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 Buzz.
GLD Following Through to Upside
Click to enlarge
In keeping with our morning note that a bullish 'hook' had been put
SPDR Gold Trust
(NYSEARCA:GLD) held the upside breakout on Friday and is following
through with a large continuation gap.
Friday looks like a Pause Day following Thursday's thrust - an
overall TNT pattern (Thrust, Pause, Thrust).
Click to enlarge
Today's outsized gap is over the 50-day and is threatening at least
2 key bullish technicals:
- A stab through the lateral 130 key resistance and prior
breakdown line from June
- An offsetting of the gap on June 30th.
Also, declining trendlines shown in this space last week are being
I was finally impacted by the
Time Warner Cable
) dispute and continuing blackout when I tried watching the PGA
Championship. That stunk. CBS said on Friday that total viewership
is only down 0.2% W/W from before the blackout and that it has had
a minimal impact on its ratings. This means that not a lot of Time
Warner Cable's 14.6 million cable customers are watching CBS owned
channels (which include Showtime, so I found out).
is on a tear to the upside today and is making continued bullish
movement, but the rest of the technicals remain bearish from a
longer-term view. The trend remains down, and at the very least, we
need to see a recapture of the upper rail of the downward channel
that on May 28.
Click to enlarge
On the other hand, crude failed right at the 61.8% retrace, which
the bears needed to happen. Net-long positioning in the weekly COT
report was only reduced marginally by 5.4K contracts to +357.52K ,
representative by a few shorts being added. So that downside
For rates, the 5-year yield has now flipped into a bullish trend,
though the 10-year and 30-year remain neutral and very close to
turning positive. They had all been in a bearish trend since the
second week of May. Positioning remains more neutral via the JPM
survey, SMR survey, and COT futures, so upside catalysts are
possible there. Using the
long bond future
(US1) as an example, open interest has declined to 580K contracts
from a peak of 744K contracts in early May. For this morning's
action, we saw strong buying show up at the NY open, and that has
now gotten flipped back at higher prices. Demand during the NY
sessions has been stronger than the Asian sessions, for what its
Equity breadth after the first 30 minutes was almost exactly 1:1
neutral for NYSE all securities. After the first 60 minutes, this
was relatively unchanged with a tiny amount of decliners added.
While looking through positioning charts, I re-stumbled across the
net-long positioning of speculators in S&P 500 futures, and it
looks like another bearish divergence from the prior market highs.
Net longs decreased to +97.4K, with longs being reduced by 40.5K
contracts. Shorts increased by 40.97K. See it below.
Click to enlarge
Apple Vs. Gold: Parallel Bull Market Structures
Got your attention? Okay, I'm having a little bit of fun here. But
really, there is a rhyme and reason to time and price and to how
investors herd to a particular stock, commodity, or trend. A look
at a chart of
) vs. gold highlights the parallel bull market structures… and
Click to enlarge
Investor psychology is reflected through price movement and is a
big reason why I am a proponent of technical analysis. Support,
resistance, trend following and exuberance.
Trade safe. Trade disciplined.
Click to enlarge
I hate to sound like a broken record, especially since the downside
move I have envisioned has yet to materialize. I will, however, say
that the stock market's upside momentum has waned since my July 19
timing date even if prices have not gone down. Still, the weight of
the evidence suggests this is not a time to be playing very hard
with stocks as the divergences continue to mount. Yesterday, the
astute Jason Goepfert wrote, "Despite the fact that most
broad-based stock indexes are hovering near new highs, 'sentiment'
has deteriorated, forming a kind of negative divergence (see
chart)." This is what happened right before May 22. Jason goes on
to note that the Option Speculation Index is flashing cautionary
signals as well. Similarly, when I run many of my indicators, they
show the same kind of negative divergences. For example, the credit
spread between "junk" bonds and Treasuries failed to make a new
high. In the past that divergence has been a cause for pause. Then
too, the number of stocks in uptrends is declining, yet another
negative divergence. And while in the past the Hindenburg Omen
Indicator has not worked all that well, when it does work, it is
impactful. Recall a Hindenburg Omen is registered when: 1) the
daily number of NYSE new 52-week highs and the daily number of new
52-week lows are both greater than or equal to 2.8 percent; 2) the
NYSE index is greater in value than it was 50 trading days ago; 3)
the McClellan Oscillator is negative on the same day; and 4) new
52-week highs cannot be more than twice the new 52-week lows. All
of those metrics occurred last week. If the Hindenburg works, we
should see the
(NYSEARCA:DIA/154.03) close below 154 followed by a break by the
(INDEXSP:.INX/1689.47) below 1684.
