Monday Market Movement - Trying to Get Bullish

We are still trying to get more bullish.

Over the weekend we set a new, higher set of levels for our Big Chart on the assumption that our breakout levels hold up and our new Must Hold lines become Dow 13,600 (not there yet), S&P 1,360, Nasdaq 3,000, NYSE 8,000 and Russell 800, which means it's now up to the Dow and Nasdaq to continue to show leadership if we're going to be having a rally good enough to get us to add our next 10 bullish plays.

I already added 2 aggressive upside trade ideas on XLF and SPY in the weekend post and last week we already looked at WFR, X, BAC, GLW, BBY, CHK, AAPL, AA, and BA but we also added a new Long Put List (Members Only), which had 19 stocks that we thought were good downside horses to ride if, per chance, we fail to hold 3 of our 5 breakout levels.

It shouldn't be too much to ask – IF this is a real bull market. We've been extremely skeptical up to this point and, Fundamentally, I still have my doubts but Technically, we can't keep fighting the tape so were drawing a line in the sand for Mr. Market to cross and, if it does so, we're happy to play along. If it fails to do so, however, well – we've already made those bets!

Our aggressive take on the Dow is the result of analyzing the 5 components that were replaced since the crash with MO and HON thrown out for BAC and CVX in Feb of 2008, AIG replaced by KFT in Sept 2008 and C and GM replaced by CSCO and TRV in June 2009, causing a massive distortion in the index, meaning 16,000 is the old 15,000, possibly even lower:

The Nasdaq is similarly distorted by AAPL, who are up 500% since 2009 and when a stock that is 11.5% of an index is up 500%, that stock alone causes the index to go up 57.5%, which is why we now call it the AAPLdaq. The AAPLdaq itself is "only" up 100%, which means the ENTIRE rest of the index is lagging with a 42.5% contribution – those who tell you that tech is somehow loved again are fooling themselves – or perhaps just you – in order to spin a market story that simply is not so.

In fact, if we removed AAPL suppliers from the AAPLdaq along with Big Daddy AAPL, we'd have an index that is every bit as pathetic now as it has been since the great crash of 2000. The largest potential for a market catastrophe is AAPL selling off and that's why SQQQ is one of our primary hedges and QQQ July $61 puts ($1) are on our Long Put List – because the AAPLdaq without AAPL is just "daq" – and no one wants to buy daq.

This morning AAPL went against my advice and announced a complete waste of cash dividend of $10.60 per share, which is roughly $10Bn out the window in order to give their shareholders a 1.8% dividend. Just to prove that, perhaps, they are truly out of ideas and SHOULD have their money confiscated, they also announced a $10Bn buyback, which also works out to 1.8% of the company (at the all-time highs) and you know the Jobs era is dead when AAPL can't find something better to invest in than their own stock. As I said to Members in the weekend post:

AAPL investors (real ones) should be FURIOUS if AAPL pays a dividend. Who gives you a better return on capital than AAPL? Why would you want them to give you money – you'll only blow it on some stock that's not AAPL! That $100Bn cash everyone is salivating about was $5Bn 5 years ago, when AAPL stock was $85. Now the stock is $600 and they have $100Bn in cash – THAT'S GOOD! Why would you want to take money away from them? Did you turn $5Bn into $100Bn in the last 5 years? Did you turn a $85 stock into a $600 stock in the last 5 years? So who has a better chance of taking $24Bn (a 4% dividend) and doubling it in the next two years – you or AAPL?

AAPL giving out a dividend and buying back their own stock is a vote of "no confidence" from shareholders and their own board and a black spot on the new management, who couldn't come up with a better plan to grow AAPL than this. Sure they still have lots of money left but $20Bn to goose EPS 1.8% and give $10.60 back to shareholders one time? What else could AAPL have done with $20Bn? I'm glad you asked:

How about buying TWX ($35Bn market cap), which pays a 2.9% dividend ($1Bn) and drops $3Bn to the bottom line. That's 10% back on your money per year and gets AAPL into the cable Biz and gives them a well-known publishing platform, ownership of music content as well as marquis TV and film content like HBO, Cinemax, TNT, TBS, Warner Brothers, New Line Cinema, etc.
The CBS Corporation is exactly $20Bn and they drop $1.3Bn to the bottom line with a $200M dividend. AAPL should love them as they bought $1Bn of their own stock last year (5%) and should help boost their EPS in 2012.
DWA is just a $1.5Bn company, AAPL could have bought that by just paying out $9 in dividend instead of $10.60 and what announcement would you like better – that AAPL is giving you $2.65 a quarter or AAPL is giving you $2.25 per quarter and just bought Dreamworks? While not as successful as Pixar, clearly it's a business Steve Jobs wanted to be in and he drove the value of Pixar up to $7.6Bn when Disney bought it from him in 2006.

