Motorola (MOT)

Handset sales disappointing. Revenue is going to $1 bln below guidance in the 1st quarter; EPS also m issing by a mile: 17c was expected, loss of as much as 9 cents now expected. MOT halted, but when it's resumed they won't be using a claw hammer; they will pull the wrecking ball out.

Motorola (MOT) was rumored to be the buyer of PALM (PALM) tomorrow morning, I wonder if Ed Zander had to say, "mommy does this mean I can't buy Palm?"

Fed Statement Quick Analysis - Not That Hard, Really

There's some debate over whether the Fed is now hinting that it will cut interest rates. I believe that it has opened the door to that possibility, though certainly NOT indicating that an easing is imminent.


Let me allow the Wall Street Journal to help me. They've put together a great graphic comparing today's statement to the January statement:

With the Fed now in a "balanced/symmetric" bias from a tightening bias in spite of the statement's continued language about inflation, one has to ask, 'why go to a symmetric bias while still talking inflation troubles? It's not rocket science folks -- yes, the Fed is concerned about risk of a hard landing and is preparing to react later this year. What the Fed has left out of the statement vs. January is as important as what's in there.

Market Volume

As we move towards the close, once again volume is an issue. With 20 minutes to go as of this writing, NYSE volume is below yesterday! There is however a distortion - from 9:30 to 2:15 volume was in the "dead" catagory today as the market awaited the FOMC statement. IF there's upside follow through tomorrow, we'll have to see if there's a pick up volume; this is going to be an important factor in whether the market can get back to the recent highs.

Gold

Gold is near the highs of the day up by more than $4 an ounce at above the $662 level. I have been heavily long gold futures once again this week with a fairly tight stop since I have a large quanity of GLD in the stock market.

Ultimate nightmate for Fed... STAGflation... weaker dollar drives commodities higher.

Dollar index down again.. .33 at 82.78.. breaking the key 83 level. Seems as if DXY is hell bent on testing the the 80 level.

Don't Fight the Tape

I am now long Spider Calls.... just a little to see what happens.

It is possible that the S&P could find itself at the highs of the year again on the mistaken notion that rate cuts will cure all. Wouldn't that be the ultimate lunacy? A run back to the highs of the year for the ultimate double top and then an even nastier slide because the Fed has to scamble to do something in crisis mode?

VIX at below 12... c'mon, but ok, you can't fight these markets, but I still think you see a 30+ VIX sometime this year.

Fed Opens the Door to a Rate Cut

As widely reported, the Fed has gone back to a neutral bias and stocks are taking off. 1430 on the S&P... above 66% fibonacci, and as noted yesterday I was wary of shorting into the rise we saw yesterday. The wariness also comes from the realization that the Fed has been ginning the system with massive amounts of cash as they did last July. 1430 is also above the S&P's 50 day moving average. You've got to be careful here since things are now looking overbought. Overbought doesn't mean it crashes tomorrow, it just means that the S&P has now risen 50 points off the lows point in a treacherous fundamental environment. 50 dma on S&P is actually 1424.. let's see if it can close above that level.

I'm Back

I went with the simple diner tuna melt on rye... quite tasty.

So we're about 15 minutes away from the big event... the Fed announcement. Unless the Fed were to totally surprise with a rate move, it may literally come down to the omission or addition of just a few words in the statement which could still have a monumental impact on the markets. Stay tuneed.

Pre Diner Musings

I'm headed out to the diner with my wife for brunch or something.

But a few notes...

Anticipation is building for Apple's (AAPL) Leopard. Will it be released as early as March 24th, or along side the release of Adobe CS3? Looprumors adds fuel to the speculative fires.

STFL reiterates a SELL today on Accredited. The firm says that unless secondary market conditions improve LEND's new and expensive funding gives it another 3 to 6 months.

FDIC says subprime woes to affect bank earns Ya think? And just imagine if the FDIC chieftess told us what she really knows! Incidentally, Reuters also noted that the execs of troubled New Century have declined to testify at Senator Dodd's subprime hearing tomorrow in Washington.