While stocks are not going down, they are not really going up
either. The sideways action has caused my phone to light up with
the question, "Jeff, are you softening your downside call?" So far
my answer has been, "No!" Our financial advisors have been getting
questions too. The question du jour is, "Okay, we raised some cash,
but the downside did not show up. Isn't it time to put that money
back to work?" Of course, in most cases these are the same folks
who didn't want to buy stocks on the back-to-back Upside Volume
Days of 12-31-12 and 1-2-13 that kicked this buying stampede off.
This morning, however, they are right with the pre-opening futures
up on hints of stronger economic data on both sides of the
Getting Long BBRY
), which has fallen over 95% from its all-time stock price high of
over $230 about six years ago, has recently been making rapid
rebounds in the market after news that CEO Thorsten Heins might be
taking the company private. Prices spiked upwards about 7% to
$10.42 this morning on positive speculation from reports that Heins
wants to get out of the public spectrum and allow BlackBerry to
catch its breathe. The company has not yet begun its search for
prospective buyers, and BlackBerry is quite an unattractive prize
for any enterprise interested given its 13% stock price drop YTD,
EPS of -0.41, and steep loss of subscribing customers. However,
there are other enterprises like Silver Lake and CPPIB that have
shown some interest in the failing mobile network provider.
Analysts project that if Silver Lake is successful in taking
) private, it may become partners with BlackBerry as well. Dell has
struggled with the changes in the technology industry, from
desktops to mobile devices. A pooling of the companies' efforts and
resources could solve their problems. Another interested suitor,
Canada Pension Plan Investment Board, said it would consider
purchasing BlackBerry if the company went private. No buyout offers
or negotiations have been made yet.
To widen its arsenal of assets, BlackBerry announced today that it
created a strategic operations committee in charge of both
bolstering sales for its newest BlackBerry 10 smartphone and
seeking possible partnerships or joint ventures to counter the
ferocious competition from companies like Apple and
(KRX:005935). Timothy Dattels, chairman of the committee, said:
During the past year, management and the Board have been
focused on launching the BlackBerry 10 platform and BES 10,
establishing a strong financial position, and evaluating the best
approach to delivering long-term value for customers and
shareholders. Given the importance and strength of our
technology, and the evolving industry and competitive landscape,
we believe that now is the right time to explore strategic
Heins, who will also serve on the special board, stated, "We will
do our homework and assess what we think is best for the company
and then we will have discussions and they will either yield
partnerships, alliances or not." He went on to say that in the
meantime, the rest of BlackBerry will continue its original plan to
reduce costs and take advantage of the opportunities that arise.
In the midst of restructuring its marketing strategies, BlackBerry
has also decided to reevaluate its operating infrastructure,
putting the company in a very precarious situation. A report by CBC
news found that BlackBerry not only fired 250 employees who were
stationed at a test facility in Waterloo but also got rid of three
crucial veteran executives: global manufacturing and supply chain
senior vice president Carmine Arabia, corporate information
technology vice president Doug Kozak, and service operations vice
president Graeme Whittington. Rebecca Freiburger. A spokeswoman for
BlackBerry, stated, "We are in the second phase of our
transformation plan where we will be assessing our organization -
from top to bottom - to ensure we have the right people in the
right roles with the right skill sets to drive new opportunities in
mobile computing." No news is available for how many other jobs
BlackBerry plans to cut this time around, though not all sectors
within the company are necessarily involved in the restructuring
Prem Wasta, BlackBerry's biggest investor, announced today that he
is also leaving the company "due to potential conflicts that may
arise" while taking the enterprise private. He still supports Heins
in his efforts to redirect BlackBerry's momentum, though he
speculates it will take some time before the company starts seeing
major gains again.
