament for Ben Bernanke's job. I have maintained Janet
Yellen was going to get the "nod" for a multiplicity of reasons
and yesterday the stock market agreed. Indeed, the "Summer (s')
rally" came late this year beginning in earnest on 9-9-13 with
the Syrian chemical weapons deal. As stated, that news wrecked
the rhythm of the decline, and when combined with the changing of
the Dow components, well y'all know what's happened.
Monday's Dow Wow took the
(INDEXDJX:.DJI) within sneezing distance of their all-time
closing high (15658.43). Ditto the
(INDEXDJX:DJT), which hit an intraday high of 6629.29, also
within sneezing distance of their all-time closing high
(6670.06). At this juncture I would wait to commit more capital
because either we are going to get new all-time highs from those
two indices (a Dow Theory "buy signal"), or we will get a huge
upside non-confirmation. A potential "tell" may have come
yesterday when the
broke out to new highs and then failed to extend (see chart).
Click to enlarge
Dueling Reactions for Microsoft and Pandora
It's interesting to note the reactions to news from
Microsoft announced a significant dividend increase and share
buyback program, which drove a quick 5% pop to $34.49. Less than
two hours later, the stock's just barely holding on to $33. (I'm
short and looking to close my position out very soon).
Bad reactions to good news? Not a good sign, especially on a day
(INDEXRUSSELL:RUT) just keeps creeping higher
And Pandora announced a dilutive secondary offering, which had
the stock declining as low as $22.50 after the close yesterday, a
fall of 6%. But Pandora is very quickly making up ground and is
right back around $24. Remember, when secondaries get bought
quickly (as we saw with
) recently), that tends to be a bullish indicator.
And by the way, if Apple's new iPhones don't take off, Pandora
may be a beneficiary as Apple is putting out iTunes Radio, a
competitor to Pandora.
Check out the charts below.
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The markets are in meander mode with an upside bias (surprise) as
we tick-tock toward tomorrow's Fed announcement. Meanwhile, the
bear (formerly plural) is attempting to hold the line at recent
-- and yes, all-time -- highs.
There's not much left to say that hasn't already been said; the
tape trades great, and the bulls (plural indeed) will look to use
tomorrow's alleviation of the big bad unknown (taper) to their
advantage and trigger the cup-and-handle formation we flagged
It continues to feel like 2003, with gains begetting gains and
performance anxiety driving a long squeeze all the way up. It's
been ages since we've witnessed a "healthy" 10% correction; what
remains to be seen is whether the supply is pent up, or off in
the distance. I don't trust 'em but I sure respect 'em; having
"RALLY" tattooed across your forehead will help do that.
Tomorrow promises to be whippy so get some rest tonight; for my
part, I'll be jockeying between lacrosse practice (for club team
#2) and the fourth-grade football draft, looking for sleepers
along the way. I'm not complaining mind you; once upon a time, I
pined for balance between working hard and that thing called life
and in what seems like a blink of an eye, I'm up to my ears in
Six-two stacked monster; I'll see YOU in the ayem.
No Taper, No Cred
Taper you say? No way, says the man with the spigot; despite
hints and innuendos to the contrary, the FOMC is keeping the
punch bowl front and center. There couldn't be a more dovish
move, absent an
The first, and yes, intuitive, move is higher as the
pops through 1709 and notches a new all-time high. THE question
will be whether folks begin to question the credibility of the
Fed -- -
a view that I share
-- and ask "why" rather than "what?"
IF (big if) that mindset permeates, the first move (higher) will
prove to be the false move.
FOMC Instant Reaction
I was wrong. This is more dovish than I could have imagined.
Slower growth, no tapering, less urgency to hike rates --
This all seems bullish from a monetary policy standpoint. Ben and
Yellen didn't take this chance to taper so they want markets
higher. That seems to be the main takeaway.
The fact that their June growth projections seemed optimistic has
already proven true. They took down 2013 and 2014 but don't
worry, as 2015 is going to be great. Just like 2014 was going to
be last September.
One thing we have speculated on is that the Fed is no better at
modeling the economy than anyone else, and possibly worse than
most large funds who are paid to be right.
In June, we rallied on growth. Today, we rally on more QE.
Logically, I'm just not sure how a policy that isn't working as
well as they would like (or else they wouldn't have cut growth)
just needs more.
I will be curious to see if this sparks more layoffs in the
mortgage industry. I will be curious to see what other countries
think of this move, especially that notorious "currency
manipulator" China. Maybe EM will be happy as the flood of cheap
money pouring in resumes?
I am not sure why Summers managed to get involved so easily when
Yellen seemed like a sure thing, but I can't imagine today really
helps her case.
At least those who did think we should hike rates next year
thought they should be above 1%, even while inflation projections
were higher, and allegedly we will be about to burst out in 2015.
This move coupled with last week's
deal would seem to be great for LBO candidates. Can we get that
first $100 billion LBO done?
For all of this not to be good for the market we would need to
see the market focus on growth or the lack thereof. Or we would
need a market to become disillusioned by the fed that a couple
people control so much and seem to be guessing as much as anyone
else on what it does or what the future will bring.
For now I have to sit back, lick my wounds on this and see if the
press conference alters anything, but in spite of how bullish
this seems, I can't help but think the Fed is losing credibility.
Thursday, September 1
Is It Over?
Could it be that the trend of yields rising is over?
The charts say.... yes.
Across the curve, yields have dropped below the 40 dma, which
would indicate the trend higher is over. Historically, when
yields are in a trend, the 40 dma has always acted as the "fence"
for that trend, so to speak. Breaking through that support
indicates the trend is over.
