Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Jul 27, 2015 at 10:30 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Stock Market News
E-commerce king Amazon.com, Inc. (NASDAQ:AMZN) is reportedly developing drive-through grocery stores. The project, which sources say will initially be deployed in Silicon Valley, will allow customers to order online and schedule a pick-up time.

On the charts, AMZN has been a major mover, soaring 74% in 2015 to trade a hair below $540. Today, the stock is getting a 2% lift from price-target hikes at Goldman Sachs (to $650 from $570) and UBS (to $650 from $550). Last Friday, the shares gapped up on earnings to a record peak of $580.57.

Call buyers are banking on the upward momentum to continue. Amazon.com, Inc. (NASDAQ:AMZN) has racked up a 10-day call/put volume ratio of 1.28 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That ratio ranks near the top quartile of all readings taken in the past year.
Published on Jul 27, 2015 at 11:35 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move

China-based equities are taking it on the chin again, after the Shanghai Composite suffered its worst day in years. Along with Baidu Inc (ADR) (NASDAQ:BIDU) and Sohu.com Inc (NASDAQ:SOHU), among the notable decliners are e-commerce concerns Alibaba Group Holding Ltd (NYSE:BABA) and JD.Com Inc (ADR) (NASDAQ:JD), Internet TV provider Youku Tudou Inc (ADR) (NYSE:YOKU), and silicon wafer maker JinkoSolar Holding Co., Ltd. (NYSE:JKS). Let's take a look at how BABA, JD, YOKU, and JKS are faring on the charts, and how Wall Street is betting on the shares.

BABA is 2.8% lower at $80.72. Since tagging a record low of $76.21 earlier this month, the shares attempted to stage a rebound, only to be rejected at their 40-day moving average. The stock is now 22% lower year-to-date.

Alibaba Group Holding Ltd shorts are likely cheering the slump. Short interest grew nearly 11% during the two most recent reporting periods, and now represents nearly a week's worth of pent-up buying demand, at BABA's average pace of trading. However, the stock could be vulnerable to an analyst backlash; 21 out of 22 brokerage firms maintain "buy" or better endorsements. 

JD is 4.7% lower at $33.02, and trading back beneath its 10- and 20-week moving averages. Still, the shares remain more than 42% higher in 2015, with recent pullbacks contained in the $32 neighborhood.

Amid all the volatility in China, short sellers have also piled on to JD.Com Inc. In fact, short interest surged 19.3% during the past two reporting periods. What's more, option players are also betting bearishly on JD. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.88 stands in the 86th percentile of its annual range, reflecting a healthier-than-usual appetite for bearish bets over bullish of late.

YOKU has surrendered 4% to linger near $19.34, and is testing support at its 10-month moving average. The stock has given up more than 21% so far in July, pressured beneath its 10- and 20-day trendlines. 

Still, option players remain optimistic. The security sports a 10-day ISE/CBOE/PHLX call/put volume ratio of 6.72, indicating traders have bought to open almost seven Youku Tudou Inc calls for every put during the past two weeks. Plus, this ratio registers in the 78th percentile, suggesting a bigger-than-usual bias toward long calls. What's more, traders are paying up for their short-term bets on YOKU, as the equity's Schaeffer's Volatility Index (SVI) of 73% stands higher than three-quarters of all other readings from the past year.

Finally, JKS has suffered the most thus far, down 5% at $22.74. The stock has dropped nearly 23% in July, and is on pace to end south of its 10-month moving average for the first time since February. 

While short interest dropped 14% during the most recent reporting period, these bearish bets still account for nearly 18% of JinkoSolar Holding Co., Ltd.'s total available float. Likewise, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.50 sits in the 70th percentile of its annual range, hinting at faster-than-usual put buying over call buying. However, four out of five analysts uphold "strong buy" opinions; a round of downgrades could exacerbate selling pressure on JKS.

Published on Jul 27, 2015 at 11:35 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Stock Market News

By Francesco Guarascio and Renee Maltezou

BRUSSELS/ATHENS (Reuters) - Talks between Greece and its international creditors on a third bailout began in Athens on Monday but the lenders want to see more reforms turned into law before they disburse the first loans to keep the near-bankrupt country afloat.

The government of Prime Minister Alexis Tsipras has pushed two packages of measures through parliament this month as conditions for starting negotiations on a three-year loan program worth up to 86 billion euros ($95 billion) to keep Greece in the euro zone.

