Thursday – Natural Gas Preview, Oil Review, Catalyst Update, Bakken Sale Comments

Posted on by zman

 

Market Sentiment Watch: Ugh...Portugal, Spain, and Greece debt fears weigh on sentiment again. On the domestic front, jobless claims came in at an abysmal 480,000 vs the 455,000 expected but payrolls tomorrow is the most important number of the week and we may see upward revisions to past losses there (see article 824K More Jobs Lost That Previously Recorded).  Later today we also get Factory Orders (forecast at 0.2%).

 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Natural Gas Preview
  4. EIA Oil Inventory Review
  5. Stuff We Care About Today - ATW, WLT, GMXR, Bakken lease sale
  6. Catalyst List Update
  7. Odds & Ends

 

Holdings Watch:

  • $10KP II:
    • $19,400
    • 24% Cash
    • The Quick View section of the Holdings tab has been updated.

Yesterday's Trades:

  • EXXID – Added (2) March $15 calls for $5.40 with the stock at $19.85. High delta on these means it should move well with the stock should we get further catalytic news at Davy Jones. Went in small on the high side of the mid as these are traded very thinly.
  • HAL – Added (20) HAL $31 Feb Calls for $0.67 with the stock at $30.50. I own the $35s as well from before the earnings release last month and while the numbers were good and the story seems to be firming the broader market downdraft took the stock lower. My sense is that as the E&Ps announce 4Q results, service pricing traction will be verified by many especially in North America. Management mentioned earlier that they may start a buyback and that may get a little traction with investors in coming days.

 

Commodity Watch:

Crude oil eased $0.25 to close at $76.98 yesterday in erratic, equity market driven trading, after the EIA released neutral to slightly bullish inventory numbers (see below). Iran test firing a long range missile mid day news that the Mars oil gathering system in the Gulf of Mexico may take 350,000 bopd offline next month for a few days also added to the volatility. After the bell the Coast Guard also reported weather disruption at Gulf Coast ports. This morning crude is trading off nearly a buck.


Natural gas closed off $0.035 at $5.42 yesterday. This morning gas is trading flat.

Natural Gas Preview

  • My number: 120 Bcf
    • Last Week: 86 Bcf withdrawal
    • Last Year: 195 Bcf withdrawal
    • 5 Year Average: 178 Bcf withdrawal
    • 10 year Hi: 38 Bcf withdrawal
    • 10 year Low: 236 Bcf withdrawal
  • Street Consensus: 123 Bcf

EIA Oil Inventory Review


ZComment: Crude stocks should no longer be considered bloated as low imports have effectively offset lower throughput attributable due to low end product demand, especially for diesel. As we start to think about the Spring, we should expect to see an uptick in gasoline demand, well before the beginning of the traditional "driving season" in May. Note also that gasoline stocks are within tolerable levels of normal and the same lower refinery runs that are cutting oil demand are resulting in declines in gasoline stocks at a time when they normally would be building.


CRUDE OIL:

 

 

GASOLINE:

 

 

DISTILLATES:




 

Stuff We Care About Today

North Dakota Lease Sale Brief:

North Dakota held a lease sale this past Tuesday, click here to query the results

A quick breakdown of high bids:

  • Billing County: little activity, primarily Slawson and (ME)
  • Burke - a little better, not pricey
  • Golden Valley - ditto
  • McKensie County - Pricey - ranged from $700 to $4,000 per acre, avg. probably close to $3000 per acre
  • Mountrail - Pricey - $4,000 to $7,000 in the core
  • Williams - 500 to $4,500, notables present CLR, Slawson

ATW Reports Better Than Expected Quarter; Look To Call For Color

The 1Q10 Numbers:

  • Revenue of $164 mm vs $157 mm expected
  • Costs came in a little, good thing they beat on the top line.
    • Drilling costs came in at $61 mm vs $59 guidance - a number of their rigs came in a little high
    • G&A was $11.6 mm vs $10 mm guidance
  • EPS of $1.03 vs $0.98 expected


