Need to Know
MAY 10, 2013
6 gut checks before the stock market's opening bell
By Shawn Langlois
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Wikimedia Commons
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Good morning.
J.C. Penney is one of the few exceptions in the emerging trend of heavily-shorted stocks busting out to the upside. U.S. Steel is another. Both are in the dumps so far this year and have been treating their detractors to some nice gains.
But that doesn't tell the full story of what we're seeing during this nosebleed climb. Squeezed stocks are actually pacing the upside. Even on the Dow , Johnson & Johnson and Intel are the two most-shorted stocks, and both are beating the blue-chip index so far this year. See: 10 most-shorted stocks of the Dow .
While it's not that rare for market advances to catch a lift from stocks with lots of short interest, this particular scenario is on the extreme side (more on that below).
If you're one of the short-sellers who's had enough of betting on the "Don't Pass" line, there are plenty of other unsavory investment strategies to consider. Perhaps long tobacco stocks? "We often hear that the last 13 years have been horrible for stocks. Well, not all stocks," writes Eddy Elfenbein . "The chart actually understates how well tobacco has done because their dividends are usually above the rest of the market."
J.C. Penney is one of the few exceptions in the emerging trend of heavily-shorted stocks busting out to the upside. U.S. Steel is another. Both are in the dumps so far this year and have been treating their detractors to some nice gains.
But that doesn't tell the full story of what we're seeing during this nosebleed climb. Squeezed stocks are actually pacing the upside. Even on the Dow , Johnson & Johnson and Intel are the two most-shorted stocks, and both are beating the blue-chip index so far this year. See: 10 most-shorted stocks of the Dow .
While it's not that rare for market advances to catch a lift from stocks with lots of short interest, this particular scenario is on the extreme side (more on that below).
If you're one of the short-sellers who's had enough of betting on the "Don't Pass" line, there are plenty of other unsavory investment strategies to consider. Perhaps long tobacco stocks? "We often hear that the last 13 years have been horrible for stocks. Well, not all stocks," writes Eddy Elfenbein . "The chart actually understates how well tobacco has done because their dividends are usually above the rest of the market."
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BigCharts.com
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Key market
gauges: Japan bagged another big day, even as much of Asia
resisted the buying. The Nikkei soared almost 3%, knocking out a
6.7% gain for the week. The rally came as the dollar busted through
resistance to breach the ¥100-level for the first time in four years. Read why
the dollar's move says as much about the U.S. as it does Japan .
Investors cashing in on the Japanese rally might want to hold off on the celebratory sake, because this is going to end badly, warns Mike Shedlock. "Prime Minister Shinzo Abe is playing not with matches but with dynamite," the blogger known as "Mish" wrote . "There is no reason at all to believe Japan can easily contain this mess."
Taking cues from Asia, Europe is staring down the barrel of four straight days of gains , with a 2013 record in its sights. Italy's FTSE MIB is leading the charge, up 1.3%. Not to be outdone, futures on the Dow and the S&P are setting up for a strong finish to the week.
With equities getting snatched up around the world, gold is getting pummeled this morning. The shiny stuff is down 2.2%, turning negative for the week after notching back-to-back weekly gains. Read: Metal stocks .
The economy: Fed Chairman Ben Bernanke will take the mic in Chicago at 9:30 a.m. Eastern and investors will be tuning in for any clues about where we're headed with the $85-billion-per-month asset-purchase program. If he hints at a halt or even cutting back, look out below. But that's not going to happen with inflation running below the bank's mandate and unemployment still up at 7.5%. Read: Spotlight on the economy .
So are we in a bubble? On bonds, Paul Krugman says definitely not. He's not quite as convinced about stocks , though. "Mr. Bernanke should brush aside the babbling barons of bubbleism, and get on with doing his job," he wrote.
The buzz:Dell is back in the spotlight on reports that Icahn and Southeastern Asset Management are launching a fresh bid for the company, setting up proxy battle with founder Michael Dell. The stock is up 1.5% in premarket trading.
Priceline.com is trending after the company posted a higher profit late yesterday. Shares, however, are getting hit just a bit in extended trading on a disappointing outlook. Joining the online travel discounter on the StockTwits list are MGIC Investment , Ford and Barnes & Noble , with investors still beaming over yesterday's Microsoft-induced 24% surge .
Abercrombie & Fitch is still one of the most searched topics on Google, with the company's "cool kids only, no fatties" approach rubbing HuffPo's Andrea Neusner the wrong way and drawing barbs across the social media landscape.
I was ENRAGED when I read that article about Abercrombie's CEO until I realized I'm hot.