A spokeswoman for the European Commission said teams from the creditor institutions were now in Athens. "Work has started, meaning that the institutions are talking to the Greek authorities," she said.

The talks had been due to start last Friday, but were delayed because of organizational and security issues.

"Negotiations on a Memorandum of Understanding should now progress as swiftly as possible," Commission spokeswoman Mina Andreeva told a news briefing. Both sides say they want a deal concluded before Aug. 20.

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People walk in the early morning at the Plaka area in Athens, Greece July 27, 2015. REUTERS/Ronen Zvulun

Greece came close to the brink during a long stand off between the government and its creditors, with Athens missing a debt repayment to the International Monetary Fund and forced to close the country's banks for three weeks.

Voters angered by years of austerity demanded by the creditors rejected an earlier bailout offer in a referendum, but Tsipras later agreed in Brussels to the lenders' terms as the crisis deepened.

The institutions involved in the talks are the European Commission, the European Central Bank and the IMF, as well as the euro zone's rescue fund, the European Stability Mechanism (ESM).

EU officials said the heads of mission of the Commission and the ECB were already on the ground and the new IMF mission chief was due in Athens by Friday to hold talks on a political level.

Andreeva said Greece had delivered "in a timely and overall satisfactory manner" on promises made at a euro zone summit on July 13 of prior legislation to enable the negotiations.

"More reforms are expected from the Greek authorities to allow for a swift disbursement under the ESM. This is also what is being discussed right now," she said.

The banks have re-opened after the ECB increased emergency funding but capital controls remain in place. Doubts also persist about whether a severely weakened Greek economy can support another program after a six year-long slump that has cut national output by a quarter and sent unemployment over 25 percent.

Among politically sensitive measures held back from the initial package were curbs on early retirement and changes in the taxation of farmers to close loopholes that are highly costly for the Greek state. A source close to the talks said these reforms were expected to be enacted by mid-August.

However, touching pensions is sensitive with Tsipras's left-wing Syriza party, which has already suffered a substantial revolt over the Brussels agreement, and the main opposition New Democracy party opposes ending tax breaks for farmers.

ACCESS PROMISED

EU officials played down the logistical and security issues that have dogged talks between the creditors and Greece since Tsipras's radical government took office in January, promising to free Greeks from humiliation and imposed austerity.

An EU official said access for the negotiators to ministries and all relevant government bodies had been agreed. An ECB official said part of the talks would take place at the Athens Hilton Hotel.

The talks will mostly cover a reform program that Greece must implement to receive phased disbursements of loans, money it needs to meet its debt service obligations and help recapitalize the banks. However, an ECB policymaker said they would also cover debt relief for Athens.

ECB Executive Board member Benoit Coeure said in a newspaper interview published on Monday that the euro zone no longer questions whether to restructure Greece's debt but rather how best to go about it.

All euro zone countries wanted Greece to remain in the shared currency bloc and were prepared to offer "unprecedented financial solidarity" as long as Greece carried out reforms, Coeure told the French daily Le Monde.

"In truth, the question is not whether to restructure Greece's debt but rather how to do it so that it would be really useful for the country's economy," he said.

"That's why it's important to make this restructuring, whatever form it takes, conditional on the application of measures that reinforce the economy and ensure the sustainability of Greek public finances," he added.

Coeure defended the ECB in the face of criticism about its handling of Greece, notably the rationing of liquidity to Greek banks, saying it had always stuck to its mandate during the crisis.

Five months of acrimonious negotiations had caused huge economic and financial costs for Greece, and exposed how deeply flawed the euro zone's decision-making was, he said, urging more integration in order to take tough decisions effectively.

Germany's finance minister proposed at the height of the crisis that Greece take a five-year "time out" from the currency bloc if it could not meet the conditions.

"The genie of euro zone exit has escaped in the Greek crisis and won't easily get back in the bottle," Coeure said.

 

 

(Additional reporting by Alexander Saeedy and Philip Blenkinsop in Brussels and Leigh Thomas in Paris; Writing by Paul Taylor; editing by David Stamp)

Published on Jul 27, 2015 at 8:07 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Overseas Trading

Asian markets traded lower today, led by a bloodbath for Chinese stocks. Specifically, the Shanghai Composite took an 8.5% nosedive, while Hong Kong's Hang Seng lost 3.1%. Ongoing weakness in commodities contributed to the sell-off, as did reports that the government is tapping the brakes on its market-stabilizing efforts. Also contributing to the slide was Wall Street's drop on Friday, and disappointing figures on China's industrial profits. Overall, Shanghai's main bourse suffered its biggest single-day decline since February 2007. Elsewhere in Asia, Japan's Nikkei closed 1% lower in the face of a stronger yen, and South Korea's Kospi dropped 0.4%. 