Nutshell: This is a little offshore driller with 9 rigs and two on the way. Eight of these have work at the current time, with the last, the Southern Cross, having recently swung a short term gig. The name trades in line with its bigger peers (RIG, NE, DO) on 2010 P/E at 8.7x and yet EPS should walk higher as they add those two new rigs to the tune of $4.16 in 2010, $4.84 in 2011 and $6.15 in 2012.  None of its peers have anything like that earnings growth track.  The company just about never provides color in its quarterly press release, leaving that for the conference call but I'll be looking for comments on their backlog (at last count it was $1.8 B), activity /sentiment levels especially as it relates to jackups and maybe for them to provide an update on contract negotiations for the 11th rig their goal is to keep it below (the first of these is contracted for at least its first three years at $470,000 per day). Notably their debt levels remained unchanged quarter to quarter at $275 mm easily in line with their plan to keep debt below $500 mm during the construction of their two semi-submersibles to be delivered in early 2011 and mid 2012. I hold the February $35 and $40 calls at present.

Conference Call: Today, 11 am EST.

WLT Reports Better Bottom Line; Still Sees Strong/Record 2010

The 4Q09 Numbers:

  • Revenue of $236.5mm vs $276 mm expected
  • EPS of $0.62 vs $0.59 expected

Comment: Strong quarter and I'll be on the call but I do not have a position at this time.

Conference Call: Today, 10 am EST.

GMXR Quick Thoughts:

  • Reserves fell 24% to 355.3 Bcfe, 93% of bookings are still Cotton Valley despite the shift in focus to Haynesville/Bossier Shale drilling.  Average pricing and rules on proven undeveloped reserves were responsible for the dip in proved reserves. Reserves under the older SEC method would have been 453.9 Bcfe.
  • Reserve replacement of 793% is going to be one of the better ones seen this year but and would have been higher were they not subject to the 5 year rule for getting their Cotton Vally proven undeveloped (PUD) locations into the proven developed producing (PDP) category. 
  • 4Q09 production was 3.5 Bcfe, coming in at the low end of their guidance of 3.5 to 3.75 Bcfe.
  • 1Q10 production guidance is 3.5 to 3.8 Bcfe, so they slowly are starting to turn volumes up sequentially.
  • I sold my shares a little while back but continue to watch the story for their larger casing diameter completions in the Haynesville - something I will add to next week's update of the Catalyst List.

Catalyst List Update

The items listed in yellow are new or changed from the prior list. This is list is archived on the catalyst tab above.

 

Odds & Ends

Analyst Watch:

  • BP - upped to Overweight at HSBC
  • PXD - upped to Outperform, target upped $5 to $55 at BMO
  • SB - Cantor starts at Buy with $10 target

 

 

144 thoughts on “Thursday – Natural Gas Preview, Oil Review, Catalyst Update, Bakken Sale Comments”

  1. First there were the BRIC countries… that was good. But now we have to worry about PIIGS and STUPID. With the worries about Greece combined with Portugal’s not selling all the debt they wanted and the BOE halting their bond buying program… sovereign spreads have widened. This has attracted short sellers (CDS buyers) of sovereign credit like BearStearns, then Lehman, attracted bears. End result = flight to quality.

    And — yes — tough as it is to believe, the US is still considered the “safe haven.” So, expect treasuries and the USD to rally today. That is not good for stocks or oil. But, if the global markets don’t get all worked up about PIIGS and STUPIDs… then we should return to some sort of normal. But probably not today.

    Also, expect buyers to sit on their hands ahead of tomorrow’s Jobs Number. So it could be kind of an ugly day. Depends on if the Global Macro Credit Bears are able to whip fears to a frenzy. I’m betting not. After all, no one expects the PIIGS and STUPIDs to support the US export or global energy market.

    TechTrader predicted a 64/40 SHORT trade for today. But that was last night. With the gap down, HeadTrader says, “who knows.” May not be able to short the gap down and make $$.

    Should be an “interesting” day… as in “May you live in interesting times.” So buckle up and pick your targets. Then go wait in the weeds. Could be a day to pick off some slow-moving, fat antelope.

  5. Credit indices back from the wide this morning. It’s going to be a down day… but should be able to keep from going all panicky. This is back to the CDS mrkt, trying to make mincemeat out of the Weak Players again… BearStearns and Lehman deja vu all over again.

    What has Chanos (noted bear) been saying?

  6. You folks that don’t read the post, tsk, tsk, tsk. There are prices per acre paid in the Tuesday lease sale by county, there is also a link so you can see who’s buying, got pretty pricey in the core but there was acreage to be had.