Bill Fleckenstein's web site features a note from a subsciber (worth the $125 a year) who says prices for special lumber for fine furniture have fallen through the floor boards, always a pre-recession indicator in that individuals business. Says Fleck's subscriber, "We usually enter recession 5-6 months ahead of the rest of the economy. IT'S HERE! Prices for green and finished lumber are falling at a faster rate than at any time since 1974".

In checking out plain old lumber futures, I see there are signs of trouble... already near a triple bottom point of pain and bear in mind the 2001 swoon in the economy was not even led by a housing slump, yet lumber still sold off hard:

But hey, the consensus says the economy is still good so sorry to have wasted your time with that chart.

Off to counter act my cholesterol meds with some good diner food!

Wednesday Curtain Raiser

I spent the last 3 hours researching and writing a post about a number of very important matters and Google Blogger had a "technical problem"; so as I pushed the 'publish' button one of my longest posts just vanished into thin air. Oh well. See you folks in the morning.

Important Intraday Rebound

The above chart shows the S&P 500 back at an important test level of the 50% fibonacci area. This 1410 neck of the woods has proven to be tough resistance. Also for the first time since the Feb 27th pull back, the S&P is above its 20 day moving average. MACD has also flashed a turn to the positive and RSI is closing in on 50. It would not be a complete surprise if the S&P made its way to somewhere between the 50% and the 61.8% retracement, which would take it to 1420, so I am wary at this point of shorting into this strength. The equity only put to call ratio is down 26% today to .6 and that's also a big check market in the bullish column.

However, the above is intraday and if the market washes out and fails stay above the 1410 at the close it will be another defeat for the bulls at this level.

Palm

Plenty of takeover speculation about Palm, but is there much premium? Over 3000 May 22-1/2 calls have traded today. Unstrung.com says a deal could be struck and announced by Thursday at "$20 or more". The "or more" part is the tricky issue. In looking through past analyst comments I'm hard pressed to believe "or more" means anything that will be beneficial for those May 22-1/2 call buyers. Sure, they could know more than I do - we'll see.

It is intriguing that Motorola's chief cancelled an important speech which only served to stoke speculative fervor that MOT will be the buyer of Palm. Maybe the lemonade from potential lemon May 22-1/2 calls would be a bidding war for Palm between Motorola and Nokia? That seems far fetched given the fading franchise that the Treo et al has become.

Gateway Speculation

More speculation that it will eventually be Acer for Gateway. No word in the link of a takeover price.

The Jim Cramer Video That's Made it to Drudge

Cramer admits to manipulation in a past life...



...though after watching this, I realize the video was cut at the end of 2006. Why is this Drudge news now? Because the NY Post discovered the video. Folks who jump into these markets need to remember they must go into a trade with a plan, a good plan, but as in life - the best laid plans of mice and men - they should be ready for anything including the manipulations of strangers like Jim Cramer and his ilk.

Naked Shorts does an even better job of giving perspective to this story.

China To Stop Accumulating Foreign Reserves

Xiou Xioachuan, Chinese central bank governor, apparently read
Lauriston Letter's fun things to do with a Trillion in Reserves and got the message. He was humiliated by the fun that Lauriston poked. Xioachaun now says the Chinese government will stop accumulating foreign reserves!!! That could surely mean trouble for the dollar.

Morning Market Comment

The headline number on the housing data looks great - 9% jump in February Housing Starts! But look under the hood and the report is another clunker with that 2-1/2 percent slide in building permits to a 1.532 mln annual rate.

The British Pound is surging today - Pound futures are up 160 points after higher than expected UK inflation figures - 2.8% gain vs expected 2.7% - sparked speculation the Bank of England may lift interest rates another quarter point in April.

Japanese Yen futures are up 16 points. As expected the Bank of Japan left its benchmark rate at .5%, with some BOJ watchers thinking the BOJ signaled there will not be a rate move until after Japanese Parliamentary elections in July. IF, if that's the case then the carry trade vs stock market indicator may suddenlybecome an unreliable indicator - a situation to watch closely.

For now however Yen vs stock market and overall dollar condition vs stock market appears to be quite valid. With the dollar moving lower, stock futures are struggling amid the weak building permits figure.

There's even normalcy in the gold futures market, where a weak dollar is translating into a powering up of gold and other metals. I have been long gold futures since Sunday night.