Those are just 3 quick ways, off the top of my head, that AAPL could better spend their money than paying out dividends. They are a media company and being able to pick up media assets at depressed prices is a far better use of funds than handing it back to shareholders who don't understand the basic value of having a moat of cash around a company. Just ask Warren Buffett what he thinks about dividends….

We'll see if AAPL declaring itself out of ideas takes the wind out of the market's sails or if it (like everything else that happens) becomes yet another reason for the market to take off to new highs. This week's calendar has a lot of housing data, beginning with today's NAHB Index at 10, followed by Housing Starts and Building Permits tomorrow at 8:30, then the Mortgage Index and Existing Hime Sales on Wednesday, the FHFA Home Price Index on Thursday topped off with New Home Sales on Friday.

If you're determined to be bullish this week, HOV at $2.80 is a good play as we're either going to get good housing data that pops them over $3 or the whole market is going to pull back on negative reports because, without housing coming back – this rally is definitely getting ahead of itself.

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JRW III

Member

March 19, 2012 10:30 am

exec / Position

Didn't you see my posts?

I was long, then short, then long, now cash waiting to see what happens at IWM 83.33 (buy a breakout)

jabobeast

March 19, 2012 10:32 am

Priceline.com price target raised to $800 at Monness Crespi

Burrben

March 19, 2012 10:33 am

HOV Trade – Did anyone get filled for net 0.10-0.13? I've been trying since the morning and no dice. I put in a GTC order for 0.10 in case I can't watch it.

exec

March 19, 2012 10:34 am

JR,

I did, but was wondering since the P-Bars would suggest that we may have some downside.

angelcur

March 19, 2012 10:35 am

with all due respect to chanos hes been shorting china since the earth was cool…i am going to see how he's doing with it

March 19, 2012 10:37 am

Phil – IFF
What do you think about taking a long position in IFF?

From Douglas Kass

IFF, my largest long (great franchise with takeover potential) is ex dividend today by $0.31. Adding $IFF

March 19, 2012 10:38 am

exec,

If we don't breakout, we will likely range from IWM 82.94 to 83.34 the rest of the day; I don't see a catastrophic failure here (yet) !!

wappler

March 19, 2012 10:39 am

LNKD/Kongen,
Not really sure about the bull case for LNKD. Here's something to consider: AAPL has a P/E of 18 and LNKD a P/E of 760 – does that mean that they are 42x better than AAPL? If we assume they are about as good as AAPL, their fair stock price is $1.22. I know, I know, I did not account for the unlimited growth potential of LNKD (CHINA!!!)…

Full disclosure: Short LNKD 100 April/ Long 120 June

stjeanluc

March 19, 2012 10:42 am

Agreed on Chanos Angel, he has a vested interest. But his numbers are usually verifiable. Not saying that his analysis of them is correct. But that's more than we can say about China's official numbers!

March 19, 2012 10:43 am

he is probably taking a hit on it this year, but depends on how he is hedged and what he is short..but if you listen to him he has sounded increasingly frusttrated the couple years my bet is he is getting keel hauled..i don't know his performance though

1020

An occasional beer, that's it…. 🙂

kinkistyle

March 19, 2012 10:44 am

DWA/Phil: Speaking of DWA, what do you think of it as an value investment for regular folks. They have incredible leadership, a respectable history and portfolio of popular, profitable movies. China growth is always a factor. Worst case scenario liquidation they would see a good deal of net asset value if they sold off their entire movie library. Seems like accumulating it under 20 is not a bad idea not just for AAPL.

rainman

March 19, 2012 10:45 am

Nice beat down on the $.

Phil

Author

March 19, 2012 10:47 am

TSA/JMM – Yes, there was a lot of expansion of Government but HomeSec is really just 200,000 people and TSA just 60,000 (not sure how big it was before 9/11) so accounts for SOME of the expansion but nothing compared to the military build-up (that Obama is also winding down).