We'll have to spend some more time in this area to prove it's not
a fakeout, especially because it is due to some heinous Fed
activity, but so far the charts are saying that the trend of
yields rising is over. Hallelujah!
Click to enlarge
Click to enlarge
There is an old adage that you can drive from New York to
California with your headlights illuminating only 20 feet in
front of you the entire time; that's the mindset for active
trading, where a stair-stop process trumps big-picture concerns
seven ways till Sunday.
That approach is being debated across the street as macro funds
attempt to shift their style to capture reward. With the
up 20% -- and
(INDEXNASDAQ:.IXIC) up 25% -- those who have relied on
traditional metrics (such as the market being an extension of the
underlying economy in any way, shape or form) have found
themselves playing ketchup in the evolving long-squeeze.
S&P 1710 (former resistance) is next-step support -- with
below that -- as the market casts a forward eye on the potential
government shutdown. Of course, each and every potential pitfall
has been swallowed whole by the bulls so you can excuse them for
not feigning concern. That may or may not matter with the
(INDEXCBOE:VXO) at 13 or with the Fed chair telling us the
economy is soft (the "why?") but we should continue to see both
It is worth noting that the S&P teased the bulls with similar
breakouts in May and August before providing requisite pullbacks
of 8% and 5%, respectively. Of course, even the bears are
conditioned to cover up quick given the pungent smell of singed
fur, which begs the question of where we are on the second chart
As always, I hope this finds you well.
Click to enlarge
Click to enlarge
Some weeks ago, I offered that Tesla had potential to 177. TSLA
has bounced off well-tested support at its 20 DMA and spiked up
Today's date vectors/aligns with 176.50 for a possible square-out
A reversal back below recent lows around the 20 DMA in coming
days would confirm the significance of a possible square-out at
Below, see the daily TSLA chart from May with its 20 DMA.
Late May was a spike high. Roughly 60 degrees later in late July
was a spike low, so it will be interesting to see if a
high-to-low-to-high cycle 60 degrees in time later happnes here
in late September.
Click to enlarge
Friday, September 20, 2013
Apple Up on iPhone Lines, Monday May Be Key
(AAPL) is trading higher this morning on optimism for the new
iPhone 5S, released today.
There are a mountain of news reports indicating big lines outside
stores in major cities, which is giving Apple bulls hope.
However, Monday may be the real tell.
Last year, Apple released the iPhone 5 on September 21, and
a press release
on September 24 announcing opening weekend sales of 5 million
I'd imagine an awful lot of people will be looking for
confirmation from the company on Monday. If we don't get a press
release, the stock will in all likelihood pull back then, unless
there are mitigating factors like bullish channel checks from
Was the Fed Bullied by the Bond Market?
In delaying the initial reduction in the pace of the asset
purchases (QE3), the Fed chairman cited the recent increase in
long-term interest rate and uncertainties surrounding the
upcoming fiscal negotiations. Of these two issues, the run-up in
long-term interest was the biggest concern (although the latter
is a significant downside risk for the economy).
The Fed was initially puzzled by the increase in long-term rates
back in the spring. The Fed's view had been that the total amount
of assets purchased was what matters, not the monthly pace. It
should make little difference whether the Fed begins to taper in
September, or in December, or in early 2014. Tapering is not
tightening. The Fed would continue to add policy accommodation as
it slows the rate of purchases. The Fed's strategy all along was
to use asset purchases to generate some momentum in the economy,
then scale the program back and rely on low short-term interest
rates to continue to provide support the economy.
Some Fed officials believe that the long-term rates rose because
of an improved economic outlook. However, recent economic reports
have generally been mixed (although consistent with a moderate
pace of growth) - not a significant shift from what was expected
earlier. More likely, market participants either misinterpreted
the Fed's intentions or there was a potential for a major
reassessment of risk. Market participants have never been clear
about how the Fed's asset purchase program was supposed to work.
Moreover, there is still some confusion between asset purchases
and monetary policy tightening in general. Amid tapering talk,
the bond market began to price in an earlier hike in short-term
interest rates than what the Fed expected. Most senior Fed
officials do not expect to begin raising the federal funds rate
target until 2015 - and most see that rate as remaining far below
normal even at the end of 2016. That commitment to keep
short-term interest rates low should prevent long-term interest
rates from rising too rapidly.
Long-term interest rates have risen significantly in recent
months. It's unclear how much that may slow the economy. The Fed
is merely buying some time so it can determine that impact.
Still, we all know that tapering is going to begin at some point.
Annaly Capital Cuts Dividend
(NLY) cut its quarterly dividend yesterday evening to $0.35 from
$0.40. At its current price that implies a 11.66% yield. For the
last 5 years, NLY has averaged a dividend of 14.4%. Even in the
recent two years it has averaged 13.76%, so a 13% yield is a bit
more realistic given where coupons have gone to. At a 13% yield,
NLY should reprice to 10.78 from its current 12.05. That's the
"bullish" scenario. There is also thinking I'm sure that NLY can
bring that payment back up, but I know that their WAC is in the
low 4's (I apologize I don't have the data offhand) so it would
be a little difficult for them in this stage to go up in coupon.
I am relatively bullish on MBS, but I am cutting the position
because I'd rather ring the register and not find out where the
market thinks the appropriate yield is for this instrument. Note
that NLY goes ex-divi on Sep 27. I may rotate this capital into
munis or a more conservative MBS fund simply from a yield
perspective, not price appreciation.
Note also that
(AMTG) cut its quarterly dividend to $0.40 from $0.70 and
(AGNC) to $0.80 from $1.05 so be careful if you own other mREITs.