Though the company has experienced heavy losses, BlackBerry will
not "go gently into that good night." The latest developments in
its fight to stay afloat include authorization from the Defense
Information System Agency (DISA) to operate as a mobile network
provider on the U.S. Department of Defense's broadband. DISA plans
to incorporate 10,000 BlackBerry 10 smartphones into its network
this fall and add another 30,000 by year end. To be authorized by
the DoD is an impressive achievement that involves meeting
incredibly strict security standards, which BlackBerry has been
very familiar since its network normally deals with managing
private corporate information. With news of the approval, Scott
Totzke, Senior Vice President of BlackBerry Security Group, stated,
"Being the first smartphones to be supported on U.S. Department of
Defense networks further establishes BlackBerry's proven and
validated security model. With foreign entities - governmental and
criminal - ramping up attacks on electronic communications and
information systems, BlackBerry provides government agencies with a
proven partner that follows top-to-bottom security protocols."
Investors will surely keep an eye out for Blackberry's activity in
the near future. Meanwhile, the company's stock continues to hover
around $10.35, up 6% for the day and trading at the highest prices
in the past 30 days.
Where there is smoke, there is fire. I think that BlackBerry has
more upside potential, but I always want to define my risk vs
reward. This is a longer term play in BlackBerry, but if it breaks
to the upside, then this trade has a potential reward-to-risk ratio
of 3 to 1.
: Buying the BBRY Jan 13-16 Call Spread for $.70
$70 per 1 lot
$230 per 1 lot
Reward vs. Risk:
I will look to sell 50% of the Spread if the position doubles and
hold the balance until Expiration
Boring Is The New Black
has a great article on the proliferation of "safe" bank CEO's in
the aftermath of the banking crisis. Read the article
As I discussed last week at TEDx Wilmington, changes in confidence
alter our preferences and actions. When confidence is low we choose
safe, whether we are alone, in the boardroom, or among other
banking regulators. That financial institutions are picking boring
executives at the same time they are selling off their far flung
global operations, boosting risk management departments, and
experiencing weak loan growth all fits together. Confidence doesn't
affect just one aspect of behavior, it impacts everything - and
, August 14, 2013
Ducking in and out of meetings yesterday afternoon, I blinked twice
when I saw the Apple "news" that Carl Icahn bought a large position
in the stock -- and then took to Twitter to 'talk it up.'
The SEC ruled
that social media is an acceptable medium for company announcements
in April, 2013. Still, yesterday's events felt a world away from
the SEC warned
(NFLX) CEO Reed Hastings about posting his prognostications on
(FB) last December.
Is social media, and the ways in which we communicate, moving that
fast? Evidently, the answer is a resounding yes.
To be sure, other high profile investors have posited their
positioning on Twitter - Bill Gross at PIMCO comes to mind. But at
what point have we jumped the proverbial shark?
With HFT to the left of us and social media disclosures to the
right, the investing process is morphing at warp speed. As Josh
Brown eloquently observed yesterday-
on Twitter, of course
-"Apple adds $20 billion in market cap, or Chipolte + Under Armor,
on a pair of tweets from Carl Icahn. Baller."
I won't take the other side of that statement -- Carl Icahn
a baller -- but we've seemingly entered into a new realm in the
investing landscape, a social sphere situated somewhere between
"Pump & Dump" and "Post & Boast." Mr. Icahn's 52,000+
Twitter followers got a gift -- or at least a first-mover advantage
-- as the rest of the global financial marketplace, many of whom
are not on Twitter, were left to play catch-up
And you wonder why mainstream America thinks
they're at a disadvantage
I have no horse in the Apple race. I had a level I was looking at,
but it never got there and my greatest cost was one of opportunity.
If nothing else, however, yesterday's sequence served to fortify
the frustration felt by investors who feel the investing process is
unnatural -- and yes,
in the words of Stan Druckenmiller
T-Report: Worst Volume Day for CDS Ever
The IG CDX Indices had their lowest volume of the year yesterday as
far as I can tell.
Only $2.5 billion of IG Indices traded, and IG20 barely topped $2
billion. That used to be a couple of big trades.
