Sunday, December 31, 2006

M3 - My, My You've Put On a Few While You've Been Away

Comet Gold alerts to some clever folks who have put M3 back together again: (Click Here to See M3). What's especially interesting is the analysis of the impact of accelerated activity in repos and their impact both on gold and the stock market. Also, M3 monetary creation has been on overdrive in recent months. hmmm.

While those figures are guesses at U.S. M3, the Eurozone still puts out real M3 figures and money supply is exploding across the pond (read about Eurozone M3) which leads to talk about additional ECB rate hikes. That of course would swing the rate differential further in favor of the Euro and push the dollar lower (and you thought the 'differential' was something your auto tech only talked about!) The article also mentions in passing that the Euro has now caught up to the dollar as the most widely circulated currency. That has broad and negative implications for the dollar too.

And for some comic relief, but then again maybe not so funny. I don't know where this orginates, but it's making its way throughout the web..


What's In a Name?

With the New Year comes a change to this blog.

I have decided to put my name at the top of the page. TheButtonwoodSpeculator is now history. If I’m wrong about something – no secret identity for me to hide behind – you’ll know who I am. For now the present URL will remain, but i do have a temporary site up under http://www.jimkingsland.com/ and at some point I will migrate this blog over there and redirect traffic there as well; but one step at a time.

Yes, I'm Jim Kingsland. Kingsland is an old English name derived from one of the ancestors being a Viscount to the King's land about 600 years ago, or so the story goes. Most of the Kingslands were actually killed off in the early 1500's during a brutal feud between the O'Sullivans and the Kingslands. It seems the Kingslands whacked a few of the O'Sullivans, but then the O'Sullivans came back en masse and killed most of the Kingslands in Britain at that time. The family line survived because a number of Kingslands were living in Barbados -- there are only a few hundred Kingsland families in the world today. In the early 1850's, a Kingsland by the name of Ambrose was elected mayor of NYC and served one- 2 year term... long enough to set aside the land for what is now... Central Park! But I digress.

Originally, I had intended to keep a low profile as thebuttonwoodspeculator and show off a few stock pics and make some market comments. But why let nearly 30 years of credentials in broadcasting, with names on the resume including Bloomberg, CNBC and FNN, 1010 WINS and WBZ, go to waste?? Plus, why take the word of someone who won't tell you their name, especially when it comes to matters concerning your money? I realize these blogs are not dispensing official advice per se (see my disclaimer below), but anonymity in the realm of an effort that presents itself as an informational or educational entity is just a bit odd, but maybe that's just an odd hang up I have.

I'm going to strive to go beyond the well commoditized elements of the business news coverage. Everyone and his brother has lists of stock and options picks and coverage of top business stories. I am not going to fool myself into thinking I can do a better job than some of nimble young guys out there with their scalp picks, options plays, etc. Sure, I will look at a lot of that commoditized stuff, but I will dig deeper and find unique angles whether through quantitative, qualitative, or technical analysis (using my reporters sleuthing skills) that will hopefully give the both of us at least a small edge.... a leg up of just a short time over the competition can make a big difference.

For years I woke up at 2 in the morning to drive (would get car sick in car service, especially if driver showered by using cologne - I could tell) to midtown Manhattan to broadcast financial radio reports from 5 a.m. to 10 a.m. on a 50,000 watt a.m. stick to cover mostly stocks, plus a little on bonds, currencies and commodities; then I would run up a flight of stairs and hop on a t.v. set to do similar reports on camera. But behind the scenes, options, forex and commodities became a focus for me personally, and that will be a focus on this blog as well. There’s so much out there about stocks … and not nearly enough about anything else. I'm going to make sure to provide some decent information about commodities and forex on this blog.

Before my days in the studio, I spent a bunch more years down at the Exchange on Wall Street situated just above the floor near a bunch of options guys. Wow, did that make coverage loud and exciting. One trader could shout with such strength that I nicknamed him "Mr. Polyp", because I felt that someday his vocal chords would develop some sort of disease! So I've built up a wealth of contacts and eventually I will get around to generating some interviews and putting them up on this blog for some interesting special guest shots. I promise a "no cheer leading zone!!"

As time goes by in ’07, eventually I will get a feed, or email service of some sort up. Since I am partially sighted, the email feed is problematic, since I often will dash off a post, then realize that I need to do touch up corrections. Once I work through that issue, I will get the feed up.

-jimk

JsMineset and Comet Gold

I've added two new links in my "favorites" sections.

The http://www.jsmineset.com/ site is something that I have been a avid reader of for quite some time. It's owner, James Sinclair, has impeccable credentials and has made millions in the gold trading business: http://www.forbes.com/global/2001/1210/064.html. Sinclair is the real deal with a long track record and not a johnny-come-lately hot shot. He has some very important things to say about the current state of play with respect to many matters these days and is worth listening to.

The http://cometgold.com/ site ended my search for a place to go for a steady stream of information about gold and metals. Comet also has a community of investors who talk about metals and features links to resources and information. Comet has it all.

Did Apple (AAPL) Buyers Jump the Gun? Apple and the 50 DMA

Just a quick comment... AAPL failed to close above its 50 day moving average on Friday. The stock closed at $84.48, 50 dma is $84.98. This will need to be watched in the coming trading days since there have been times when the stock has struggled in the 50 dma range and not surged past. The L.A. Times on Saturday ran this Apple story. An Aussie newspaper also had this ominous report. Sure, it's all well and good that Apple cleared Jobs, but it will be much better once the free and clear comes from the feds in Washington.
The premise of the rally on Friday was that analysts were thinking that catalysts in the weeks ahead would rally that stock back to its previous highs. The market was weak on Friday, but even so - there wasn't enough relief in the news of the day Friday to keep Apple at the highs of the day. There was call buying all the way out to the Jan100s... bad idea IMHO... always buy in the money, or close to it. For shareholders, the stock getting stuck near $85 might not be a big deal until the "catalysts" that analysts are looking for arrive, but for call holders in the $90 strike and above eaching passing day is tick, tick, tick, tick. But MacWorld and earnings loom large, so Wednesday will be interesting.

Saturday, December 30, 2006

Microsoft and Freebie Killer Laptops

Interesting report from this blogger: http://www.istartedsomething.com/20061227/microsoft-free-ferrari. Yep, the blogger reports MSFT has been sending gifts to kind worded bloggers. By the way, did I every tell you about my GREAT experience loading in Vista... WOW, it was sooo wonderful! only kidding.

Actually, I had tried loading a beta version of Vista on another machine a few months back and totally corrupted the hard drive; it was a mini disaster. I'm going to wait a little while before before I give the official release a go.