In Europe, stocks are taking a cue from their Asian counterparts, and indexes across the board are moving lower. Caution ahead of this week's U.S. Federal Open Market Committee (FOMC) policy-setting meeting is also contributing to the risk-off attitude. At last check, Germany's DAX and France's CAC 40 were each 1.6% lower. London's FTSE 100, meanwhile, is off 0.4%. 



150727Overseas

Published on Jul 24, 2015 at 8:08 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Overseas Trading
Stocks in Asia ended the week on a low note, following the lead of Wall Street and the commodities market. The Shanghai Composite snapped a six-day winning streak, retreating 1.3% due to a steeper-than-forecast drop in the preliminary China Caixin purchasing managers index (PMI). Japan's Nikkei shed 0.7% after the International Monetary Fund (IMF) urged the Bank of Japan to "stand ready to ease further, provide stronger guidance to markets through enhanced communication, and put greater emphasis on achieving the 2% inflation target in a stable manner." Meanwhile, Hong Kong's Hang Seng and South Korea's Kospi fell 1.1% and 0.9%, respectively.

European bourses are just barely higher at midday, despite weakness in commodities, mixed earnings, and a retreat in Markit's flash eurozone PMI. At last check, London's FTSE 100 is up less than 0.1%, the French CAC 40 has added 0.4%, and Germany's DAX is a mere 0.01% higher.

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Published on Jul 24, 2015 at 12:27 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Analysts are weighing in today on credit card issues Visa Inc (NYSE:V) and Capital One Financial Corp. (NYSE:COF), as well as integrated circuit specialist Skyworks Solutions Inc (NASDAQ:SWKS). Here's a quick roundup of today's brokerage notes on V, COF, and SWKS.

  • V jumped to a record high of $76.92 earlier on a huge earnings beat, and was last seen up 4.5% at $74.97. Further stoking the stock's bullish flames is a round of price-target hikes from roughly a dozen analysts, the most ambitious of which came courtesy of SunTrust Robinson (to $90 from $78). Longer term, Visa Inc is enjoying a more than 14% year-to-date lead, and could get a lift if short sellers start throwing in the towel. Close to 61 million shares are sold short, representing nearly two weeks' worth of pent-up buying pressure, at V's average trading levels.

  • Rival COF, by contrast, is taking it on the chin. At last check, the stock is down 11.9% at $80.01 -- the result of an earnings miss and bearish brokerage attention. Among the six analysts weighing in on Capital One Financial Corp., Goldman Sachs removed the security from its "America's Conviction Buy" list, lowered its rating to "neutral" from "buy," and slashed its price target to $91 from $103. This is likely music to the ears of put buyers at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the last two weeks across that trio of exchanges, speculators have bought to open two times as many COF puts as calls. COF's resultant put/call volume ratio of 2.05 sits a mere 6 percentage points from an annual peak.

  • SWKS has surrendered 4.1% to trade at $98.93, despite upbeat quarterly results and guidance. The drop is especially peculiar, given that no fewer than 11 analysts upped their price targets on the security, with Canaccord Genuity setting the highest benchmark, at $132 -- never-before-seen territory. Despite the technical hiccup, Skyworks Solutions Inc remains a long-term outperformer -- up 36% on the year, and approaching a recent level of support at its 120-day moving average. Should the stock resume its trek north, there's plenty of pessimism in the options pits to fuel the fire. Specifically, SWKS' 10-day ISE/CBOE/PHLX put/call volume ratio of 0.65 outstrips 83% of comparable readings from the previous 52 weeks.

For other stocks in analysts' crosshairs, read Analyst Upgrades: Amazon.com, Inc., Starbucks Corporation, and Juniper Networks, Inc. and Analyst Downgrades: TripAdvisor Inc, TrueCar Inc, and Sunesis Pharmaceuticals, Inc.

Published on Jul 24, 2015 at 2:26 PM
Updated on Mar 19, 2021 at 7:15 AM
  • By the Numbers
Earlier today, I highlighted three biotech stocks that are in overbought territory, according to the historically predictive 14-Day Relative Strength Indicator (RSI). For a more in-depth explanation of that indicator, I'd recommend reading this piece by Schaeffer's Senior Quantitative Analyst Rocky White.