A few notable movers...
Accredited shares soar on loan deal
Affiliated Computer Founder, Cerberus Bid to Buy Firm ...

A look at analyst calls a bit later in the hour.

The Fed Prop and Other Dangling Mortgage Shoes

There's just no doubt that the cash spigot is wide open not only at the Federal Reserve by way of its so called "window" at the New York Fed Bank, but also at the U.S. Treasury. The figures for Monday alone show that a 1-day $10.5 bln repurchase (repo) agreement was conducted at the NY Fed and another $5-1/2 BILLION was injected from the U.S. Treasury through a transaction known as a Term Investment Option, or TIO. That's $20-BILLION in a day. This is temporary cold, hard cash that can go directly to money desks on Wall Street to influence the markets, or it can even be loaned out by the broker dealers which count among their ranks the biggest names in banking. Thanks to the marvel of fractional reserve banking billions in short term loans can still add massive amounts of money to the economy even if the original 1 day to two week loan is paid back as promised.

Yes, the Fed policy markers are going to fool everyone on Wednesday by saying their standing pat on interest rates, or that rates must remain steady because inflation is a danger. Behind the scenes with competition from the Treasury to dole out cash, the Fed continues to pump the system with liquidity and Fed 101 says flooding the economy with money is akin to loosening credit!

Why do this? One reason is that the mortgage mess is far from over. Everyone calls it subprime, subprime, subprime, but the fire is spreading to different types of loans which are not necessarily relegated to dungeon level credit scores. Here's a note I received from a hedge fund manager earlier in the day:

• "Just FYI, i am sure the market as discounted part of this already... Next month, 3 year ARM holders will understand why that was a bad decision. There are 2 waves of ARM mortgage rate increases coming. The first wave will occur in April on 3 year ARMs. This is hard to believe, but if interest rates remain the same in the next few weeks, then these ARM mortgage holders will see a 100% increase in their interest rate. If they were to refinance today, they would see a 60% increase in their rate. The second wave of increases will begin this Summer on the 5 year ARMs, and will continue to run for the next few years unless homeowners refinance. The best hope these people have now, is for us to have a large enough slowdown in the economy that would cause Bernanke to lower interest rates.
  While some market analyst were only worrying about defaults coming from sub-prime loans, they forgot to look at the mortgage defaults that will occur because of the 3 and 5 year ARMs. What this means is that we are likely to see these problems filter down to the banking industry, and that would put pressure on the market. Analyst are telling us that these problems are not affecting the banks. The reality is, that these problems take time to filter down to banking financials. Over the next few months, you will hear how banks will have to increase their default reserves, and how it will begin to affect their profits."

That email gives a sense of better perspective as to why there's such great urgency on the part of the entities run by Treasury Secretary Paulson and Fed-Head Bernanke to flood the markets with liquidity: The first wave of subprime implosions which have featured the demise of 41 subprime lenders according to Aaron Krowne's count thus far is only the beginning. There's a long way to go before the contagion reaches the top of the food chain and it would seem our monetary authorities are trying to protect or insulate our economy and markets from the next round of mortgage shocks.

I wish I knew what was really on the minds of Helicopter Ben Bernanke and Agent Paulson, at least with respect to the economy, because when Bernanke says the economy is on a path of moderate growth, or Paulson says subprime is contained I just don't believe them given what their organizations have been up to.

PM Market Comment

I've been busy with various and sundry matters today.. sometimes my Mondays end up being my day off to run errands since weekends become overloaded with shuttling and participating in the activities of my 3 children.

I kept half an eye on the market through the day. Price wise the major indexes sizzled not only out of the open but through the day, it was volume that fizzled once again... NYSE volume figures among the slowest of the year. While some have suggested that both volume and the price spurt in the indexes might be an artificial post expiration phenomenon the fact remains that up-days have featured less than stellar participation since the late Feb swoon.

Another big missing ingredient in today's rally - the chip stocks. JP Morgan this morning warned that consensus estimates are going to have come down across the board for the semis and the SOX moved lower. Stare at this chart long enough and you'll notice similar topping formations in the past. While semiconductor stocks misbehaved the energy market was pulled to and fro. Crude oil futures fell today while RBOB (gasoline) futures surged. The first link says crude fell because supplies are going to rise, while the gasoline link says prices rose because supplies are going to be tight. The real reason? The RBOB crack is through the roof at above $20 and the contango on crude is clearly showing the market is getting ready for summer demand with summer barrels going up today even as the front month moved lower.