— Trevor S (@trevso_electric) May 9, 2013
The chart of the day: Green Mountain Coffee Roasters and Tesla Motors both jumped more than 24% yesterday, slaughtering the short-selling masses in the process. But these aren't the exceptions. It turns out that taking the other side of the bear bet on heavily-shorted stocks, in general, has paid off in a massive way in recent weeks. In fact, they are the primary drivers of this rally, according to Bespoke Investment Group . This chart tells the story. Simple. The best performing stocks are the most shorted. The worst are the least shorted.
Investors cashing in on the Japanese rally might want to hold off on the celebratory sake, because this is going to end badly, warns Mike Shedlock. "Prime Minister Shinzo Abe is playing not with matches but with dynamite," the blogger known as "Mish" wrote . "There is no reason at all to believe Japan can easily contain this mess."
Taking cues from Asia, Europe is staring down the barrel of four straight days of gains , with a 2013 record in its sights. Italy's FTSE MIB is leading the charge, up 1.3%. Not to be outdone, futures on the Dow and the S&P are setting up for a strong finish to the week.
With equities getting snatched up around the world, gold is getting pummeled this morning. The shiny stuff is down 2.2%, turning negative for the week after notching back-to-back weekly gains. Read: Metal stocks .
The economy: Fed Chairman Ben Bernanke will take the mic in Chicago at 9:30 a.m. Eastern and investors will be tuning in for any clues about where we're headed with the $85-billion-per-month asset-purchase program. If he hints at a halt or even cutting back, look out below. But that's not going to happen with inflation running below the bank's mandate and unemployment still up at 7.5%. Read: Spotlight on the economy .
So are we in a bubble? On bonds, Paul Krugman says definitely not. He's not quite as convinced about stocks , though. "Mr. Bernanke should brush aside the babbling barons of bubbleism, and get on with doing his job," he wrote.
The buzz:Dell is back in the spotlight on reports that Icahn and Southeastern Asset Management are launching a fresh bid for the company, setting up proxy battle with founder Michael Dell. The stock is up 1.5% in premarket trading.
Priceline.com is trending after the company posted a higher profit late yesterday. Shares, however, are getting hit just a bit in extended trading on a disappointing outlook. Joining the online travel discounter on the StockTwits list are MGIC Investment , Ford and Barnes & Noble , with investors still beaming over yesterday's Microsoft-induced 24% surge .
Abercrombie & Fitch is still one of the most searched topics on Google, with the company's "cool kids only, no fatties" approach rubbing HuffPo's Andrea Neusner the wrong way and drawing barbs across the social media landscape.
I was ENRAGED when I read that article about Abercrombie's CEO until I realized I'm hot.
— Trevor S (@trevso_electric) May 9, 2013
The chart of the day: Green Mountain Coffee Roasters and Tesla Motors both jumped more than 24% yesterday, slaughtering the short-selling masses in the process. But these aren't the exceptions. It turns out that taking the other side of the bear bet on heavily-shorted stocks, in general, has paid off in a massive way in recent weeks. In fact, they are the primary drivers of this rally, according to Bespoke Investment Group . This chart tells the story. Simple. The best performing stocks are the most shorted. The worst are the least shorted.
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Bespoke
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The call of the
day: Buy DirecTV , says Woodlawn Management's Craig Blank
on the SumZero blog . This is "a
broadly cheap business with intelligent management that is capitalizing on the
discounted share price with an aggressive share buyback program." The
stock "could unlock big value" if it spins off DirectTV Lat.
Blank is targeting $84 for the shares, which are currently at $62.98. And it
doesn't hurt, he says, that it's a top 10 position for Berkshire
Hathaway ."
Random reads: The diamond heisters got nothing on these guys, who managed to steal $45 million from A.T.M's "in two precision operations that involved people in more than two dozen countries acting in close coordination."
Not even famous people are immune from China's one-child policy. In fact, this celebrated director could be fined some $26 million.
Need a vacation from all those godforsaken tech gadgets that rule your life? Here are "10 anti-tech getaways" to consider. Or just give in to it all .
Not to mix social-media streams here, but did Wayne Rooney just de-friend Manchester United on Twitter?
Need to Know starts early and is updated as needed until the opening bell, but sign up here to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @slangwise on Twitter.
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Random reads: The diamond heisters got nothing on these guys, who managed to steal $45 million from A.T.M's "in two precision operations that involved people in more than two dozen countries acting in close coordination."
Not even famous people are immune from China's one-child policy. In fact, this celebrated director could be fined some $26 million.
Need a vacation from all those godforsaken tech gadgets that rule your life? Here are "10 anti-tech getaways" to consider. Or just give in to it all .
Not to mix social-media streams here, but did Wayne Rooney just de-friend Manchester United on Twitter?
Need to Know starts early and is updated as needed until the opening bell, but sign up here to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @slangwise on Twitter.
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