I now want to explore the stocks that have been stuck in oversold territory (RSI at or below 30) for some time -- specifically, at least two weeks, as of this past Wednesday. You'll notice in the data below a lot of metal producers, which makes sense given the recent drop in commodity prices. The three we'll take an in-depth look at are Alcoa Inc (NYSE:AA), Barrick Gold Corporation (USA) (NYSE:ABX), and Silver Wheaton Corp. (USA) (NYSE:SLW).

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AA  was last seen at an annual low of $9.65. It's been a brutal 2015 for shares of the aluminum giant, down 38.9%, and facing unrelenting pressure from their 10-day moving average -- though they did get a brief post-earnings lift, which should please broad-market bulls. Based on the table above, the equity has spent 32 consecutive days in oversold territory.

Today's technical "milestone" likely isn't being welcomed by traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Alcoa Inc's 10-day call/put volume ratio of 2.69 ranks just 7 percentage points shy of a 12-month peak. In other words, bullish bets have been flying off the shelves recently, relative to bearish.

ABX also touched a low today -- though the equity's bottom at $6.79 resides in territory not charted since 1989. At last check, the stock was down 0.7% at $7.02, bringing its year-to-date deficit to almost 35%. In addition, its RSI of 12 easily qualifies as oversold -- a streak that's stretched to two weeks.

Option traders have been gambling on losses for Barrick Gold Corporation, per data from the ISE, CBOE, and PHLX. Across those exchanges, the stock has amassed a 10-day put/call volume ratio 0.45 -- which tops almost three-quarters of comparable readings from the last year. This negativity is echoed among the brokerage crowd, where 13 of 16 analysts consider ABX a "hold" or worse.

Finally, SLW is yet another commodity stock in oversold territory, spending the past dozen days under RSI 30. As with its peers highlighted above, the silver concern is fresh off its own multi-year low of $12.07, but was 3% higher at $12.78, at last check. Since the security's late-January high of $24.22, it's given back close to half of its value.

Not surprisingly, Silver Wheaton Corp.'s bearish ranks are getting full. During the last two weeks at the ISE, CBOE, and PHLX, the stock has accumulated a put/call volume ratio of 0.72, which stands above all but 10% of comparable readings, looking back one year.
Published on Jul 24, 2015 at 2:39 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview

Second-quarter earnings season kicked into high gear this week with a number of notable blue chips and tech titans releasing their reports. While a handful of big-time social media names will steal the spotlight next week, Beijing-based Internet issues Sohu.com Inc (NASDAQ:SOHU) and Baidu Inc (ADR) (NASDAQ:BIDU) will step up to the earnings plate on Monday.

  • SOHU will take its place in the limelight bright and early Monday morning, and option traders have been loading up on long puts in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 0.35 rests higher than 81% of all similar readings taken in the past year. In spite of the uncertainty surrounding the scheduled event, premium on SOHU's short-term options is relatively tame at the moment. Specifically, the stock's Schaeffer's Volatility Index (SVI) of 55% sits in the 36th percentile of its annual range. Looking back over the past eight quarters, Sohu.com Inc has averaged a single-session post-earnings swing of 5.6%, but this time around, the equity's near-term at-the-money (ATM) straddle is projecting a loftier 12.5% move. Technically speaking, the stock has shed 16.1% year-to-date to linger near $44.60 -- and has spent most of July moving in step with broader Chinese benchmarks. Today, in fact, SOHU is off 3.5%, after China's Shanghai Composite snapped its recent winning streak.
  • BIDU will unveil its results after Monday's close, and based on the equity's near-term ATM straddle, the options market is expecting an 8% post-earnings move. This is slightly more than the 6.2% swing the security has averaged over the past eight quarters. Speculators have been rolling the dice on a move to the upside -- BIDU's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.91 ranks in the 82nd annual percentile. Simply stated, calls have been bought to open over puts at a faster-than-usual clip. Meanwhile, Baidu Inc's short-term options are pricing in elevated volatility expectations, considering its 30-day ATM implied volatility (IV) of 42.1% sits just 5 percentage points from a 52-week peak. On the charts, the stock has been feeling the heat from its 140-day moving average since February, down over 5%. More recently, the shares have been tracking the moves of mainland markets -- and were last seen down 0.7% at $206.21.
Published on Jul 24, 2015 at 9:19 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Upgrades

Analysts are weighing in on e-commerce concern Amazon.com, Inc. (NASDAQ:AMZN), java giant Starbucks Corporation (NASDAQ:SBUX), and networking communications specialist Juniper Networks, Inc. (NYSE:JNPR). Here's a quick roundup of today's bullish brokerage notes on AMZN, SBUX, and JNPR.