HY20, the on the run CDX volume got to only $665 million.
iShares High Yield Corporate Bond
SPDR Barclays Capital High Yield Bond ETF
(NYSEARCA:JNK) combined for almost $500 million of volume (though
over 70% of the volume was in HYG). While high-yield CDS remains
the hedge of choice, two things are clear:
- The ETF's are becoming as big or a bigger technical factor in
high yield as CDS.
Other low volume points had been April 29 and July 15. While low
volumes in April preceded the first big bond scare and spread
widening, the low volumes of middle July preceded a gap tighter. So
I am not sure that low volumes are indicative of anything other
Name That Move
Not that 10 points is a big move given the outright level of the
S&P 500, but it is big enough that I would like to be able to
S&P Futures for Past 2 Days
Click to enlarge
I would like to say that spike up was due to lower inflation data,
the drop was because of a weak auction, and the bump was good
I am sure if I tried hard I could attribute each of the moves to
something, but it feels like I would have to try hard. Normally it
is pretty obvious to me why the market did something (in
hindsight). Whether you agree with the move or not, it is
relatively easy to pinpoint. Yet another sign of apathy?
A Random Crawl Down Wall Street
So little is going on that to call this a random walk down Wall
Street would be doing the phrase injustice. There really seems to
be a tone of apathy.
Relatively few people want to discuss "taper". Fewer still want to
examine whether "tapering" will impact the equity market. In
theory, QE supports the economy (good for equities and bad for
bonds), and over the past few months, the monthly $85 billion of
Fed money seems to eventually find its way into stocks rather than
For now the "meme" is that the Fed will only taper because the
economy is doing so well and that they will time it perfectly so
growth continues without fed support. That Higher interest rates
are not a drag. That the Fed times things perfectly, and their
growth projections make sense. I have far less faith in the Fed and
far less faith in the growth story.
Bunds Finally Crack
Ten-year Bund yields moved 8 bps higher. At the same time, Spanish
and Italian bond yields moved a bit lower. This is a very bullish
We are starting to focus on Europe again as we near the one and
only German debate on September 1. That will be a key date as we
will get a sense of whether an "anti-Europe" faction will develop
The popular view seems to be that the German elections and election
results will usher in a new wave of the European financial crisis.
I'm not so sure. It could happen, but several factors are at play
that may make it less of a risk than many think.
We will take a closer look at Europe over the coming days, but for
now, we continue to dislike bunds. We also think the most likely
case for sustained U.S. growth will come from a rebound in Europe.
That isn't our base case for the European outlook, but it is an
important factor in our analysis. We find few compelling growth
stories in the U.S. without a rebound in Europe, and by compelling,
I mean +2.5% GDP or more.
Silver Gains on Gold
Between gold and silver, silver has had a rougher year despite gold
stealing all the attention. The white metal, though, has
outperformed the yellow metal percentage-wise
since both metals' lows. Gold and silver reached their most recent
2013 lows on June 28. Since that date, silver has rebounded about
17% while gold has rebounded about 12.32%.
iShares Silver Trust
(NYSEARCA:SLV) June 27 low, it has rebounded about 17.8%. GLD has
gained about 12.3% since its June 28 low. The charts below show the
ratio of SLV to GLD. For perspective, I've included two sets of
charts, showing the SLV-GLD ratio constructed both ways.
The shorter-term trend of GLD outperforming SLV has reversed, and
the GLD-SLV ratio is nearing an important resistance point from a
trend that began at the end of last year at just under 6 . Flipped,
the SLV-GLD ratio is nearing resistance at 0.167.
Click to enlarge
Click to enlarge
Silver correlates with gold, and it usually outperforms gold when
gold rises and underperforms gold when gold drops. So far, silver's
price has exhibited this behavior, and it may be a better play than
gold, based upon historical behavior, if gold continues to trend
Below, see 1-year chart of SLV's and GLD's percent changes.
Thursday, August 15
When Is Cisco Gonna Pull A Viacom?