Friday, December 29, 2006

Some Random Midday Musings: AAPL, AT, PACT

Goldman Sachs says the AAPL SEC filing should clear the way for near term catalysts to drive AAPL shares higher including product announcements out of Macworld on 1/9 and earnings on 1/18. There's decent buying in the January AAPL calls out to the 110 strike.

Alltel (AT) is up more than 4% on WSJ report that it may attract a private equity offer. STFL threw fuel on the fire, according to flyonthewall.com, by stating that a bidding war could erupt for AT. However, analysts at SOLE aren't so enthusiastic and reiterated their SELL rating on AT doubting anyone would step in to buy the wireless carrier at current valuation of $22-bln.

Pacificnet (PACT) is breaking above recent resistance after landing a contract with China Telecom. The formula is simple: Up and coming U.S. company + new business deal with the word "CHINA" in it = a nice rally. Stock up as much as 14% today.The bigger issue is whether the stock can ever break beyond its mostly range bound condition which has kept it trapped under $9 over the last few years.

edit: by the end of the day PACT closed just above $6, well below the highs, which from a technical standpoint probably gets it off to a poor start in the New Year.

12/29/2006 Morning Market Comment

Posting is going to be limited today ahead of the looong weekend with the extra day in most markets next week in honor of President Ford.

Apple (AAPL) is the big news today (click here), perhaps the intrepid Jan90 call buyers of the last few days will end up being right.

WTI bounced off of $60 and no doubt will be challenged again amid the warm weather... but check out DT's blog.. he's not throwing in the towel yet WRT to cold returning at some point: http://dtwxrisk.blogspot.com/. As noted earlier in the week the $57 area is the big long term area of support, though many shorter term areas would have to be taken out first.


Gold/dollar... the Euro is up 35 this morning, while gold touched $638. Demark studies are showing that a close above $638 would be an ideal and bullish signal.. we're getting quite close. The recent turn up in the Euro vs dollar has clearly been beneficial to gold.

Have a happy, healthy, prosperous and blessed New Year folks! Thanks for reading! I was out with my son and daughter for Chinese food the other night and somehow the subject of their great-grandmothers came up. My paternal grandmother lived to 97 and my maternal grandmother in Korea, their great grandmother, this wonderful, small little woman of 4' 10", is still alive and holding her own at the age of 98. My 6 year old was not impressed by the longevity of the great-grandmothers and said, "I don't want to die, I want to be a kid forever." With that statement the barrage of steaming dishes arrived and the conversation changed. But my son's statement lingered on in my mind. For a six year old, he's a perceptive young guy, already aware that time and the changes it brings does indeed march on.

On The Other Hand...

While my post below on the Dow throws out some additional fodder for the bears, there's also the nagging issue of global liquidity that can't be ignored and has clearly been a key driver not only for the U.S. stock market but for overseas markets, M&A, commodities, etc. On my regular reading list are the contrarian folks at the Daily Reckoning. Earlier today they examined the phenomenon of dollar demand in this age of asset class creation (Read About It Here). Of course, the DR presents not only the best case scenario, but also the doomish side of things, but their report gives great perspective on what has pushed global markets higher in general. This is why I've advocated caution and WAITING for the bullish upward channel in the S&P 500 to first be broken before jumping into broad short, or put positions against what has been an incredible stock market propelled by unprecedented capital flows and global liquidity. I think of it as a jet stream of cash that's constantly flowing from the U.S. to the Pacrim, to Europe and then back across the Atlantic to the U.S. again. Both my forex and futures trading systems are on nearly continuously from Sunday night through Friday evening as these markets hum along. There - now you've got my attempt to throw an opposing point of view into the mix. These markets don't have to crater next Wednesday. The 30 day moving average is something that I'm going to continue watch closely on the S&P and I'm thinking that sooner rather than later it will come in for some testing in the new year. Remember to read the disclaimer below. If you were planning to buy a bunch of OEX puts on Friday, don't let this post discourage you - that's between you and your professional financial advisor.

While fairly obscure services like the DR examine the issue of liquidity, along with this little blog, I think it's going to be a huge issue in 2007... there, my first 2007 prediction as well.

Thursday, December 28, 2006

Will The Dow Make It 7 In a Row?

That's 7 UP months in a row? Technical analyst John Murphy at Stockcharts.com notes that in the last ten years the Dow has on two occasions advanced for six consecutive months, including the six months ended this month... but never seven consecutive months. Sure, 7 is possible, but not probable.I want to throw a few other items into the mix: We are looking as overbought as we did in late 1993 and 2003 which were followed by sharp New Years selloffs. The parallel to '93 is even more significant since at that time volatility sank to near all time lows in similar fashion to what we've witnessed in recent weeks. Notice in late '93 volatility swooned to below 10 then early in Q1 of 94 surged above 22 (chart below) while the Dow was hammered with a sledge hammer (chart above). ...hang on for a bumpy ride in January.

Apple Unlikely To Be "Nailed"

That's the headline of this report in Appleinsider.com. The Apple faithful are still hoping for good things in the weeks ahead. The most active options remain the AAPL Jan90s with more than 11,000 trading today and open interest of over 100k.

One of the more interesting pieces of speculation to hit the Street over the past 24 hours is that Apple will make its long awaited SEC filing early - this evening - instead of tomorrow evening, to spank the shorts into submission. It's hard to say whether that speculation is helping to provide a floor beneath the stock today. If it is and no 'early' filing is made, it will only end up being counter-productive to those who made the suggestion to intimidate the short side.

Keep on Truckin' - Maybe Not..

I've made a number of posts in the last month about the breakdown in the Dow 'trannies', or transports and the red flag which that has posed in the past to the broader market. Here and there I've also thrown in a few stories about generalized trucking companies warning that business has slackened substantially in the 4th quarter. Yet more evidence appears today that economic headwinds are picking up: (Read this trucking industry report on falling truck tonnage)

Crude Inventory Draw - Whoa? Not So Fast

DOE Crude Inventories for week of December 22nd:
Crude inventories dropped more than 8 mln barrels vs. consensus estimate of 2.5 mln... Holy Cow! in the words of the great Phil Rizzuto. Gasoline inventories rose by nearly 3 mln barrels vs the consensus estimate of 750K. Distillates were 472K vs. consensus estimate of 500K.

Some analysts are saying the recent fog and grog problem at the Houston ship channel account for these wild readings. Thus far, crude is up only 18-cents and nat gas is holding to a rebound of 2.5%.

Post Data

Better than expected Consumer Confidence, Chicago PMI and Existing Home Sales, but Euro still up 20 against the dollar and gold hanging on to a gain of about $5. interesting.