  • It's poised to be a record-setting day for AMZN, with the shares up 22% in electronic trading. Today's bullish backdrop comes courtesy of the firm unexpectedly banking a second-quarter profit and a subsequent round of upbeat analyst notes. Among those chiming in on the stock were B. Riley -- which boosted its outlook to "buy" from "neutral" and its price target to $646 from $428 -- and Barclays, which raised its rating to "overweight" from "equal weight" and its target price to $700 from $412. Heading into today's trading, the stock was already boasting an impressive 55.4% year-to-date lead to trade at $482.18 -- and the options market was pricing in a much slimmer post-earnings move. Regardless, option traders should be pleased with this projected move. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Amazon.com, Inc.'s 10-day call/put volume ratio of 1.21 ranks in the 65th annual percentile, meaning calls have been bought to open over puts at a faster-than-usual clip.

  • SBUX is also set to explore uncharted territory today, after the firm unveiled better-than-expected fiscal third-quarter earnings, as well as a new buyback program. As we suspected earlier this month, a bevy of brokerage firms boosted their price targets on SBUX, including Wedbush (to $70), Guggenheim (to $68), and Barclays (to $54), with the latter remarking it was "among the strongest and most remarkable quarters" for the company. Specifically, after closing last night at $56.56 -- its highest settlement to date -- the shares are up 5.5% ahead of the bell. Should Starbucks Corporation extend this momentum, a mass exodus of option bears could help fuel the stock's fire. The security's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.67 ranks higher than 75% of all similar readings taken in the past year.

  • Not to be left out, JNPR is eyeing an 8% pop out of the gate -- and a move to levels not seen since January 2014 -- thanks to a strong showing in the earnings confessional, a fresh share repurchase plan, and a round of upbeat analyst notes. MKM Partners, for example, raised its rating to "neutral" from "sell" and its fair value to $28 from $22. Cantor, meanwhile, upped its price target to $36 from $31, territory not seen in more than four years. Another round of upgrades and/or price-target hikes could come down the pike, should Juniper Networks, Inc. continue to add to its nearly 19% 2015 gain. Roughly 64% of analysts maintain a "hold" or worse suggestion, while the average 12-month price target of $26.02 stands at a discount to Thursday's close at $26.49.
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Published on Jul 24, 2015 at 9:38 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

U.S. stocks are higher following strong earnings from a few heavyweights. In company news, today's stocks to watch include Internet radio provider Pandora Media Inc (NYSE:P), drugmaker Biogen Inc (NASDAQ:BIIB), and tech concern Nokia Corporation (ADR) (NYSE:NOK)

  • P reported better-than-forecast quarterly numbers, and also upped its full-year outlook. As such, the shares are up 14.3% at $15.86 in early trading -- though still 17% lower from their most recent peak of $19.20 in late May. Short-term option speculators are extremely put-skewed toward Pandora Media Inc right now. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.19 indicates put open interest outstrips call open interest among options expiring in the next three months. Also, P's SOIR ranks in the 98th percentile of its annual range.

  • BIIB is down 17.5% at $317.90, as the company's downwardly revised full-year outlook overshadows a second-quarter earnings beat. Today's bear gap has wiped out the stock's year-to-date gains. Call buyers are likely unhappy with this sharp downside move -- which follows Wednesday's data-induced dive. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.65 calls for every put -- a ratio that is higher than 82% of comparable readings from the past year.

  • Finally, NOK's proposed acquisition of Alcatel Lucent SA (ADR) (NYSE:ALU) has received approval from the European Commission. Traders are cheering the news, with Nokia Corporation up 1.5% at $6.82. However, the stock's 50-day moving average is just overhead, and could act as a speed bump. Put players are counting on NOK to steepen its year-to-date deficit, which sits at 13.1%. The security's 10-day ISE/CBOE/PHLX put/call volume ratio is 1.86, with long puts nearly doubling calls. On top of that, this ratio registers in the bearish 98th percentile of its annual range. Looking ahead, NOK will report earnings next Thursday morning.