85.85/JRW – That would suck for the TZA play!

Dollar totally flatlining since Friday.

Good thing that girl is cute Rustle! I would be scared to leave her home alone though…

LOL Jrom – I thought I recognized you from the cartoon re-enactment….

BAC $10 – WOW!

VIX/Rustle – I still like them for a trade. With VIX at 15, VXX is at $21.33 but you can sell the April $22 puts for $2.35 (essentially a bet the VIX stays over 15) and you can use that to buy the $17/21 bull call spread for $2.50 for net .15 on the $4 spread with a break-even at $19.58, a line VXX has not yet crossed (was $19.88 last June on a spike down).

10:00 AM On the hour: Dow -0.04%. 10-yr -0.25%. Euro -0.1% vs. dollar. Crude +0.49% to $108.11. Gold +0.14% to $1658.15.

NAHB Housing Market Index: 28, highest level since June 2007, vs. 30 expected and 28 (revised) prior. "While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving," notes NAHB Chairman Barry Rutenberg

The sharp recent rise in homebuilder confidence (latest figures from today) has not yet been matched by a bump in single-family house sales.

The worst of the debt crisis lies ahead, writes Wolfgang Munchau, who takes the contrary stance that the ECB's policies have not bought time, but instead have slowed necessary economic and political adjustment. Spain – which had the most egregious property bubble, but has done little to account for it – is next. "Default is the only escape."

Lagarde Warns Against False Sense of Security. International Monetary Fund Managing Director Christine Lagarde urged policy makers to be vigilant as oil prices, debt levels, and the risk of slowing growth in emerging markets threaten global economic stability. “Optimism should not give us a sense of comfort or lull us into a false sense of security,” Lagarde said today at a speech in Beijing at the China Development Forum. “We cannot go back to business as usual.”

IMF Staff Sees Potential Need for More European Aid to Greece. Greece remains “accident prone” and may require further debt restructuring or additional financing from euro countries if it struggles to implement measures attached to a new 130 billion-euro ($171 billion) bailout, staff at the International Monetary Fund said.

Last week's Treasury bond sell off – the worst since last summer – prompts UBS to declare the end of the 2-decade bull market. New "bond king" Jeff Gundlach agrees to a point, but says the 10-year too far above 3% (currently 2.32%) would self-correct because of the resultant damage to the economy. TLT -0.3%.

Federal Reserve Stress Tests Make Us All Muppets. The Fed has an imperfect view of the future, as do we all. It has repeatedly demonstrated a limited ability to control economic outcomes. In light of this, the Fed could have required banks to build up shareholder capital on their balance sheets in case their aggressive risk-taking again becomes reckless and creates enormous losses. Instead, the Fed is allowing big banks to reduce capital levels, increasing the likelihood of another financial and fiscal crisis and endangering the broader U.S. economy. We are all muppets now.

Look Who's REALLY Footing The Bill In The $25 Billion Mortgage Settlement With The Mega-Banks.Surprise! The banks win again.

Bank and Broker Default Risk Still Elevated. (graph)

Wall Street Keys On Landlord Business. Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae. The idea is that the new owners would rent out the homes at first rather than reselling—potentially aiding a housing-market recovery by reducing the number of properties clogging the market.

The U.S. Cruises Toward a 2013 Fiscal Cliff by Alan S. Blinder. As tax cuts expire and spending falls, the economy will be hit with a 3.5% decline in gross domestic demand. At some point, the spectacle America is now calling a presidential campaign will turn away from comedy and start focusing on things that really matter—such as the "fiscal cliff" our federal government is rapidly approaching. The what? A cliff is something from which you don't want to fall. But as I'll explain shortly, a number of decisions to kick the budgetary can down the road have conspired to place a remarkably large fiscal contraction on the calendar for January 2013—unless Congress takes action to avoid it.

"We Are This Far From A Turnkey Totalitarian State" – Big Brother Goes Live September 2013. In its April cover story, Wired has an exclusive report on the NSA's Utah Data Center, which is a must read for anyone who believes any privacy is still a possibility in the United States: "A project of immense secrecy, it is the final piece in a complex puzzle assembled over the past decade.