12/28/2006 Morning Market Comment

Last night I left off with a little red-flag dollar missive. This morning the dollar is falling - with the euro up 75 points... (Read about it here) on more ECB jawboning. Jobless claims rose by a scant 1k. 10 a.m. is when there's further market moving potential with Conference Board Consumer Confidence and Existing Homes Sales. I've decided to jump back into gold futures again with a wider stop loss in light of recent negative developments in dollar sentiment and geopolitical concerns which have given gold more a safe have luster again. Even the Yuan in China rose to its highest point against the buck (Click here) ahead of the long New Year's holiday in that part of the world. Depending on the data at 10, I may add more to the gold position. This is a trade that I'm going to be in for the long haul and plan to add to in the New Year even into any weakness.

By the way, one of the blogs which I check out on a regular basis is Kevin's Market Blog. Today he has an especially insightful post about Jake Bernstein's Rules of Trading which is definitely worth a look: http://kevinsmarketblog.blogspot.com/2006/12/trading-rules.html.

Marketwatch characterizes this morning's action in stock futures as the market being on "pause" after the Dow's run to yet another lifetime high. They also devote some space to Apple (AAPL) which is down only about 2% (Click Here). I thought Howard Lindzon did a clever job blogging about the potential play on words for possible Apple headlines (http://www.howardlindzon.com/) in light of what is rapidly becoming known as Apple-gate on the Street.

In addition to Euro strength, we're also seeing some bounce to the ounce in nat gas - rebounding after getting slammed earlier in the week.. even a modest bid to crude oil ahead of inventory data a little later this morning.

Barrons.com alerts to heavy insider transactions:
"Insider sales overall rose to $2.8 billion for the week ended Dec. 22 from $1.6 billion the week before, according to Thomson Financial. Most of the selling is options-related as the average premium shot up to 70%, generally a high level. The number of sellers outpaced buyers 2.7 to 1, a bearish sign.Insider sales overall rose to $2.8 billion for the week ended Dec. 22 from $1.6 billion the week before, according to Thomson Financial. Most of the selling is options-related as the average premium shot up to 70%, generally a high level. The number of sellers outpaced buyers 2.7 to 1, a bearish sign."
But then Barron's then goes on to quote a market maven who says the insider selling is not as bad as selling that preceded recent bear markets... so carry on... no worries.

It appears that prosecutors investigating the radiation poisoning of the former Russian spy in London last month are doing what amounts to "following the money"... and that there may be a tie to Yukos, according to this report in The New York Times. Truth is indeed stranger than fiction.

Gold

I've jumped back into the gold frey this morning at $632.10... more in the morning market comment a little later.

Wednesday, December 27, 2006

The Dollar Conundrum

With the Dow passing and closing above 12,500 for the first time stocks remain all the rage - the dollar? Who gives a ... well, never mind. The dollar got a reprieve from the new home sales which the market interpreted as being better than expected, but before the data came out, things weren't looking so happy for the dollar on word that the UAE decided that it will be diversifying some if its reserves away from the buck (Click Here). There was that flurry of angst over the dollar around Thanksgiving, but that's all largely been forgotten as the blue chips rage higher like the Colorado River used to before they dammed it up. Since the U.S. current account deficit requires a 'round the clock need from every central bank around the globe to continuously buy dollar based financial instruments, today's hardly noticed UAE story may have been the most important piece of news of the day.

As the Apple Turns - AAPL

Tonight's after-hours action in Apple Computer shares was nothing short of extraordinary following an almost unbelievable regular trading session. After rallying from a 5-percent early morning tumble to finish regular trading 1-cent higher, Apple pretty much drifted from 4 p.m. until 7:48 p.m. It was at that point that the fireworks re-erupted when the Financial Times moved a report concerning a huge stock options grant to AAPL CEO Steve Jobs in 2001 that was not authorized (or 'authorised' as the Brits spell it) by the company's board (Click Here). The report was eventually picked up by CNBC which sent AAPL down 3% during the final 12 minutes of after-hours trading in one of the more unusual bouts of late, late after-hours activity I've ever seen.... level 2 quotes went nuts.

We'll see how things shake out tomorrow morning. Call me loony, but I find it hard to believe that 3% can be melted off the bid on shares of a 69-BILLION dollar company literally in the final 12 minutes of late after-hours trading because some small timers unloaded their odd-lots of AAPL because they heard only half the story on CNBC about Jobs receiving the improper grant, but not surrendering them. Seeing that bid evaporate in real time was remarkable - not often seen since stocks are usually halted pending news - and fortunately 8 p.m. came along to stop everyone dead in their tracks until tomorrow morning. I'm willing to concede that only about $12 mln worth of volume was involved in the late selling spree, so if I'm wrong, I'm wrong - and after hours trading be damned if the market can be manipulated that sharply.
A number of analysts today defended the stock which leaves me wondering who's left for tomorrow morning, and tonight Drudge has the FT story emblazoned in red which may make for a rough go in the A.M.... I'm trying longs, but it's not looking good at this point.
As mentioned earlier in the week, I've been off to the sidelines amid the thin holiday volume in both futures and stock trades. With respect to Apple, the smartest thing would be to WAIT until the SEC filing is out this Friday - likely after the close on Friday (wouldn't it be fun if Apple surprised everyone with an earlier than expected filing?!). Until then, longs and shorts will be flying in a thick fog until that filing is out... an awful position to be in. No one knows for sure exactly what's going on - it's all a crap shoot until we get 'official' information. There will be plenty of time to jump in next week to either ride the stock back up if all of this is much ado about nothing, or ride the stock down further if we're looking at a protracted saga involving a formal SEC and Justice Department process.... or to simply pass. The FT's "sources", or assurances from Wall Street analysts just aren't enough for me.

November New Home Sales

By all media accounts today's data on New Home Sales portrays a better than expected performance during the month of November. My realtor wife was quick to chide and remind that the government's figures do not take into account cancellations, but count signed contracts as sales. Oy. She's right. And you'll recall that Ara Hovnanian and Robert Toll both noted a heavy rate of cancellations during their recent earnings conference calls. So these November numbers are muddy, but the markets will take what they can get; stocks are getting a lift, bonds pulling back off this data.

Natural Gas

While we're enjoying natural gas prices in the $6 per decatherm, or million BTU, or 1,000 cubic feet price range here in the U.S. thanks to the mild winter and abundant supply, the ongoing nat gas crisis involving Belarus is nothing short of astrounding. The Stratfor people (see link in the right column) sent this email dispatch a little while ago as part of their daily updates of problems around the world:

"BELARUS: Belarusian First Deputy Prime Minister Vladimir Semashko said Belarus will increase transit fees for Russian natural gas going though its territory to Western Europe if Russian energy giant Gazprom increases its prices for gas to Belarus. Semashko's comment follows Gazprom's announcement that it will increase the cost of gas for Belarus from $46 per 1,000 cubic meters to $200."

Keep in mind 1 cubic meters = 35.3146667 cubic feet (ah, what would we do without Google), so even at $200 per 1,000 cubic meters that price is still pretty darned good... but still a gargantuan shock to various parties involved. Read more about the situation via this Business Week story. Bigger and nastier natural resources disputes are just one more pleasant thing to look forward to as we move deeper into the 21st century.