  8. Z – #2 Hmmm, CNBC are onto it already, With the SPX down less than 5% ?

    I thought the rules were that they had to wait until a proper crash before they put the bears on.

    Actually, from a sentiment standpoint, it has been a bit puzzling to see the (so far) minor drop treated as the end of the world.

    OK, so some things (eg China) are down more that 5%. And CNBC noticed! Must have gotten told by the Hong Kong CNBC people.

    BOP – erm … which are the STUPID countries?

  9. Oh wait, um … “Sinapore, Taiwan, Uruguay (sp?), Poland, Indonesia and Denmark”. Got it!

    Huh?

  10. Oops, that should have been “Singapore”.

    Z – crude getting whupped by the jobless numbers?

  11. #3 — hey! I almost ALWAYS read the entire post. Wouldn’t want to miss anything that might make me $$.

    Heard from a Bakken Player that acreage went as high as $7k in the last lease sale… thx for tracking that down. wow.

  12. Z,

    Sorry about yesterday, I used to work for Ronnie, now my grandfather is drilling all of his horizontal wells in SE New Mexico. BTW, he owns a good sized company called RKI.

  13. PIIGS = Portugal, Ireland, Italy, Greece, Spain

    STUPID = Spain, Turkey, UK, Portugal, Ireland, and Dubai

  14. I wonder is that big VIX put position 2 days ago was a trade or an investment? Looking less good this AM.

  15. Credit Indices back to their wide of the morning. IG out 4 bps. That’s a pretty big move. Let’s watch what it does from here.

  16. RMD — did you see that the WSJ picked up that trade yesterday? So, HeadTrader got the rumor right. That’s why he is HeadTrader.

  19. Reef – probably until after payrolls tomorrow.

    Dman – yeah, crude was off 20 cents late last night, 70 cents before the jobless numbers and is tracking the S&P. Saw a headline sayings it’s down on weak demand but that guy is lazy or stupid or both.

    BOP – Just had to kid you about it, lot of acreage in the core going for $4,000+ it seems

    The ATW quarter was a good one, costs a little high but more than offset by revenues, should be a good call, just a bad day in the market there.

  20. milepost — that was a lovely trade… and the gift that keeps on giving! (10% coupon per yr). thx for the update.

  22. S&P nearly giving back Monday and Tuesday’s rally now, down 1.5% at 1081. The low of 1071.59 would obviously be a capitulatory point on the chart.

  24. BOP – What are the chances that EXXI calls those bonds (10s), now that things are better for them?

  25. Things that bother me: slide 9 of PXP’s presentation blissfully mixes gross acres for most areas and net acres for 1 area. Either give both gross and net acres, or just the net as that’s what is relevant.
    End of rant.

  27. CPE, what’s not going down today?..CPE…any thoughts on fundamental soundness would be appreciated…stock is currently trading on a P&F buy signal off a bottom base…my understanding is that CPE received a large payment recently, but it’s trading like something else is going on…

  28. Al – I sent her an email re 24.

    RMD – yep, bad form on their part.

    Stocks drifting off their lows, barely, ATW call about to start.

  29. Jerome – I jokingly mentioned them the other day as one that could have ultradeep potential the other day, their balance sheet is not pretty, nor is their track record.

    Market looking to test last week’s lows now.

  31. RE: #29, thanks…oh-well…it has such a nice looking chart…but, what’s equally important is what’s under the hood…

  32. Jerome – Weil is pretty smart, and you want the ugly balance sheet if prices are going to stabilize/rise as it levers your return … so it may be worth a shot, will have a harder look later, they have had some things go their way of late.

    On ATW call…

  33. Z-CRR off 10% today-evidently earnings/guidance did not inspire-did you see anything totally negative.

  34. ATW call: Stock off 4% at open of call.

    Very little upcoming downtime, usually there is a laundry list of nits, this time only 2 rigs down for 10 days in the coming quarter for inspections.

    … more in a bit….

  35. What group has been doing well lately? The homebuilders. Heck, as I type this DHI is even up.

  40. ATW – experiencing an increase in activity since the last call, Southern Cross got a contract as per earlier comments, also 3 rig extensions.

    Seeing positive momentum in activity levels.

    Still working on second newbuild contracting.

    Both newbuilds remain on schedule and on cost estimates.

    ….

  41. MMR looking like it wants to drop into the yawning gap somewhat. Anyone know where you can see a chart that continues EXXI to EXXID?