Biotech Funding Gets Harder to Find. Biotechnology firms are coming around to a harsh reality: The gravy days are over. These small, innovative drug companies were once an investment darling, able to secure millions of dollars from venture capitalists and even more later through public offerings. But in recent years, venture financing for biotech has been in decline, due to the tough economic environment and poor returns from stock offerings.

10 Fascinating Insights From Wall Street's Sharpest Minds.

Look at that dollar.

They're trying to break it out JR

March 19, 2012 10:48 am

Angel – If he is shorting Shanghai, he must be doing OK… they were at 3400 just 2 years ago and now the index is around 2400!

March 19, 2012 10:55 am

You may want to take some profit here (IWM 83.58)

msf65

March 19, 2012 11:01 am

Lflan,
so what's your hunch on AAPL performance after the announcement?

March 19, 2012 11:06 am

Fairly impressive drop in the dollar in the last 10 minutes !!

March 19, 2012 11:24 am

Angel – Well, maybe Chanos will be proven right after all…

http://ftalphaville.ft.com/blog/2012/03/19/928801/chinese-property-alert/

Chinese property sales and prices have made for dour reading recently. Property sales value contracted 20% year on year in the two months ending in February. This is not only the worst result since the property slide in 2008 – it’s the worst result since the series began in 2006.

Interesting reading…

Pharmboy

March 19, 2012 11:26 am

PLX….

March 19, 2012 11:27 am

Interesting theory on what is going on with oil sales from Saudi Arabia:

http://ftalphaville.ft.com/blog/2012/03/19/928521/the-saudi-oil-sales-enigma/

Neatly summed up, the idea is that these may be deliveries that were already sold to the market by intermediary banks in bilateral deals on behalf of producers back in the days of contango madness, completely off radar and off balance sheet. That the likes of Saudi received $$$ (or, interest-free loans) for the barrels long ago. That these “paper barrels” ended up flooding through the system, making the market think there was a lot more oil out there than there really was.

Now this “short” position taken on by the banks on behalf of the producers is starting to be covered. This time with real deliveries, since the positions can no longer be rolled forward for a profit by the banks.

One could say, it’s a spin on the gold leasing trade. The idea being that producers who wanted to benefit from the steep futures curve effectively took on collateralised loans from banks, pledging yet-to-be-produced oil as collateral. For a long while this financing was easily rolled on via the futures curve, because the premium in long-dated futures ensured that banks received the equivalent of an implicit interest return in exchange for the funding. However, if it’s no longer cost effective to sell short into the curve, it no longer makes sense to hold the short positions.

So are these deliveries being used to close out the shorts? After all, it’s presumably easier for Saudi to deliver the “collateral” than to pay back the $$$?

It's getting hard to get a "real" price for oil…

In which case, what might appear to be a temporary short squeeze could turn out to be a large oil dump soon enough.

March 19, 2012 11:28 am

pstas…FCX….

March 19, 2012 11:30 am

oh i think he is right..but when you are fighting an overt manipulation of a systems economic results?..if i were him i would hope that the chinese leadership doesn't read his insulting (and accurate) depitcion of a gov't riven with venal pols and corruption and decide to ruin him..he has wasted alot of npv in this trade

March 19, 2012 11:31 am

X up 6% this morning – Things are getting nasty for the bears! Even YRCW is up 2%.

Dollar diving to 79.875 and that's popping oil to $108.50 but dangerous to short while the Dollar is falling.

Euro with a big pop to $1.32 and Pound touching $1.59 line but not over yet.

We can play gold up with ABX as they had a rough March so far and are down at $44.11. The April $42/45 bull call spread is $1.75 and you can sell July $40 puts for $1.25 for net .50 in the $3 spread that's starting out $2.11 in the money.

HOV/Burr – Very hard to get net fills if you don't break up the legs. .60 on the bull call is an easy fill and then it's just a question of getting .50 for the $2 puts but .45 is not a tragedy and you'll be lucky to get that if HOV busts over $3.

IFF/Burr – Not a company I spend a lot of time thinking about at all but it seems like a nice little business. I think I would not buy them under the 200 dma ($57) as they haven't broken over it since Aug 2011 except briefly and, even if they do, I'd watch that line closely. On a nice sell-off, they would get more interesting but the put prices aren't very exciting with the VIX this low so not a trade I like at the moment for those reasons.

LNKD/Wappler – Very good analysis.

