The Market Ticker

Ok guys, where's the SEC?



Notice the first big volume spike just before 11:00, along with the price? Then the second around 1:15 or so?

Guess what - no news on the wire. Of any kind.

Now note the accumulation of shares up to that point, especially in the few minutes before.

This was yet another rumor that the company is being bought. Uh huh. Just like the last 20 rumors, most specifically the ones from earlier this year and then Cramers bullcrap.

Guys, nobody is going to buy this turd. If anything, the real news on the Mortgage Mess today was that S&P is raising capital reserve requirements on MBS issues (specifically, second liens - which includes both "silent seconds" and HELOCs.) This is a stunning blow to the profitability of "ALT-A" paper and will have a severe and immediate impact on their marketability.

Never mind this little ditty:

"Home prices are expected to finish down for the year, the National Association of Realtors (NAR) said Tuesday, which would mark the first drop since the group started tracking values in 1968."

Anyone wanna buy a house? No? You're gonna wait for the declines so you don't overpay? So is everyone else. Do you need a mortgage if you're not buying a house? No? Hmmm... what's that say for CFC's business prospects?

Or that any rational analysis of CFC being "LBO'd" comes up with something more like this:

"Countrywide ``at this juncture is very unlikely to be taken out in an LBO deal,'' said Ricardo Kleinbaum, an analyst on BNP Paribas' trading desk in New York. ``They need to be able to access a range of capital markets in order to compete effectively with the big bank lenders. To take them private would be to destroy their model.''

Yeah.

Now why do I think the SEC should be involved? Because this (1) isn't the first time, and (2) every time this happens the "rally" is instantly sold into - like someone has been tipped off to accumulate the shares prior to the "leak", so they can sell into it.

With a stock like this that trades this many shares this game is pretty easy. If you know there will be a "rumor" of a buyout, you accumulate yourself a half-million shares (not hard in a stock that trades 8m+ a day on average) over a couple of days, the rumor is leaked "on schedule", and bingo - you sell into it and profit to the tune of a million or more. Its damn next to impossible to catch someone doing this - unless the SEC starts running surveillance on the trades.

It is high time that they do so and put a stop to this crap.

If you're one of the bagholders you just bought some VERY overpriced stock from someone.

By the way, lest anyone think I'm just shooting my mouth off here and don't really believe the company has zero chance of being bought, I bought some May $42.50 PUTs this afternoon. I bet they double in value over the next couple of days, which will be fine with me as a quick swing trade. And no, I did not buy any CALLs - if I'm wrong, I'm gonna eat the PUTs in a week and a half. That will be some expensive Crow.

In the absolute "pumpers are silly" column, we have Imergent (Amex:IIG). Their cheerleaders have been cranking along. This is a stock that came up on my radar a couple of months ago when I was doing screening for a complex options play that I like. I took one look at their business model and the fact that the Utah AG was after them and said "no thanks!"

Well, recently they came back on my radar due to some chatter on message boards. As a former ISP operator a quick analysis of what I saw as sustainable revenue (as opposed to "sell things to people through seminars") said to me "short with both hands." Oh wait - can't. No shares. Darn. I will be watching this one, as I fully expect it to implode. It may take a while..... but all you can really do is watch - their PUT premium is sky-high, and thus unattractive to me. Maybe the option guys smell it too?

Oh, Barrons did a hit piece on them in this issue. The company just had its conference call - the centerpiece of the Barrons' piece was a claim that the CEO had shared inside information on earnings before they announced, and someone had actually taped the call. That's an explosive allegation if its true, as its a clear violation of Reg-FD, which is supposed to prevent both inside trading and "front running" by "favored" analysts and institutions. On the CC their General Counsel spent several minutes lambasting Barrons' but what was notable in all the lawyerese and babelspeak was the one thing he did not say: "The alleged tape is a fake."

Hmmmmm...... let me see. If you know that the tape is fake, why not say its fake? Let me think about that one a bit.....

Toll Brothers (TOL) reports tomorrow. I've got a PUT spread on them and expect a boom-boom. We shall see. The spread is good out until June though - I didn't want to play in close to earnings.

Ok, back to the general market.....

Check this out:



Can you say "Holy Wedgie Batman"? That'd be the SPX again.

This thing's about to run out of room. I thought we might get a break down this afternoon, but it didn't happen. In fact, a valiant attempt was made at a break UP. But it didn't hold, so we're back to "sit on hands" mode - my finger was on a very itchy trigger finger to buy SDS with both hands today, but no signal is no signal, and pulling the trigger early will get you fried - especially in a market as jittery as this one.

Cisco reported good earnings. The street didn't like it, punishing them immediately with a $1/share loss after hours. Guess they expected a blowout, rather than just good, quarter.

In general nothing has changed in the thesis. I am waiting on a breakout or a breakdown before making any big moves. I still have a good set of open positions, most on the short side (PUTs), a couple of actual shorts, and a handful of straddles; those are due to be closed here in a few days.

Oh, The Canary is starting to gasp a bit again. Today was veeeeerrrrryyyy interesting for him.

Will be updated if there's a reason to do so.....

Time to perk up!



Bottom of the channel is at 1499, support is at 1481. Note that there is no confirmation of the channel violation until support is broken, although if you want to be extremely aggressive you could start looking at SDS on the channel break - if you do, make sure you have a tight stop set just inside the channel in case its a headfake.

If support breaks we should see a retracement to at least the 50/100DMA range, which is right near the 1440 area. If we break that then we're clear to the 200DMA. And below that.... let's not talk about that.... yet.

Existing home sales 6.29 mil, down from 6.34 last month

New homes, 864k, down from 904k.

Price projection: Projected down 1.0% from 0.7%

All month-over-month from the NAR (the cheerleaders, of course)

BAD BAD BAD!

Now people unable to get qualified!

Gee, how come the forecasts keep coming down?

PS: Note that all of the models used to gauge risk on morgage securitization do not include the possibility of price declines. In other words, those risk models are invalid.

Wow - what a color! Something we haven't seen in a while.

Asia was almost uniformly down, with the outliers being Shanghi and New Zealand. Of course Shanghi has been closed for the last week, so I guess they can be forgiven.

Europe has color in it as well.

The Dow looks to open down 40 or so, with the S&P off about 4.

It will be interesting to see what the follow-through looks like.

We're basically through earnings now, with one significant outlier - Cisco - reporting this evening. Hewlett-Packard (HPQ) has updated guidance and apparently likes their 2nd quarter thus far.....

One note - Adidas posted an 11% profit drop. They're a global company, and its tough to parse whether this is all supplier cost (e.g. currency) related, or whether there is a slowdown story in there somewhere.

Oh, McDonalds' posted an increase in April same-store sales. Of course McDonalds' could be seen as a contrary indicator - when you can't afford steak.....

Is the underlying bid evaporating? We shall see.......

Oh, the IMB Calls I noted last night? They didn't "stick". Looks like someone was playing a dividend game. Cute (and profitable), if it works out for you. Not so cute if it goes wrong on you - and it can.

Looks like the VIX calls did not "stick" either.

So we have two potential indicators from last night that are now in the "disregard" column.....

Have a profitable day!