Apple - AAPL

It looks like the Law.com story has roused many Wall Street analysts out of vacation rest to defend Apple. If this were a normal week, analyst comments would have been out en masse by the 9:30 open, but now at just before noon east coast time some damage control is under way. According to flyonthewall.com JPMS, PIPR and MSCO have come out to defend the stock. Piper even went as far as saying there is only a 5% chance Steve Jobs has direct involvement with falsified documents. The stock is now close to going green. . That's an impressive comeback from a 5% drubbing this morning which took the stock into very oversold territory. This is a drama that will no doubt play out in the weeks ahead and will likely keep a cloud of uncertainty hanging over the shares... or will it? The street seems content to dismiss this morning's news as old and inconsequential.

WTI - Texas Tea - West Texas Intermediate Crude

Back at it's 50 day moving average...

This has been good news for us at the pump! 50 dma is an interesting area for crude. The last big break below the 50 dma sent WTI from $73 right down to $57. Does that mean crude is going to fall another $20? Wouldn't that be wonderful, but the answer to that is in the realm of "now way, Jose". Already today, the bears have lost their ambition with follow through crude selling of only 17-cents more to the downside following yesterday's slide. If the bears acquire further gumption for a further push lower the $57 area remains key. The chart clearly shows that you can draw a line just above $57 from today all the way back to March of 2005 as support/resistance. If ever there was a time for the bears to test this $57 support area again, the coming early January time frame (if this mild weather can stick around) ahead of another OPEC output cut and months before the summer driving season would be it. Whether they will is a completely different story, especially with major geopolitical tensions looming on the horizon. The complete shrugging off of the UN-Iran sanctions was somewhat surprising, but until crude breaks $60 I'm not convinced the market has thrown all geopolitical caution to the wind.

12/27/2006 Morning Market Comment

Apple Computer is a stock that's been featured in this space a number of times recently for the unattractiveness of its stock chart after having been one of the grandest of high flyers not only of the year but of the past several years. This morning it's taking a 4% beating ahead of the open in the style of many want out, only a small one door exit. The first sign of trouble was it's failure to move past the $100 mark; it simply it a brick wall in the low 90's in late November, consolidated only briefly and then headed south and never looked back. This morning the stock is sliding as stock options troubles are making headlines with the element that federal prosecutors are taking a look. (Where have we heard this script before?) While the stock is close to becoming severely oversold - what's that old saying about catching falling knives? And if this news of a possible federal "probe" has any merit (that word "probe" always reminds me of a visit to my urologist and the snap of the glove), this will be a long term cloud over the stock.

Otherwise, it's looking as if the late Santa rally has further legs with continued excitement over the Ford-Toyota talks; the sale of the Minneapolis Star Tribune for $530 mln and the recent slide in the price of crude. WTI down another 30-cents this morning as natural gas continues to lead the way lower on the mild winter weather. As stated yesterday, indeed there are red flag divergences (eg. breakdown in Dow transports, QQQQ; low put to call) but as long as the S&P is able to remain above its 30 day moving average, the bulls seem good to go.

Lightreading.com's 2007 Unstrung's Look Ahead is worth a read (Click Here). Among the predictions: Sirius Satellite could be bought out and that Time Warner could be the buyer.

It's likely that next Wednesday markets will be closed in observance of the death of former President Gerald R Ford. We'll see what the regulators decide. Monday is already a market holiday for the New Year Holiday, so a Tuesday close is highly doubtful. Kudos, by the way to Reuters, for including the ticker symbol F, for Ford Motor, in one of the early obits of the former President... you can't make this stuff up.

Tuesday, December 26, 2006

Energy Whipsaw and a Word about WXRISK

The muted retailing selling season came even with lower energy prices both at the pump and no doubt showing up in home heating bills. Crude oil higher earlier on the Iran tensions, has done a complete about face and is now down by more than $1/bbl following the lead of a 6% natural gas slump. Over the next 10 days here in the NY Metro area daytime high temps are forecast to stay mostly in the 40s!

This doesn't mean winter is completely DOA. I've got a new link in my favorite's section to the right. It's Dave Tolleris' wxrisk.com weather blog. Dave, or DT to his friends, is a pro meteorologist based in Virginia - he is THE man when it comes to forecasting and serves a number of big name clients in the commodities world. He's also nice enough to blog and share his weather insights with anyone who stops by his blog. Just the other day DT emailed me to say that "there may still be some winter left". We'll see what that means from a trading standpoint.

Of course, sooner than you know it, we'll be talking Spring again and with that season comes the speculation and trading opportunities in gasoline ahead of the driving season, along with summer demand for natural gas to fire power plants, not to mention the threat to energy assets from hurricane season. Reliable weather knowledge is key to being able to trade in the energy markets and DT's company is at the forefront providing that type of information.

DT's blog is something I look at every day. The first thing you realize with DT's blog is that you have escaped the powder puff and scripted world of the Weather Channel, or even your local tv weather babe or dude, and have entered a nuts and bolts world of original thinking, real science and real weather forecasting that still has wit and a sense of humor.

Manufacturing Contraction in Dallas and Richmond

Barely noticed, but a couple of Fed bank surveys point to weak manufacturing in the Dallas region and in Richmond (Click Here)

QQQQ and Some Other Problem Stocks

Last week I noted the troubles the Nasdaq 100 shares, or QQQQ were running into - slicing through the 50 day moving average. As demonstrated by the weekly chart below QQQQ had been trading in a sideways pattern since November even as S&P and Dow have maintained their narrow upward channels. This past week things got very ugly with what appears to be a near term top registered at just above the 44 level.

While the Nasdaq sold off more sharply than did the S&P and Dow earlier in the year, the breakdown underway in the Nasdaq at this point bears close watching given that the Dow Transports have been under heavy pressure of late. Within the Nasdaq, big names leading the way lower in recent weeks include: Apple (recently breaking through its 50 dma), Google (breaking down following a head and shoulders top) and Ebay (falling apart following a break below its 200 day moving average). If those examples aren't shabby enough, behold... Gilead's chart... Yikes, it has Sominex written all over it:


So more reasons to be cautious going into the New Year. Whether it's 2005 all over again and the markets slump and dump right away in '07, or the topping out process results in one more blow off rally and the process takes us into February is anyone's guess. But it does appear as if the winds are shifting and we're now getting a whiff from the direction the bulls have been grazing in.... potent aroma.

Ford and Toyota

The heads of Ford and Toyota held talks last week, at Ford's request. to discuss possible future partnerships... that's the word from Nihon Keizai Shimbun (Click Here, subscription required).