China/StJ – Yes but what does it matter if China is going to CONTINUE to make up good numbers and the rest of the World is going to continue to accept them? If you have a competition based on GDP and 19 nations are honest and range between -2% and 5% but one nation says they grew at 8% and no one ever checks – then who "wins"? Unless we're going to start doing audits, China will continue to post great numbers. To me, the evidence that China is BS is the fact that oil isn't $200 a barrel and copper isn't back at $4.50 as well as the fact that YUM and NKE and KO and 1,000 other companies have had little more than a minor bump in sales with their China expansions. Show me just ONE company (maybe COH), that is making real money from China. There should be hundreds – thousands – and we can't see any? That does not make sense…

DWA/Kinki – Well, Pixar did go for $7.6Bn, which is 5x what Dreamworks is going for and you can certainly argue that there's little difference between the two that a couple of good movie ideas won't change. I like them long-term but I think they need better management as Katzenberg is not getting the job done and Spielberg and Geffen don't really contribute to the animation side of things, which is stupid of them as this company is two hits away from a double (and one miss away from $12 – so keep that in mind!). I think, as an initial entry, I'd just sell the Sept $17.50s for $1.20 and see how it goes at net $16.30. We have no particular reason to think they are going to rocket higher. $16.35 was their recent low (twice) and the 200 dma is falling so I'd want to see it bottom out before getting on board this one with a big commitment. $12 is the level at which I think the company is worth its scrap value so a sell-off would be a nice opportunity if it comes.

79.71 as our poor Dollar goes back into an abuse cycle.

11:00 AM On the hour: Dow -0.11%. 10-yr -0.19%. Euro +0.21% vs. dollar. Crude +0.7% to $108.33. Gold +0.46% to $1663.35.

Surprise Increase in Interest Rates Is Credited to Signs of Recovery (NYT)

2nd time today this has been posted as "news" so it's making the rounds: The U.S. is cruising toward a "fiscal cliff" that will hit the economy with a 3.5% decline in gross domestic demand, former Fed vice chair Alan Blinder writes. "A number of decisions to kick the budgetary can down the road have conspired to place a remarkably large fiscal contraction on the calendar for January 2013 unless Congress takes action to avoid it" – a phrase that sends shivers up his spine.

“The preponderance of the evidence still argues for a market pullback,” Citi's Tobias Levkovich says, believing upcoming data may not be as rosy as expected, and that the warm winter has pulled demand forward and boosted numbers. “Investors have yet to witness any clear negative numbers to generate new concerns,” he says. “It is fair to suspect some of these issues will show up in coming months."

Evaluating ECRI’s Recession Call (Financial Sense)

ECRI Explains Why Recession Is “Inevitable” (Financial Sense)

Don't focus on stocks, what's really indicative of the Fed's "success" is credit deals, writes Bruce Krasting, particularly 5 from last week in which companies borrowed at low rates in order to pay dividends. Krasting believes Bernanke believes that creating financial wealth for big players creates jobs. Sadly, it also sows the seeds for the next bust.

Bank of America (BAC +2.6%), whose shares have now more than doubled from their Dec. 19 low, continues to power higher amid positive comments from Morgan Stanley. The firm raises earnings estimates and price targets for BofA, as well as C +3.3%,GS +1.5% and JPM +0.8%, citing stronger consumer credit among the reasons.

JPMorgan (JPM +0.6%) edges higher after Goldman lifts its PT to $50 following a meeting with top management. Goldman notes management believes the housing market is close to a turning point, and that JPMorgan's capital markets business is "off to a good start this year." Management is also confident "Volcker and swaps rules will be sorted out in a more market-friendly manner."

Housing Bulls Aren’t So Far Out on a Limb (WSJ)

Why banks will continue to rip off clients (Reuters)

The Good, Bad and Ugly of Capitalism (NYT)

Capital Gains vs. Ordinary Income (Economix)

Replay: what could Obama have done differently economically? (New Yorker)

Apple (AAPL) and Amazon (AMZN) are similar in that each takes a long time to develop unique products, says Netflix exec Adrian Cockcroft. With Apple, the goal is creating highly polished products, whereas with Amazon, the goal is providing massive scale. Netflix remains a heavy user of Amazon's highly scalable web services, though it wishes they would support solid-state drives (SSDs). Several SSD vendors are targeting the cloud market.