    Both MMR and EXXI are holding up reasonably well in a chart sense, since neither has yet entered the gap below, despite bad markets. Good news flow will do that, but if the market continues to fall apart …

    So why am I holding my mutant EXXI/EXXID DITM calls? Good question. Possible answer: if I have to hold something in this market, it might as well be them. Good enough answer? Hmmm. Dunno.

  42. ATW CC

    Small cost increase as they mobilize the previously idled Southern Cross, overall not a big hike in costs, partially offset by falling G&A.

    No outside capital needed to complete upgrades on existing fleet of 9 vessels or to complete their 2 newbuilds.

  44. Dman,
    Fidelity’s charting now covers EXXID for 6 months if that is of any use. The yawning gap support starts at 14! What a buy!

  45. Dman – mulling adding my swing position back on the MMR on this dip, probably more prudent to wait on payrolls tomorrow. Good chance we have news from the Davy Triad next week.

  46. ZTRADE: BEXP – Added (25) Feb $15 Calls for $0.40 (on the mid and easily) with the stock off 7% at $14.15 in an ugly tape. Bit of a higher risk trade if the market continues to pound lower but we are riding this level below $15 after a number of strong well results in the Bakken. The Catalyst List today outlines 5 more wells which should be reported in the not too distant future, including an important extended lateral in the Ross area near where they have drilled three good wells with shorter completions last year. They speak at Credit Suisse tomorrow.

  47. ATW call over, positive quarter, good outlook, humming along on keeping existing fleet busy, didn’t catch a current backlog, probably not much changed but a little up from their last comment of $1.8 B. Nothing in there to override a tape like today’s though.

  50. Alhambra — #24… good question. Thought a lot about that myself. The 10s are callable in June this year at 105, the 16s are callable in June next year at 106.50. I think EXXI uses their excess cash flow this year to pay down some bank debt. Then I think they go after the 16s next year, in a refinancing. Or, more likely, refinance both the 16s and the 10s. But, i think you have at least a year and a half on the 10s… don’t think they go away before June 2011. That’s the problem with success in the high yield market, your best bond investments get called (or the company gets taken out). So, i would not chase the 10s above 101.

  51. BOP – re 50, and that right there is why YOU get paid the big bucks. Smart answer and it makes sense against his revolver comments yesterday.

  53. z — that was nice of you. I’m just trying to think like a CFO. Anyway, by June of 2011, EXXI should be in a much better position to book reserves at DJ… and probably talk about Blackbeard and others. The added reserves and visibility decreases the cash flow risk in the name and would allow EXXI to refinance the bonds at a higher credit rating and lower interest expense. Until they get to that point (visibility on DJ and friends) it doesn’t make sense to decapitalize your sub (non-bank) debt.

    The only real BONE-HEADED move i’ve seen EXXI’s CFO make is to issue — and add insult to injury by upping the size of — the perpetual convertable prefereds. You can’t even deduct the coupon expense there. They will live to regret stuffing that tranche into their capital structure. But, what’s done is done. Rant over.

  55. BOP – can you run this by HT?

    My sense is that we close higher than here today, that we don’t see a selling crescendo into the close. If we get +25 on payrolls tomorrow we see a sharp rally back to at least 1,100 as the market is discounting worse news. If we see down 25 we gap lower at the open but still rally into the close based on the fact that the market has already discounted such a number, and maybe a little worse.

  56. I’ll run that by him. One thing i can say is that HT is not worried about a market meltdown here… to him, it’s just a down-day. Backing and filling.

    I think most of 2010 will be like this, after the mega-move in 2009.

  58. Site still intermittent, monitoring both

    SP stuck down 25, crude stuck down 3.80.

    Dollar index broke out today, all the way to 80. All technical. Guess no one believes the President can get the Yuan up.

  61. Z: RE 55: if you feel that way, are you tempted to purchase some ATW, or WLT or even more HAL, on stocks that did well earnings wise, but are being shot along with everything else?

  62. BSJ – tempted yes, added some BEXP, will wait on the others to see payrolls.

    Dman – I made that change to the catalyst list and reposted it.

  63. Z – I don’t see anything (eg on Yahoo or on my trade system) about the BEXP earnings date. Do they have a history of springing it at short notice?