Retailing Ripples

Mastercard (MA) says holiday sales rose only 3% this year over last year (Click Here). This would confirm what I observed on my shopping adventures on Saturday and Sunday. On Sunday I ventured out to the 3 mln sq ft Palisades Mall expecting total retail mayhem, but easily found a parking space and the ability to pick up the few last minute items that I needed with ease. A variety of retailers from SHLD and WMT to TGT to ANF to COH are all lower today.

If there's anytime of the year when the consumer is going to pull out the stops and spend, it's during the December holiday season, yet they mustered the ability to spend just 3% more than the year before. If that doesn't point to a hangover from years of over reliance on home equity and plastic, then what does?

There's still time for retailers to salvage the season with big sales this week (though margins will be crunched). And if all else fails, the first quarter can be salavaged by turning Groundhog Day in Feburary into some sort of mega-retailing event!!

What's In Your Wallet? Capital One

There's some lottery ticket buying today in the January 80 and 85 calls of Capital One (COF). theflyonthewall.com noted some "unconfirmed takeover chatter" . While the call volume on both strikes is active at over 1,000 contracts, volume is still well below open interest on both... sounds like street noise at this stage. COF has a present market cap of over 23 BILLION dollars.

12/26/2006 Morning Market Comment

I took a complete day off from the markets yesterday to enjoy the holiday with the family and to cook the Christmas dinner, which if I do say so myself actually came out pretty tasty, and no one to my knowledge is suffering from e-coli this morning!

Geopolitical events are having the biggest impact on the price movements of gold and crude oil. Gold has been up as much as $10 and crude as much as nearly $1 on the latest round of tensions between Iran and the UN. Crude also got a lift from ongoing unrest in lovely Nigeria. While the sabre rattling goes on between Amhadinejad and the UN, it been interesting to watch the internal political developments within Iran, though most analysts, including the Stratfor people, think that while the average Iranian is unhappy about standards of living, Iranian foreign policy is not about to change since power in the Iranian Assembly is more symbolic and supportive of Ayatollah Ali Khamenei. My entry for gold still remains at above a close of $632... so close, but not yet.

This is a big vacation week for the movers and shakers on Broad and Wall, so almost needless to say, the trading volume will be thin as 2006 comes to a close. But even as junior traders man the desks and floor posts, there will some economic data that may move the markets:

The most important piece of economic data comes this Thursday: the Chicago PMI. Last month, you'll recall, the index of manufacturing in Chicago-land fell to 49.9 in a big surprise to many. The drop brought on talk of a coming recession. Economists are forecasting a slight December rebound back above the expansion line to 50.1%. Incidentally, Marketwatch columnist Mark Hulbert used the "R" word in his column, and not to scoff on the notion of one, but to suggest that IT might be on the horizon: (Click Here).

Other data due out this week: On Wednesday, new home sales are expected at a 1.02 million in annual seasonally adjusted rate compared to 1.004 million in October. On Thursday we'll get figures on consumer confidence and existing home sales. It is conceivable to think that we may see a near term plateau in home sales, but c'mon now, this talk in the mainstream media that housing has already bottom is completely ridiculous! The housing market really fell off a cliff only last summer - so they expect us to believe that the crunch is over only after about 8 months?? I don't think so, since the housing woes are really part of the larger phenomenon of the popping of the Greenpsan 'credit bubble'. This is going to take time to work out, folks.

So it looks like a rebound attempt will try to take hold, but with the VIX surging above 11 on Friday, it will need to be watched closely along with all the usual suspects (breadth, put to call, ticks, etc) for latent strength, or weakness. The chart below clearly shows that SPX has found support at about its 1 month moving average - something I've called the "lower end of its bullish channel".



The 1405 area remains an important area of support for the bulls. At least they've got history on their side since the Santa Claus rally has often extended into the final trading week of the year. But if that 1405 area is broken, it may signal the start of a break and a confirmation of other bearish signals that have been mentioned here in the blog.

My trading activity this week is going to be very limited since volume will be thin in most markets, but I am positioning for a variety of interesting plays in the New Year. I'll have more on that as the time draws closer.

Sunday, December 24, 2006

Merry Christmas!

To You and Yours!

The Trannies and The Dow

One of my goals is to stay ahead of the curve by discerning trends as early as possible. On December 20th I noted the issue of the break down in the Dow Jones Transportation Average (see: http://buttonwood1792.blogspot.com/2006/12/tranny-breakdown-in-making.html). Indeed, last week the Trannies swooned by over 4% while the Dow-30 slipped 1%. The $64 question is how long can the Dow-30 hold up before it turns and breaks through the lower area of its bullish channel as illustrated in my December 20th post.

Other folks are starting to talk about this problem that the Dow Transports are having, including this write up on Marketwatch.com (Click Here).

Earlier today, technical market guru John Murphy emailed me on the subject, as part of a subscription service and noted:

"In two recent tops (2000 and 1990), the transports peaked at least half a year before the industrials. At two other tops (1994 and 1987), the two peaked together. In all cases, however, a drop in the transports either coincided with -- or preceded -- a top in the industrials. That being the case, the recent downturn in the transports should be enough to raise some concerns about the continuing uptrend in the industrials."

Later in the week, I'll talk more about other stocks that are showing signs of wear and tear - big names like: Apple, QQQQ, Gilead, Starbucks, Ebay, Intel, Google, Sears and others.

For the benefit of anyone who might be fully invested in stocks, the picture below is something known as CASH. "Cash" is defined as, "money in the form of coins or banknotes, esp. that issued by a government." Fully invested bulls might want to examine the stuff pictured below to get re-aquainted. While I'm not saying that Tuesday is the day to jump into it, there may come a time when allocating at least some portion of portfolio into so-called "cash" might not be a bad idea in 2007... just a thought, or just sayin' as the young crowd says these days here on the net.

Saturday, December 23, 2006

Retailers and the Warmth

The New York Times sums up what this warm weather in the northeast is meaning for retailers: troubles (Click Here). As noted a few weeks back, perhaps a slight offset to the negative impact on the retailers, is the positive impact for builders and construction companies. We'll see.

As a quick anecdotal aside: number one son and I went for a quick retailing jaunt in Woodbury, NY today - to the sprawling 220 store Woodbury Commons Outlet and the nearby Super Wal Mart. Both were quieter than I had been bracing for. Wal Mart was shockingly quiet, even the cashier remarked how she was trying to figure out "where everyone was", in her words. At the Woodbury outlets, the lot was only half full, but it is an outdoor outlet and only 25 miles to the south is the 3.5 mln sq ft indoor Palisades Mall, or 10 miles to the north, the 1.1 mln sq ft Crystal Run Mall. At Woodbury Outlet, it should be noted that the Coach Outlet (COH) was mobbed. Simply unbelievable... mobbed, with people buying, otherwise many stores we visited were quiet. My son, Ben, simply hated Coach (as one would expect for a 1st grader)... LOL, but my wife will love her new bag.