Source:NPR

March 19, 2012 11:33 am

And another 20 cent drop in the dollar !! (2nd today)

March 19, 2012 11:42 am

They're trying JR.

pstas

FCX- Pharm- yes. Opened a small position Friday. Check HAL.

chuckerd

Phil/VXX – the actual VIX index and VXX are diverging with a 3.5% increase in VIX met by a 3.5% decrease in VXX today. I understand the decay in the ETF over the long-term, but on a 7% divergence on a daily move seems really strange. How should this behavior affect our thinking regarding even a one-month time frame for a trade on VXX as you have recommended a couple times recently due to the low VIX?

March 19, 2012 11:45 am

Another leg down on bucky.

March 19, 2012 11:46 am

79.63 is the 50 dma on the Dollar. I doubt they can break that. Euro $1.325 and Pound $1.59 are lining up but $1.58.85 was the 200 dma on the Pound and the Euro is a mile below their 200 ($1.3678) so I guess we should consider the possibility that those two break up and the Dollar goes into free fall to its 200 dma at 77.29. So, I'd have to say that a further breakdown of the Dollar here could be extremely bullish and, COINCIDENTALLY, we have a ton of Fed speak this week – what will they say???

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flipspiceland

March 19, 2012 11:47 am

@Felipe

"….. Obama is "bad for business" despite the 100% gains in the Market under his watch and he's a "job killer" besides the massive turnaround in employment numbers since he took office – would be funny if not so tragic…"

I'm taking this to mean one of two things: 1) You're upset that he's not getting credit, poll numbers are so-so, BUT you think he will still win by a decisive margin in November.
2) you actually think he's responsible for the market doing so well the last three years
3) you think that since he's not getting cred for the rise in markets that he will lose.

Why else is this "tragic"? Isn't that a bit over the top for an incumbent POTUS who has already won this election? That there is no republican in the last 12 years that can beat even the worst deomocrat?
You should be jumping up and down, spinnning around and laying by some Dom for November. This election is already over and everythine else is just hyped media speculation attempting to grab eyeballs when the election is already a fait accompli.
Rre freakin lax.

sagemm1

March 19, 2012 11:53 am

pretty big divergence bewtween vix and vxx difference usually tops at about .8 ( bet 0 and .6 iseems avg) right now almost 50% higher at 1.17, seems like something is transpiring here now.

scottmi

March 19, 2012 11:57 am

WFR – weakening with the dollar falling…

March 19, 2012 11:58 am

All I have immediately above IWM 83.74 is 83.98, fwiw !!

March 19, 2012 12:02 pm

FU MARKET!!!!

March 19, 2012 12:07 pm

Phil, thanks for the feedback on the lines on XLE, XLF and XRT yesterday. I have been playing with some more of the sector ETFs as it could give us some good indication on what is hot or cold right now and invest accordingly. I'll redraw lines based on your feedback and also submit a couple more for analysis AH today.

I have to say that these 5 and 10% lines do look pretty good overall. I even tried on a Euro chart and that was eerie! I also find it somewhat scary that you mentioned looking at 5 and 10 year charts to look for S/R lines. That says a lot about this market that we can use lines from 10 years ago. On AAPL, PCLN and CMG you have to look at 5 min charts!

March 19, 2012 12:10 pm

The CDS market might be broken…

http://blogs.reuters.com/felix-salmon/2012/03/19/a-top-cds-trader-quits-the-cds-market/

It seems to me that there were two opposing constituencies in the Greek default. One group, led by European policymakers, were very happy to see the CDS market get broken — they hate CDS, in exactly the same way that CEOs hate short sellers. The other group, led by fixed-income investors, wanted to make sure that the CDS market operated relatively smoothly and that the payouts were fair.

In the end, it seems, the buy-side won — but with the vivid realization that they had gotten lucky. Fixed-income traders never want to rely on luck and fortune when it comes to things as important as default protection. And so Heller, for one, is out of the market completely — unless and until ISDA does a root-and-branch revamp of its documentation. Which, if it happens at all, isn’t going to happen any time soon.

Little-known fact from the EU:

Sam E. Antar ‏ @SamAntar

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Memo to Thomas Belesis (John Thomas Financial): When your brokers cold call to pump $IOC make sure they ignore earnings quality issues.

Very good article about Central Banks and Gold Holdings from ZHedge.