  64. Dman – not that I recall, I would guess it’s early to mid March. Is your question, so why are you buying Febs? Then my answer would be, because they could release another well or two in the next two weeks and they speak tomorrow, and it’s being unduly hit today. The stock has been trading in a range even as they prove up Rough Rider because analysts have been, for the most part, downgrading it on valuation. That pressure seems to have abated and I am thinking the stock moves back up fairly quickly for a trade from these levels when the market settles down a bit. It may go to the bottom of that channel at around $13 in which case I’d layer in some Marches. I continue to hold the $15s, the $17.50s in Febs and the common.

  65. Z – #58 I don’t think the dollar rally is technical. I think it is just that the short dollar trade became too crowded. According to Todd Harrison (Minyanville) the “short dollar, long everything else” trade is still on in size. This means that a margin avalanche could still happen from here if the various debt debacles continue to surface.

    Long term, this would provide excellent opportunities in gold miners, energy and grains. Speaking of which: wheat is up today, for some reason.

  66. EXXID starting to stabilize at its 1st hour range low…30 min “morning star”…followed by doji consolidation….probability now increasing for an intraday recovery…

  67. Z – #64 thanks for the extra color. I saw that Catalyst A was there, so I was just wondering if B might also affect the trade. As for Febs vs March: on a down 7% day I can see the logic for Febs.

  68. House about to vote on raising debt ceiling by $1.9 T and Moody’s talking about downgrading U.S. debt. … And the dollar is trading on something other than technicals. I just don’t know about that. Sure the news of the day on debt in Spain and Portugal puts them on a lower peg, thereby lifting the dollar but that wasn’t really a newsflash and the dollar has already had quite the run in the face of a jobless “recovery” where you know more and more spending will be forced through.

  70. Downgrading US debt by MCO — is this Moody’s way at getting back at Congress and the Pres for critizing its credit reports — lol lol

  71. Z – do you think the GMXR thrashing is overdone? Not looking at calls, just wondering what you think of the effect on valuation of the new info.

  72. I memetioned the price action in the homebuilders, if the country is going to hell in a hand basket, why are the homebuiders stocks acting so well?

  73. Dman – you’re welcome. Any time I don’t give the extra color just ask again, sometimes I’m busy and miss it but I thought I saw your implied question in there as I had little to due but adjust the color function on my main market watch monitor.

  74. Well, if we are going to look at the dollar technically, then I’d say we hit resistance today with the dollar index at 80.

  76. Dman – I think it probably surprised some folks, it was a big dip and I’m going to let it settle for a few days. If its drops another 10% that would be in line with the fall in reserves there. Next year I bet you get a big piece of that back but in the Haynesville, not the CV. So maybe the stock creeps lower for a bit and they then they pop a 5″ Haynesville on you with a big rate and the stock gets a 10% boost. One bone to pick I’d have if I were in the room with these guys would be all the talk about $400 NAVs in the past on potential reserves and where they see that now.

  77. BSJ – I don’t have enough thoughts about that to be fair probably, but they strike me as overly salesy.

    Re 74. Now you’re talking, lol.

  78. That’s why they’ve got a notice on the door that sez “whatever you do, don’t let Z in the room”

  79. RE: #69, MMR…intraday, MMR trying to hold support at the 30 min 200 period, SMA as I write this, MMR sure needs to get rid of those intrady “tails” and break back above this little consolidation and… I just don’t care for that “evening star” pattern developing on the daily…take a look, EXXID actually looks a bit better right now…

  80. A few years ago GMXR would present presentations that they were worth some crazy NAV. My pet peave with ATPG is that they seem to do the same thing.

  81. Thanks mcuh JB, was thinking a little longer term but that helps.

    BSJ – Those pie in the sky NAVs do nothing for anyone. So you have a bunch of PUDs booked, I could really care less if it is going to take you 20 years to get them into PDP status and especially if they make up a giant chunk of your reserves. I can get to a very high NAV on something like a NOG but I don’t do it and neither do they from what I see in their presentations and I respect that. Also glad to see EXXI not really doing that right now, maybe they do when DJ flows, dunno.

  82. MMR…support at $15, from here MMR holds its P&F buy signal until a print of $14.50…

    EXXID holds its P&F buy signal until a print of $17.50….

  83. With an hour to go to the end of NYMEX, Crude down $3.80 (still) and NG down 7 cents, not exactly getting its teeth kicked in on that number.