Wal-Mart.... no line at check-out on the Saturday before Christmas?! That was simply amazing. The Super Wal Mart that we visited in Monroe, NY has always had one of the worst run front ends, so today's easy check-out had to be due to a lack of customer traffic and not better organization. And indeed, the store seemed quieter that usual for the weekend before Christmas. My son and I swung through for some basic food shopping items. We did look around for some unplanned give gift buying opportunities, but didn't find anything; and I think that's part of the big problem that Wal Mart is still failing to overcome. It just can't seem to break out of the mold of serving the basic, no frills needs . I'm actually surprised that Mart CEO Lee Scott has last as long as he has.

Friday, December 22, 2006

Snowman's Funeral Revisted

As noted in the December 10th "Snowman's Funeral" post, warm December weather not only had the potential to send natural gas futures sliding (which it did), but to also impact a variety of other sectors of the economy including winter apparel. Tonight on Drudge...

"Retailers grumble about first 'Global Warming Christmas'; disastrous sales for cold-weather clothing, from cashmere caps to wool scarves... Developing... "

No surprise to you, Dear Reader.

Christmas At The Movies

This is one of my all time favorite scenes from "A Christmas Story", with the classic line, "You'll shoot your eye out kid!"

Today's Wallstrip Is Hilarious! Make Sure to Click It On To The Right! ---------->>>>

The Wallstrip team has been producing a series of sharp videos profiling quality names in corporate America. They've outdone themselves this time by going into their vault and revealing the audition tape of the man himself - Jim Cramer!! Click the Wallstrip link to the right for a great pre-holiday laugh.

A Few Friday Notes

I've got some down time ahead of a Costco run with the better half a little later. Mall lots were jammed by 10 o'clock this morning around the area as many shoppers now wait for as long as possible to see what discounts the retailers will roll out at the last minute. Wal Mart is among the retailing stocks down today. NY Post devotes some ink to its marketing troubles.

Sometimes Wall Street research can be eye opening. Merrill has a note discussing the future of Yahoo! and AOL. The two could either end up merging with each other, or they could seek separate transactions with other competitors, according to highlights of the research report. The report noted that Microsoft could be an acquirer in the space muscling out traditional media acquirers. While MLCO maintained a buy on YHOO, it did lower 2007 estimates citing the recent management shakeup and the outlook for Panama. Regardless of which company ends up doing what with whom, it looks like most who were either original AOL shareholders, or long time Time Warner shareholders, or long time Yahoo! shareholders will still retain the coveted title of.... Bagholder. ouch.

Apple has become the subject of morbid fascination for me. iPhone has been the subject of much speculation, we'll soon be getting earnings, the chart is starting to look shabby, ect. This site: http://www.looprumors.com/ has some interesting chatter which throws the Cingular name into the mix.

A variety of analysts loved the RIMM numbers that were out yesterday, but here again another one that's had a huge run and to no avail... the stock has stalled out today. It has really been an interesting situation for shares of Goldman Sachs, Adobe, now Nike and RIMM. Perhaps the New Year will bring better times for these high flyers, or more consolidation?

12/22/2006 Morning Market Comment

Posting will be limited today ahead of the holiday weekend.

Stock futures modestly higher... with durable goods printing higher for November, prices flat, consumer spending higher.

Half day of trading for most products in Chicago will mean a very quiet day for Wall Street.

The big mover is nat gas... slumping almost 3% this morning. First day of winter here in the NY Metro features partly sunny and a high of 44! I don't what it is with my fascination with the World Sunlight Map... but the Earth's Shadow is now at it's largest in the northern hemisphere http://www.die.net/earth/ and the promise of summer's return will begin a little later today.

I'm out the door this morning for more pre holiday activities!

Quick Gold Comment

Now that I'm set up with a new data and chart provider with far better analytics, I'm able to take a closer and better look at things. It was an early Christmas present. One of the analytics which I was missing was stochastics and what I now see is that gold is coming out of a very oversold situation. If we can hold through the light holiday chop and slop of the next week at present levels, I'm actually liking that the 50 day has crossed back above the 200 day moving average and this may mean we don't retest $600. I also like that ETF demand for gold has been strong with StreetTracks holding over 441 tons. Another reasons to like gold is that the dollar hasn't been able to reclaim much lost territory since the favorable employment data. There are other reasons as well, but it's late and I'll save that for another time. Here's there gold chart... Let's face it, that gold chart looks like a wreck out of the springtime peak, but there is the hint that the consolidation came to an end with the run in late November to $650 and that a new upward channel is in the making... time will tell. This is one area that I am planning to put capital to work in with alacrity in the New Year.

Here's the Philly Gold and Silver Index... all things considered, it has held up remarkably well... a testament to consolidation in the industry and expectations that gold and silver are not finished yet. 120 has been triple bottom support for the XAU and notice the 50 day is crossing over the 200 dma as well...

Thursday, December 21, 2006

Copper & Hank McKinnell

Since I started this blog Thanksgiving week my bias has been BEARISH on Copper as it consolidates from its blow off top of earlier this year and as LME inventories rise on cooler than expected demand from China and a slower U.S. housing market. The copper slide has accelerated during the month of December. Today, the slide was enhanced by the GDP being adjusted to a 2% annual pace in the 3rd quarter along with the negative reading in the Philly Fed Manufacturing report, though I understand Hank McKinnell, the outrageously wealthy and now retired CEO of Pfizer will be subsidizing the Philly factories for the rest of his life, so there are no worries there! Here's the copper chart... By double clicking the chart, you can get a bigger view and you'll notice that I've thrown in a 300 day moving average since the 200 day has been handily broken. Copper seems destined to do what many other commodities have done, even the entire CRB, in breaking through very long term moving averages. 300 day could mean another 10c leg down to $2.85 a pound. If it drops below $2.85, McKinnell, from what I hear, will step in and act as a market maker and permanently support the copper market! Go Hank!

But notice the upper RSI portion of the chart: relative strength is at the lower end of the range and that has often preceded sharp near term bounces. An even stronger indication that a bounce might be in order is that thestreet.com's Jim Cramer said earlier today that copper is a "fiasco" which he wants nothing to do with (Click here for the Cramerian fun and games). Wow.. sounds like it's time to load up!

Ok, seriously now, there is indeed a supply abundance in the short dated contracts which is one of the reasons that Cramer ticked off and is indeed a good reason why Copper could test the 300 day - something it hasn't done since 2005. So while I think it is looking like we're heading for a test of the 300 day moving average, I wouldn't be surprised to first see a brief rebound, or dead cat bounce.

**CEOs and companies named in this post while resembling real life, outrageously paid and retired incompetent boobs who were let go from poorly run real world drug companies were purely fictional and coincidental.