Very sad article about crime on the rise in Chicago (all cities on the rise as cutbacks eat into police activity and people get more desperate for money in general). 10 dead and 40 wounded in shootings just this weekend.

By the way, in case people were wondering:

You read 886 words per minute.
That makes you 254% faster than the national average.

If you maintained this reading speed, you could read

War and Peace by Leo Tolstoy in11 hours and 3 minutes

Here's the test. It can only be taken once so no excuses!

VXX/Chuck – I don't think I'd go by single-day divergences as VXX doesn't adjust the same time as the VIX and the VIX is a single-month reading while VXX averages 2 months so you'll never get a match at the best of times. If you look at the 1-year chart and shorter, you'll see a very tight correlation except that VXX tends to ignore very sharp spikes in the VIX, which is not a bad thing on the whole..

Obama/Flips – Sorry, no time to re-educate you today but weren't the Republicans BLAMING Obama for a bad market when he first took office, just 30 days after he was sworn in? Now they claim he's not responsible? I am relaxed but that doesn't mean I have to enjoy my forced Fox viewing on weekends when I hear a non-stop stream of BS that WOULD be funny except for the fact that almost 1/2 of all Americans take it seriously. I don't know about you but I have to live with these people in my country and that IS scary!

RUT now up 1.5% from where it opened. We'll see how Europe closes…

March 19, 2012 12:16 pm

Let's concentrate on voter fraud to distract from the outright corruption going on in the background:

http://www.latimes.com/news/nationworld/nation/la-na-contractor-politics-20120318,0,7570089,full.story

A "super PAC" that has spent more than $35 million on behalf of Republican presidential hopeful Mitt Romney has accepted donations from federal contractors despite a 36-year-old ban against such companies making federal political expenditures.

Several contributors — including a Florida aerospace company that has contracts with the Defense Department, and a Boston-based construction company that is helping build a Navy base — are taking advantage of a legal gray area created by the Supreme Court's 2010 ruling in the Citizens United case, which said that independent political expenditures could not be regulated based on who was making them.

On the long road to plutocracy…. we'll be there with you!

March 19, 2012 12:21 pm

manning to denver according to espn tebow to betraded

Springheel Jack

Bad day for the bears on trendlines so far. TRAN made a new high to kill off the Dow Theory divergence there. IWM broke the Feb high there with some confidence. My four month resistance trendline on SPX is now in trouble.

What with the overall bearish picture on bonds and the bullish reversal on EURUSD the overall setup for a decent retracement soon is looking a bit grim.

March 19, 2012 12:28 pm

DWA/Phil: Thanks for the advice. I was reading a value investor blog who calculated the actual book value exceeding $15.73 because of the way Dreamworks capitalizes their movie inventory at cost undervalues them because the movie portfolio continuously generates revenue. So in the hypothetical termination of business scenario, if DWA were to suddenly stop all movie production, they would cease most of their expenditures, their pre-existing portfolio would still produce income, and it could then be auctioned off at a premium to their stated book — higher than $15.73/share.

March 19, 2012 12:33 pm

PCLN almost at 700?
Up 200 points in 2 months?
Is AAPL taking them over?

March 19, 2012 12:34 pm

Man, FAS is killing us again today…

This was my comment on 2/3 when I decided to fold the FAS strangle trade because the treadmill got overheated:

FAS / Cwan – I am currently doing an analysis of where this market could take us and what it would mean to FAS. For example, on XLF I see resistance levels at 14.82, 15.88 and 17.21 if we reclaim last year's highs. Not saying that it will happen, just planning for the worse in our case. The levels are 1%, 8% and 17% away. That would mean FAS at around 93, 112 and 136. Planning a roll to 93 is manageable, the other levels would be very challenging in the short term. On the other hand, the good news is that it's the call side and decay works for us… But we have to plan for continued strength. Last summer, selling lasted for 3 months before we reversed.

And here we are with FAS at 111… Not very far with my predictions then!

March 19, 2012 12:35 pm

Oh yeah! Scored a 712, or 185% faster than the average reader. Since I mostly read comic books and Playboys growing up, I highly recommend it as a learning regimen.

March 19, 2012 12:43 pm

FU TZA!!!

March 19, 2012 12:45 pm

SGEN…..

March 19, 2012 12:48 pm

Dollar held 79.60 so far, back to 79.69 on EU close.

Oil just getting back down to $108, despite the Dollar dive.