  86. #85, ultra short term…5 min descending triangle on gold, silver in an intraday channel, still displaying lower lows and lower highs on the 5 min …

  87. z- So do you think that NG will stabalize here. I still think that things are really screwed up and that the market is going to scare everybody. Note the major drop in copper. However, I have been sitting on a fair amount of cash, what names do you think are going to hold up the best or conversely should outperform. One name that I don’t own is EOG.

  88. KOG…that 10:30 am 30 min “hammer” has held all day, seems like it just does not want to go any lower, now, if we can just get a decent reversal candle…I think I shall take another nibble…

  89. Eld – re gas, I think we are range bound for quite some time, with a move into the $4s if we get a premature warming spell or if the rig count continues to move up at its recent pace (which I don’t expect, not at the pace of +25rigs per week anyway). The kinds of stories I would expect to outperform: guys with obvious catalyst, guys with increasingly oily production profiles, NAM focused service (currently not working but I think they will).

  92. NG down 3 cents, in danger of being one the better performing things out there today. Stocks could care less at the moment.

    re 91. The right news and that’s going to seem like a bargain.

  93. BEXP has been acting like it wants to lift, hasn’t run down to new lows as the market has. From a very short term perspective, wondering your thoughts there JB.

  94. RE: #93 BEXP…zone of major support begins at about $14, I’m keeping an eye out for any intraday double bottom retest this afternoon…

  95. High seas easing at Houston ports, ships moving again, might see constrained imports again next week, but probably not as big an impact as we saw in last week’s report.

  98. Bond – I’d guess 2 foot instead of 1 foot swells and some wind, lol. Have him call you whenever they get fogged in, helps with the weekly imports read.

  99. bondbuddha — one of our nicest friends is a ship’s pilot in Houston… it is the BEST JOB in the entire world. Except when you run into a bridge or something, of course…

  102. This dollar rally is going to get crushed times 2 and is NOT based on anything other than technicals.

  103. by the way, been on a bunch o’ calls today… but, z, HeadTrader agrees with your earlier comments. He doesn’t think the mrkt stays down here. Says Mother Goldman has been buying spoos in the pits all day.

    But he also pointed out that the mrkt has NOT reacted well to what has been a surprisingly POSITIVE earnings season. So, any warm and fuzzy feelings coming off tomorrow’s Jobs # might be short-lived.

    STUPID-PIIGS conflagration is spreading. Still not outta control… but, bears are pressing.

  105. BOP – Goldman has had a nasty habit of changing their employment number with 5 minutes to go in the market the day before payrolls. Buying all day may be signaling their thought on that.

  109. Bastardi’s long range forecast now calling for a recooling into mid Feb that he’s thinking could last until St. Pats.

  110. Rallythirty on tap before beerthirty? This decline is just way too correlated. Makes one wonder what the Macros need.

  111. Eli – I agree.

    OIH has been in recovery mode last couple of hours, back to even with E&P. Maybe the Cramer effect as he touted SLB.

  113. Good afternoon all.

    Did get into my target area on the spx but the low end which signals to me that the rally we saw was iv and we are now in v down. Arguing against that is the volume which is very heavy and normally would be seen on a wave iii and not a wave v. There is big support between 1057 and 1066 and I think we find a low in that area. We have a 20 day cycle which should put in a low on this wave and we could actually bottom the 45 day cycle too in which case look for a move back towards 1116. If I am off and its quite possible of course then we are in the early stages of iii down and should be heading for 1030 in short order with probably a little bump at 1050.

    Interesting that GS are buying..

  116. Gross on the tape saying this Greece thing will get resolved. I totally agree. This is not the same as when our banking system was breaking down.

  117. That said, we are also at the wides for credit on the day right now too. +7bps on IG.

  119. Well, it has been rather a “sell the good news” (earnings) market lately. So the trend is Doll’s friend.

  129. While we are the subject of number revisions could we please delete the short term market call in #110 please. I strive to be as accurate as the stats we get from the Govt.