GOOG - Google Gets Another Table Pounder

In scanning through the flyonethewall.com this evening, I couldn't help but to notice this entry... Wow, no doubt premised on Goldilocks still being perky and not a tired old hag.

Google-GOOG initiated with a Buy & $650 target@CANT
Cantor believes Google will continue to benefit from the secular shift of advertising and marketing dollars to the Internet and they see no signs of business hitting the "proverbial wall." :theflyonthewall.com


It was just the other day that I noted the bad chart formation of Google: http://buttonwood1792.blogspot.com/2006/12/while-i-was-out-goog-adbe.html

What I wonder about with respect to some of these pie in the sky buy recs is what type of organic growth or otherwise they're expecting out of Google. Perhaps in advertising and marketing there's room to grow, but in the area of traffic and searches, Google may be much further along than officially thought... Which may be good, but then again, not so good if there's no room for further growth. (Here's an eye opening perspective).

RIMM - Research in Motion Follow Up

So it looks like the head and shoulders bottom is being confirmed to a degree with a run in the stock this evening. The options were too expensive and risky for my blood and even if the Jan135 calls go fairly deep in the money tomorrow, many will likely still lose money unless the stock runs past $143. This evening the stock moved to about $141-1/2.

Great Customer Service

True story, I kid you not. I called a company today - which shall go unnamed - for customer service. I got voice mail which said, "Thank you for calling our customer service department. We are in a meeting to improve customer service, please call back later."

More Violations

Just a few, simple charts to throw up (which is what some Apple bulls may feel like doing), showing violations of their 50 day moving averages.

The first is Apple. It got up close to mid-90's last month and ran into a brick wall after hitting a lifetime high. By the way, I stopped into an Apple Store earlier in the week at the mega Palisades Mall in West Nyack, New York where you could barely walk around. It was like the old Star Trek episode where the planet was so crowded that everyone was packed together like rush hour in the Tokyo subway. Well, it wasn't that bad, but business was booming and my daughter is going to love her iPod color player when she gets on Christmas.
Those iPods were going faster than bananas at a chimp convention, but apparently someone on the Street must have realized that everyone this side of the next star system would have to buy an iPod to keep the stock roaring past $100. Today AAPL has managed to bust down below its 50 day moving average. This bears some watching. The break below the 50 dma is similar to what happened at the start of the year which followed a blow off top and ended up being a fairly long lasting slide down to the 200 dma.

Let's look at QQQQ. It is just today moving a tenth away for the 50 day.

QQQQ has spent the better part of four months above the 50 day moving average - similar to its run of late 2004 as seen on the chart. It's slump below the 50 dma was a lot sharper and faster in early 2005, but the similarities are striking; so this is something that will need to be watched closely as well if it makes the move below.

RIMM - Research In Motion

In looking through a variety of analyst coverage on RIMM there are some who love the stock and some who hate it. That in itself is unusual. There are some analysts who communicate their ideas about RIMM with unusual fervor, almost as if they're blasting away on a chat room message board. AmTech in particular has been telling clients to be aggressive buyers ahead of earnings saying recent weakness is a buying opportunity ahead of results - seeing 25% upside to their $160 target. But Citigroup thinks that while Pearl sales have been strong, they feel Pearl has cannibalized sales of other Blackberry products and recently lowered their target from $104 to $92. So the dichotomy of thought is about as wide as you will find where analyst opinion on a stock is concerned on Wall Street. The point and figure chart shows this stock is not going to drift one way or the other after earnings tonight: It's actually pretty impressive that this one managed to hold support at its 50 day moving average recently (see below) and it really has the look of a short term REVERSE head and shoulders with the neckline being roughly at $135. You could also boil the last few weeks of trading down and make an argument for a bullish pennant formation.

The range of the calls and puts is between the $160 strike on the call side and $120 on the put side where volume is over 1,000 contracts today in the January chain. I'm just staying off to the sidelines. I doubt RIMM does two huge gap ups quarter to quarter, but there's a good chance the trend can remain higher unless they disclose they've royally screwed up since the last earnings report.

While I generally hate the idea that the best idea on Wall Street these days is this lame idea to pump and buy stocks at all time highs (it is pervasive) there are some exceptions and RIMM could be one of them. Companies with near monopolies fit into the "exception" category. Of course, the issue for RIMM is becoming just how long they hold their veritable monopoly. Tonight is going to be very interesting.

12/21/2006 Morning Market Comment

Stock futures are flat and since we're going into the Christmas homestretch trading is likely to become even duller than it was yesterday. The chart below of the S&P 500 shows the ongoing upward channel, and so long as the downward range of that channel isn't broken in the 1400 area (very clear to see) it will likely be more of the same for the rest of the year - range bound action. But as noted in recent posts about factors like low stock put to call ratio and the lowest volatility in 13 years, or even the post yesterday about the divergence between the Dow30 and the Dow Transports, or even the wayward movement of the Nasdaq Composite away from its upward channel - the New Year promises to be interesting for the stock market.

It's been interesting to see corporate earnings in recent days in the retailing and retailing related space. NKE numbers good, but not great enough to get the stock to go meaningfully higher this morning. CIBC summed it well with an increase in its stock target, but also noting that the stock will likely take a breather for a few months after its big run. These things don't go higher for ever. What I want to know was who bought at the AH high yesterday of $100.75?

Bed Bath and Beyond - one analyst calls it "Best of Breed", and I think that's accurate. But charts don't lie, and as noted yesterday, it was not able to pierce $42 on two runs recently. This morning on a miss it's down to $38.77. Of course, we know what happened earlier in the week to Circuit City.

Some of these corporate results and subsequent guidance are starting to have a topish feel to them. Granted, nothing is collapsing, or crashing, but many stocks which have had mega runs to multi year or lifetime highs are suddenly in holding patterns. Even Goldman Sachs after wildly beating Street has seen its stock stuck at the $200 mark. It again goes back to basics like the troubles emerging in the transportation stocks and growing questions over what's going to happen in the economy in '07 - soft, or hard landing? The Buy High - Sell Higher Camp may be running into some trouble. What will the high flyers of '06 do for an encore in '07? The latest 3rd quarter growth estimate shows GDP at 2% annual rate as the housing market continues to take a toll on the overall economy. That's a 2% pace in Q3 compared to 5.6% in Q1. Can't wait to see how 4th quarter GDP is shaping up.

The big earnings report due after the bell today is RIMM - talk about a flyer and raging debate over that one. Pearl is the keyword with RIMM. Has it saved the day? Did they ship out enough, or has it cannibalized other RIMM business. If only I had the definitive answers. But I will take a look at the charts and options on that a little later even as I dash out later for more holiday prep.

Iran is finding there's an economic cost to developing nukes... it's having trouble developing oil projects.