Tomorrow - Tuesday - will be the 'show me' day, at least for me. Can we have some follow through to today gains please, with some better volume, bulls?? 8:30 housing starts data will be released. The trend has not been perrty (sic)...
By 8:30 we will have also known for hours the BOJ rate decision - no rate change expected this time around; which reminds me that today's Yen decline was also very beneficial to U.S. stocks.

Tomorrow, no doubt, there will be much talk of the coming Fed rate decision on Wednesday. There has already been chatter about whether the Fed will signal the slightest chance for an easing later this year in light of the subprime prime debacle and growing evidence that GDP is likely to slow more than expected as manufacturing and retail sales, etc slow. While a rate cut hint from the Fed could certainly spark a near term short covering bonanza for the bulls, this little chart reminds that the last campaign of rate cuts was painful for stocks.

This isn't the best chart since the shortest short term rate on Stockcharts.com that i could find is the 3 month T-bill discount rate (reddish bar chart). It's compared to the S&P 500 (black line). Yes, as short term rates cratered stocks sank at least through more than half of the rate cut campaign and as rates rebounded, stocks rebounded - one of those be careful watch you wish for type of things.

Chip Slip

DRAM prices continue to plummet. The SOX is noticeably absent from today's market rally.. down by 3 points.

2 for 1 Apple Split Coming Soon?

That's the speculation on the web today concerning Apple (AAPL).

Morning Market Comment

U.S. stock futures are pointing to a higher open and again the connection points to a weak Japanese Yen. Last night the Yen out of the gate was strong and S&P futures were down almost 5 points, but as the Yen pushed toward resistance at .8700 (.8702 was the high of the night) and then weakened, stock futures rebounded. The experience of higher morning futures since the late February tankage has not always been good: often morning sizzle has led to afternoon fizzle. All eyes again will remain on Yen movement as the day wears on and looming large is this week's Fed meeting and economic data including two batches of housing data.

There are some deals and potential deals boosting sentiment this morning:

• ABN jumps after Barclays, other approaches: sources
• ServiceMaster to be acquired by Clayton for $4.7 bln
• Women's Wear Daily reports Foot Locker Said Readying Bid for Genesco
• CBOT offer formally delivered
• Quanta to purchase InfraSource
  

Accredited Lenders (LEND) was down about 5%, but now rallying. It has received a delisting notice as it seeks financing and also fights a class action suit. Other subprimes are strong, including Novastar with an early 20% gain, and Freemont chiming in with a 10% premarket rise. H&R Block also poised to rally on an analyst upgrade (noted below).

Rumors persist Apple developing AMD projects. A knife in the back or a helping hand?

An emailer sent me a note about Kronos (KRON) saying there would be a buyout but gave no other information. Oddly enough 1,770 Kronos April 45 calls were accumulated last week; previously there had been 0 open interest on the strike. I have no idea if there's any truth to the communication.

CSX was a big rumored takeover target on Friday. No takever thus far this morning; stock down a half dollar.

Some notable analyst comments...

• LEER maintains Outoerformn on Amylin (AMLN) says Byetta scrips are rising despite new agents coming to market.
• Trouble for chips: JPMS says checks suggest CONSENSUS estimates for Q2 and 2007 need to come down in the Semiconductors. JP Morgan thinks AMD, CY, INTC, ONNN likely to have largest cut in estimates, but FCS, TXN, BRCM, ALTR, XLNX will need to be reduced as well.
• Bank of America resumes coverage of Express Scripts (ESRX) now that the CVS saga is over with a target of $115 and a Buy
• UBS upgrades BEAS to Buy with a $14 target
• Juniper (JNPR) downgraded to Strong Sell from Buy at Matrix
• Pru upgrades Kraft (KFT) to Neutral
• H&R Block (HRB) upgraded to Overweight at Thomas Weisel, sees overestimatation of problems from Option One, strong tax business.

The big blowup of the day is Atherogenics - another company confessing a failed drug. The stock is down 60% pre-market.