  133. sent from HeadTrader —

    from helene meisler earlier…Equity put call ratio got low again real quick: As of this hour the equity put/call ratio is around 84%. The last four readings we had in the 80s all resulted in at least short term rallies. The dates are: June 17th- within days Spx rallied from 890ish -923, July 7th , major summer los SPX rallied from 870ish to 1017 before a breather , October 2nd 1025-1070 before a breather, October 30th 1036-1087 before a breather, pretty serious moves. We’ve got an employment number tomorrow and then there will be the fear of being long over the weekend due to headline risk, but statistically speaking, there is enough fear out there and we’re still oversold enough to get a rally in the next few days. Not saying it going to happen right now but becareful of adding short exposure down here. This put call ratio data has been stellar in predicting entries and exits in to the mkt.

  134. JB I voted-thanks looks like you’ve got one of the better votes per hit ratios in the buch! GL

  135. Overview:

    Levels: SP500 ends down 34 points/3.12% to 1063 (finishing at our lows); the SP500 is now off 1% on the week, off 4.66% YTD, and is down 7.5% from the 1150 recent highs. The Dow closes off 258 pts (finishes right at 10K). The R2K finished off 3.4% and the Nazz was down 3%.

    Sentiment on the desk – tone similar to late last week….vanillas are selling and shorts are more comfortable laying out positions; buyers are on strike; the short covering that helped so much Mon/Tues not around today; dip buyers on the sidelines and not stepping in to defend. The selling wasn’t really panicked today and was relatively orderly – even as we closed on the lows. Not a ton of single stock activity (i.e. ETFs/index activity is dominating). The trade on the desk remains to sell any rally (instead of buying dips); volumes are higher on pullbacks and we continue to end near the lows on days w/big sell-offs. Technicals increasingly precarious – we broke under last week’s lows (of 1071); people now watching 1063 (Oct ‘07 downtrendline).

    Fundamental items weighing on stocks: 1) European sovereign concerns – the usual suspects seeing their CDS costs widen in Europe (an index of the PIIGS CDS is at the highest level since back in Feb/Mar ’09). There are worries that an imminent Greek strike will imperil that country’s efforts to cut its budget; a Spanish debt sale had to be cut; there is a political vote occuring in Portugal today that could result in higher spending; etc. Also – the ECB press conf today failed to allay market concerns. 2) economic worries – while the manufacturing economy has been very strong, this hasn’t translated into the service sector (see yesterday’s non-manufacturing ISM) or to the jobs market (see today’s jobless claims). Labor has been the one missing piece of the recovery story and many are wondering if/when it will come. There are growing fears that tom’s BLS report will miss the St and show very large revisions; 3) US gov’t actions – two actions today (both crossed around 11amET) worried investors (the Cuomo lawsuit against BoA and the Boxer/Webb bonus tax bill).

    Equity Sectors – red across the board today; financials, energy, and materials are all off >3.5%. Tech, health care, industrials, discretionary, staples, utilities, telecom services finish off >2%. The Semis and Airlines look like some of the weakest groups today (off 4-5%). Hard to find any market segment that was down less than 2% today. Some of the lodging stocks were green earlier in the session on back of HOT’s earnings, but that stock (and the whole group) gave up all their gains. There were a few retailers that benefit from strong sales today (like ANF, M, GPS, BIG) but the retail index on the whole still closed down 2%.

    Best Performing SP500 Stocks: ANF (sales), M (sales), BIG (sales), AGN, RX, CSCO (earnings), COST, MET. In the whole sp500, there were only ~15 stocks flat or higher on the day. CSCO ekes out small gain (up 9 cents/0.4%).

    Weakest Performing Sp500 Stocks: WFR (earnings/outlook), MWW (earnings/YHOO deal), EK (’10 guidance), TIE, MA (earnings), ODP, CLF, MEE, JDSU, AKS, AES, AMD, ATI, CNX, CME (earnings), GNW, JBL, AVP, CBG (guidance), GCI.

    FX – some of the most important underlying trends have been occuring in the FX markets. The DXY is up ~2.7% YTD already and is close to breaking north of 80. The Euro plunged more than 1% against the buck today and is down nearly 9.3% since peaking on 11/25 (@ 1.51). The yen plunged 2% against the dollar today (the steepest 1 day decline since Jul ’09). Helping the dollar over recent weeks has been an aggressive unwind of dollar-funded carry trades, sparked by: 1) fears around European sovereigns; 2) worries about the end of US extraordinary policy (mortgage buying ending in Mar and the Hoenig dissention); 3) widening growth differentials between the US and Europe (see today’s weak German manufacturing orders). The dollar strength is wrecking havoc esp. in commodities and commodity-linked equities.