12:00 PM On the hour: Dow +0.13%. 10-yr -0.17%. Euro +0.52%vs. dollar. Crude +0.54% to $108.17. Gold +0.45% to $1663.25.

12:42 PM European shares close mixed, but right at session highs after larger early losses. Stoxx 50 flat, Germany flat, France -0.4%, Italy +0.3%, Spain +1.3%, U.K. -0.1%. Euro +0.5% to $1.3241.

Last week's sharp bond selloff prompts some analysts to talk about "a secular turning point for bond markets," but others point out that a little perspective is in order. A historical look at 10-year rates for the past half-century would seem to show that bond yields are not “spiking” at all – "we are finally just reverting to the mean."

The Bank of Greece sees the country's economy contracting by 4.5% in 2012 and unemployment remaining over 19%, but recovery starting in 2013 with GDP shrinking by just 0.5%. Having been far too optimistic about nearly every metric in Greece, the bank believes its positive view is achievable if the government remains determined enough.

While Credit Suisse's China Economic Team believes the country's commodity super-cycle is over, and the Basic Materials group agrees, the Commodity Research Team offers a contrary voice. It believes the worst of the commodity softness is in the rear-view mirror as fixed investment remains strong and exports are set to rebound.

Precious metals continue to bounce bit after an ugly 3-week run which saw gold decline nearly 9% and silver more than 10%. Gold +0.5% to $1,664, silver +1% to $32.92. The miners move higher as well: GDX +0.4%, SIL +0.5%.

China's banking regulator issues guidelines on how banks are to roll over loans to local governments. The plan is necessary as much of the borrowing was shockingly invested in projects that offered little hope of generating the cash necessary to make good on the loans. When in doubt, push the reckoning off into the future.

Citigroup (C +3.5%) sells its entire 2.71% equity stake in Shanghai Pudong Bank, reaching an agreement that includes use of Citi’s global network and credit lines to support Pudong Bank’s international expansion. The sale will result in a $349M after-tax gain, and comes after Citi last week failed to meet minimum standards in bank stress tests.

Las Vegas Sands (LVS +4.1%) rises after announcing the Sands Cotai Central casino, which is owned by its majority-held Sands China subsidiary, will open on April 11, and initially offer over 1,800 hotel rooms on Macau's Cotai Strip. Sands China claims to have invested over $8B in Macau thus far. (previously)

Teavana (TEA -0.5%) is the most heavily shorted stock in America for good reason, Frank Voisin writes, as its share price premium – trading at a P/E of 62 and price-to-book-value of 16.6 – makes its strong financial results pale in comparison: "The economics of the industry will prevail and increased competition will ultimately lead to the shorts prevailing."

Dreamworks (DWA +2.9%) rallies thanks to an upgrade to Overweight from Piper. The firm believes concerns about weak DVD sales are already baked into shares, and that worries about higher production costs and the collapse of the Viacom distribution deal are overdone. Piper also sees a high short interest (nearly 30% of Dreamworks' float is shorted) as a positive catalyst.

Ampio Pharmaceuticals (AMPE +38.4%) says a preliminary assessment of a Phase II trial studying its Optina drug showed positive results, moving AMPE to conclude its study ahead of time. Optina aims to treat patients suffering from diabetic macular edema, an eye condition that can lead to blindness.

BioMarin (BMRN +2%) gains on an upgrade to Buy at Brean Murray based on increased confidence in the timing and outcome of its GALNS program to treat MPS IV. The firm believes the treatment could eventually exceed $500M in sales.

Are tablets finally doing a number on the e-reader market? Pac Crest's Chad Bartlev has dramatically slashed his 2012 forecast for Kindle (AMZN) e-reader sales to 12.3M from 24M, after his checks indicate Q1 component orders "have fallen more than 75% from initial expectations." Bartlev's Kindle Fire forecast is unchanged at 14.9M, though he notes component orders have fallen 11% since February. (previously)

While Pacific Crest argues Kindle sales are slowing, Citi's Mark Mahaney says Amazon (AMZN -0.3%) is enjoying “robust” trends with Kindle, citing his firm's survey of U.S. shoppers which showed a jump from 12% owning one last July to 23% this past January. Respondents bought 2.4 books/month via Kindle, and satisfaction measured as “extremely” or “very satisfied” hit 78%.