A couple of weeks ago,
(VIAB) upped its buyback plans to $20 billion or about HALF of the
company's market cap. Looking at
(CSCO) balance sheet and cash flow, the company has $50 billion of
cash on hand vs. $16 billion of debt, and it generated more than
$12 billion of free cash flow in the last 12 months. Cisco 7-year
bonds trade at a YTM of 2.7%. Cisco could borrow $50 billion, buy
back 40% of itself, and be nearly debt free on a net basis 12
months out. Assuming its business stays at current levels, in four
years its net cash on the balance sheet would be back roughly to
where it is today.
Escaltor up, Elevator Down
I have been chatting about things changing and prepping for the
breakdown. I reduced exposure, so now, I'm sitting on dry powder.
Today, we finally get the breakdown and the confirmed head and
shoulders. At this point, we have gone from a trend and momentum
market to a traders market, so I'm dusting off the old trading
manual and putting the portfolio in the drawer.
Process wise, I look at the market to tell me what the easy trade
On one hand, I am looking at the best short entries. The best short
entries would be a rise into 1682 (the old neckline) for a sharp
move to the 50-day. Though, I see this as less likely at this
Click to enlarge
On the other hand, where are the best long entries for a bounce?
There are a couple of gaps below the 50-day moving average that I
have marked on the chart. If we get a break of the 50-day, then
those quickly become targets, maybe as soon as tomorrow. My old pal
NYMO had its breadth rotation tell, and now, he is in full puke
mode. Probably going to close the day out around -80 or so. When it
gets that low, I look for a long trade. If we get a nasty gap down
tomorrow, I will buy it and go fishing. Why go fishing you ask? 1)
So I don't sit there at my screen and second guess my way out of
the trade. 2) It is dropping into the low 70s in the morning, which
would make it gorgeous out on the river tomorrow.
Basically, as I see it, we have some unfinished business around
1680 with a new low for this range coming soon probably in the
1640s or possibly the 50-day moving average.
SLW Emerges from its Apr-Aug Base Formation
Purely from a pattern perspective, you can see my minimum, optimal,
and outlier targets for the upside breakout in
(SLW) from its April-to-August base pattern.
Only a break that sustains beneath 25.20 will begin to weaken the
pattern, while a decline that breaks today's low at 24.31 will
neutralize it altogether.
Click to enlarge
Friday, August 16, 2013
The Freaky Friday Level of Lore
Check the S&P chart below.
As discussed yesterday
, there 'was' room to S&P 1650, and we almost got there on the
close. The 50-day moving average is in play now (1657) and
'horizontal' support is directly below at 1650.
Expect the bulls to circle their wagons there on a slinky August
Friday -- and they should have an opportunity to do so.
Beware the Ides of August
My ears are buzzing this morning.
Yesterday, I heard a strategist say that there was no reason to be
concerned about a decline here as you don't get trend changes in
August. He went on to say August is just 'too thin, not enough
Really? What about August 1982, August 1987, August 2000, August
2007, which was the blow-out low prior to the last ditch rip to new
highs in October. August 2008 was the pre-crash pivot high.
Beware the Ides of August.
I believe that changes in confidence alter our choices and actions.
In researching confidence, I developed a framework that I call
"Horizon Preference," which states that when our confidence level
is low, it is all about "me, here, now". When confidence is high,
it is all about "us, everywhere, forever". (My book "Moods and
Markets" covers this much more thoroughly than I am here.)
What brought this to mind today, was this quote from Der Spiegel
Welcome to Egypt under General Abd al-Fattah al-Sissi. The country
is so polarized that people are no longer able to feel any empathy
whatsoever for others. It is a country in which the smartest and
most critically thinking intellectuals are now spewing little more
than propaganda, with people on both sides of the deep political
divide displaying a penchant for simplification, vilification and
agitation. Those who ask critical questions run the risk of being
physically attacked, an experience that many foreign journalists
have encountered in recent days.
Read the article
Talk about a litany of very weak "me, here, now" human behaviors:
"polarized", "no longer able to feel any empathy whatsoever for
others", "deep political divide" "penchant for simplification,
vilification and agitation."
That the Egyptian market has sold off sharply, hardly comes as a
surprise. Changes in confidence transcend everything we do.
Disclosure: Minyanville Studios, a division of Minyanville
Media, has a business relationship with BlackBerry.