The knives are drawn in the BP succession battle (Click here)

Schack Attack

I want to put in a good word for my friend Peter Schacknow who is Senior Producer at CNBC's Breaking News Desk. I hear that desk was actually made by an old Norwegian craftsman with exacting detail - hand planed with just the right touch of freehand routering. Actually, I'm not exactly sure where they got that desk from - it could have been Irving R. Levine's old desk for all I know, but it's a great desk for sure, and greater still is that Peter is now manning it at CNBC!

Peter is also blogging about the frenetic pace of things going on at that desk and the news that's being covered. Check out his blog here: http://www.cnbc.com/id/15837548/cid/97549. Peter and I have had the pleasure of working together in the past and he's a pros pro with valuable insights. Make sure to add Peter's blog to you regular list of daily 'must reads'.

Wednesday, December 20, 2006

Quick Thoughts on NKE and BBBY

NKE beat by 2c when a special tax arragement with the Dutchmen is factored out, but margins were flat... that's on a $100 stock... ohhh-kaaay. Looks like the Jan95 puts might be a great buy at the open Thursday morning, especially if for some kooky reason the stock opens higher. We'll see what happens in the morning. What can I say, "buy high - sell higher" just doesn't float my boat". NYSE AH trading just plain stinks, so we won't have a good read on the true direction until the morning.

BBBY, not quite Blood Bath and Beyond, but still down 3% for the day after it came up light on top and bottom line numbers. As noted earlier, there was reason to believe that the puts would be the better way to go. Yes, retail IS a tough business.. though I do love my garbage can with the lid that opens automatically, bought during the 3rd quarter at Bed Bath and Beyond. Had I bought 740,000 of them, I would have made their quarter for them.

NKE - Nike

The stock has been a one-thousand pound gorilla of late

That chart is indeed the true Magilla. Jan105 calls actually look like a cheap shot at 85-cents. Where NKE is concerned these days, it doesn't hurt that Warren Buffet recently raised his stake in the company, or that Adidas recently warned, or that Nike has a collaboration with Apple, or that Nike could surprise with a stock split announcement. Some analysts, however, have cautioned that Nike could miss estimates this time around because of a shift toward casual skate-type products and European-styled silhouettes. Wouldn't that be nasty. But most analysts love the stock, including UBS which has a target of $112. Stocks that trade at lifetime highs keep me wary especially consumer stocks in a slowing consumer environment.

BBBY - Bed Bath & Beyond

I've been a bit closer to home than expected today since number-1 son is home with a cold... so doing things around the house ahead of the holiday. Earnings of 52-cents a share are expected at Bed, Bath and Beyond after the bell today according to the Reuters survey. BBBY probably meets, if not exceeds... they are a catagory killer. I'm just wondering what's up with all the action in the Jan45 call options? Over 2,000 have traded today on a stock hovering at about $40 a share. Given the shabbiness of this chart action... ... that seems surprising since the stock has failed a few times to run past the $41 area. I've got no dog in the fight, but I'd be inclined to go with the Jan40 puts, where volume is actually heavier today, given that retailers have been forced to spend more on ad spending and to discount more heavily this year. In the last few days IV has ticked up from 29 to 33, so the risk for a move of a few dollars after earnings is being factored in, but no the $5 move that the Jan45 call players are hoping for. Guidance is probably where the downside risk may be, but it could end up being a draw as well. I just don't have the ability to know, so no play for me.

Housing Woes Recapped

Last night I linked to the horrifying study on the coming epidemic of subprime mortgage defaults. This morning on the Roubini blog http://www.rgemonitor.com/blog/roubini he has a complete recap of the mortgage situation.... worth a read.

A Tranny Breakdown in the Making

With Fedex (FDX) down 2% on what the press is calling "tightened" guidance next year, the Dow Transportation average, known affectionately as the 'Trannies" on the street are heading south as well. This chart does not engender confidence not only in the transports, but in the overall market... Let's do a Skippy to Jiff comparison and throw a Dow-30 chart up as well...
As usual, choosier bulls have definitely chosen the Dow lately... but there could be trouble ahead. While the Dow has continued to bop along in its fairly tight upward channel the Trannies started to break down last October and today broke below its 200 day moving average. The head and shoulders pattern in the Dow Transports is unmistakable and for how long the Dow Theory rule can be broken - where the Dow-30 keeps going higher while the transports falter - remains to be seen. In the words of Larry to Curly in warning that he might anger Moe over a scheme about to go badly wrong, "I'd be careful if I was you."

GOOG - Google

The other day we noted the bearish head and shoulders formation in the GOOG chart along with the breaking of its 50-day moving average, which it failed to recapture yesterday even after a great deal of buyside defense.

In going through the analysts comments, Soleil had some especially noteworthy things to say. That firm claims that that GOOG's average price per search keyword is down more than 10% since the start of the year. The firm also says U.S. search revenue dropped to 6% sequential growth in the third quarter. Those comments went by pretty much unnoticed especially after PACS lifted its target from $500 to $575. We'll see who's right eventually.

12/20/2006 Morning Market Comments

At least the stock market was able to bounce back yesterday as the realization set in that the bond market was not completely freaked out about the wacky PPI data given the volatility of series in recent months. But this morning the folks over at Marketwatch note that stock futures are off the highs (click here). Editor's note: Since everyone and their brother already puts out the customary list of story stock movers ahead of the open each day, I am going to link a write through which I feel does the best job of summing things up going forward. What I will offer in my 'morning market comment' is hopefully some additional non-commoditized, unique insight.

While the markets rebounded yesterday, 17 to 15 breadth on the Big Board was nothing to write home about and put to call indicators have been on the rise. That indicator alone doesn't signal an immediate correction ahead IMHO, but it bears watching when the crowd is loading up on puts in some big names like AAPL, WMT and DELL - just to name a few. But for weeks I've been talking about 'seasonality' and this is generally a bullish period of time for the markets. But we have seen fear, or the VIX find a floor at just above 9-1/2 and actually even an unwillingness to stay under 10 intraday, so there are some folks out there a tad bit more on the defensive.

There's no major economic data today aside from DOE crude inventory data a little more than an hour from now.

Morgan Stanley being total sleazes for failing to produce emails in arbitration cases - using 9/11 as an excuse! (Click here).

One company not getting coverage on the story stocks lists: Sharper Image. I couldn't help but to notice a note out from DANN that comps at SHRP will be down 22 to 25% this month. OUCH.

Zune and Vista finally like each other: http://www.theinquirer.net/default.aspx?article=36497.

I continue to be in holiday shopping and family arrival preparation mode. Posting will be limited during daylight hours for the rest of the week. Check out the World Sunlight map http://www.die.net/earth/... pretty cool stuff as we close in on the shortest daylight day of the year in the northern hemisphere. Night has indeed become a very large shadow in this part of the world.