    Commodities: Commodities plunged today, finishing at their lows, as sovereign debt worries caused a sharp spike in the dollar. Oil fell around $4 towards $73. Gold fell almost $50 to $1063, a level not seen since early November. Copper was down sharply again today, off nearly 4 pct, falling below $2.90. Natural gas managed to stay flat today amid cold weather.

    Corp Credit: Corp credit was terrible today. HY lost 1 3/8 of a pt but the real story was IG. IG spreads widened 8 bps today and finished at their lows of the day.

    Treasuries: Treasuries were up sharply today as investors fled to safety. Yields on 2s moved down to 80 bps while yields on 10s fell to 3.59 pct. The 2-10 year spread flattened a bit today to 279 bps.

  136. Nicky – yeah, I have a close of 10,002, worst 1 day fall in 8 months.

    Did anyone see the Goldman payrolls estimate?

  139. Yes. Not sure we get a positve number for Jobs… but, one can hope.

    Speaking of Hope… the House passed the $1.9T increase in the debt ceiling this afternoon. So, you can add $6,300 to every single person’s liability column.

    Brings each person’s share of the National Debt to $47,600. That’s a whole lotta clams.

  140. Excellent commentary by BedTime Market Strategist… rather puts it all in perspective (I especially like his last sentence; pick your target, pick your price, 1-2-3 POUNCE!)

    Greek Week.
    Evidently the S&P 500 could not hold the 1100 level. Today’s drubbing was the worst since April. We are having a hard time perceiving Greece’s problems as the end of the financial world. We are familiar with hysterics surrounding potential contagion, but to think that this is anything more than a momentum-oriented, hyped-up trading move, one would have to believe that a default is imminent. Even most of the market participants who are “concerned” do not think a default is likely in the short or long term. GDP of the Greek economy ranks somewhere between Michigan’s and Ohio’s (Portugal’s is a little larger than Maryland). Another way to look at it is that the Greek economy is roughly equivalent to the market cap of Exxon back in November at its most recent peak. The Greek stock market’s market capitalization is only slightly more than Citigroup’s. Essentially, if you add the GDP of most of these countries together, they will equal the size of one systemic institution in the United States. Most S&P 500 companies have better balance sheets than most sovereigns, including the United States.

    The market and the media are enamored with the credit default swap market. It is remarkable how much attention can be given to the price of default protection for an entity that most believe will not default. It is hard to join the panic considering that a nation like Japan’s debt is double its GDP and its 10 year bonds yield less than 1.5%. If it appeared Japan had imminent problems, it would be a concern, but with yields at 1.5%, that catalyst does not appear to be lurking today. Instead, the fear emanates from a small economy and is fueled by the trading action of a market lacking transparency. The reason there is no assault on JGB’s is because the market is deep. If an investor did not believe the troubled EU nations could refinance their debt that would be understandable as well, but Greece raised $11 billion last week. They had to pay a vig, but it was also 3x oversubscribed.

    From a markets perspective, one must examine constraints such as the EU’s self imposed rules like those of the Maastricht Treaty. Among other things, Maastricht provides that a nation’s deficit must be less than 3% of its GDP. The simple fact is that this is a self-imposed rule. If the EU wants to find a way to buy the troubled economies time, it will. It is not very different from the manner in which “Mark to Market” here was changed when it was deemed too rigid for the environment. We are not making moral judgments on what is right or wrong, but simply noting that if the EU seeks to provide flexibility, then the worst recession of the post war period provides ample rationalization.

    We believe this market is in or close to the capitulation phase for this corrective move. Decliners led advancers in the Russell 3000 (which represents 98% of the investible universe of U.S. equities) at a rate of 17.5 to 1 today. AAII Sentiment has dropped to 40% bullish, which is the typical buy threshold, and will likely be headed lower next week. The S&P 500 has good support at the 1030-1040 level. From here on down, we expect aggressive buyers over the next few sessions to be rewarded nicely over the next few weeks.

  143. $bpnya…goes on “bear confirmed” status…comments below the chart… also added $bpspx for comparison,

    UNG and WRES updated…I intend to make add’l comments and changes to just about every chart, but I’m a bit tired from the day, hopefully I can update some more in the morning…so much interesting stuff happening….

    …and thanks so much for all the folks who made kind comments today and voted, I truly appreciate that…

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