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Published on Jul 24, 2015 at 9:43 AM
Updated on Mar 19, 2021 at 7:15 AM
  • VIX and Volatility

The only thing we have to fear is fear itself -- or an utterly range-bound market. We've pretty much established the SPDR S&P 500 ETF (SPY) is never moving above 213 or below 205 ever again. Yet, the Fear is still there.  Here's how CNN's Fear and Greed Index looked yesterday morning:

150724Warner1

There are some oddities with this. To start, our own local Fear Index, the CBOE Volatility Index (VIX), is flashing a big fat nothing. In fact, I'd call it close to complacency, though on the CNN scale it's "Neutral." Their put/call number says "Neutral" as well.

What's more, the market itself isn't doing much of anything particularly scary. The Nasdaq Composite (COMP) just hit new highs. Apple Inc. (NASDAQ:AAPL) in and of itself might have knocked us for a loop just because it's so large, but that panic fizzled before it even really started.

Yet we're bordering on Extreme Fear, and we're getting more so this week. From CNN:

150724Warner2

So what's knocking us down? Well, let's see… There's junk bond demand. The yield premium 205 bps as per CNN, which they say is on the high end of the last couple of years. It's also diverged from VIX in a noteworthy way, per Bloomberg. 

There's also some breadth measures, and those are starting to get some ink lately. According to CNN: 

"The McClellan Volume Summation Index measures advancing and declining volume on the NYSE. During the last month, approximately 6.25% more of each day's volume has traded in declining issues than in advancing issues, pushing this indicator towards the lower end of its range for the last two years."

And: 

"The number of stocks hitting 52-week lows exceeds the number hitting highs and is at the lower end of its range, indicating extreme fear." 

The "generals" do remain quite strong, but the army keeps lagging. Should we worry?

Well, to some extent, yes. It's never good to see a narrow rally. But on the other hand, the last time these measures looked so weak was October of last year. I believe our worries then were cascading oil prices and future Fed rate hikes. It's kind of similar to now, except that the market overall was doing poorly, whereas now we're flatlining. And last time turned into a pretty good buying opportunity.

Will history repeat itself? It's a sample size of 1, so I wouldn't bet the ranch on it, I'd just say that pesky bad breadth doesn't have to stay a permanent condition. 

On the other hand, that junk bond divergence could prove worrisome. There's some thought that credit players now are the biggest users of VIX products as hedges, so that could all resolve with a move into the tradeable VIX complex.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.
Published on Jul 24, 2015 at 10:07 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Downgrades

Analysts are weighing in on online travel company TripAdvisor Inc (NASDAQ:TRIP), auto pricing issue TrueCar Inc (NASDAQ:TRUE), and drugmaker Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS). Here's a quick roundup of today's bearish brokerage notes on TRIP, TRUE, and SNSS -- which have all earned a place on the short-sale restricted list.

  • TRIP is down 9% at the open to $84.95, but appears to be finding a foothold atop its 120-day moving average. Today's sell-off is a result of the firm's second-quarter earnings miss and a round of price-target cuts. Specifically, the stock saw its target price reduced at RBC (to $86), Cowen and Company (to $75), and Evercore ISI (to $83). Heading into today's trading, the security had tacked on 25% this year, yet sentiment is skewed toward the skeptical side. More than 14% of TripAdvisor Inc's float is sold short, and 77% of covering analysts maintain a "hold" or "sell" suggestion on the stock.

  • TRUE bottomed at an all-time low of $6.55 out of the gate, after the company issued a profit warning for the current quarter and slashed its full-year revenue forecast.  What's more, a number of brokerage firms lowered their outlooks on the equity. Included in the bunch were J.P. Morgan Securities, which cut its rating to "neutral" from "overweight" and its price target to $12 from $23 -- and Goldman Sachs, which removed TRUE from its "America's Buy" list, downgraded the stock to "neutral" from "buy," and reduced its target price by $9 to $8. Thanks to today's 39% decline to $6.52, the stock is now staring at a 71% year-to-date deficit. Option traders could start jumping ship, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TrueCar Inc's 10-day call/put volume ratio of 16.27 ranks in the 73rd annual percentile. Simply stated, calls have been bought to open over puts at an accelerated clip.

  • News that the Food and Drug Administration (FDA) will not support SNSS' marketing application for its experimental cancer drug, vosaroxin -- saying the company needs to provide more clinical evidence -- was met with a backlash from the brokerage bunch. Cowen and Company, for instance, lowered its outlook to "market perform" from "outperform," while Roth Capital cut its rating to "sell" from "buy" and its price target to $1 from $5.50. Against this backdrop, the stock is down 71.3% at $0.99 -- and fresh off a six-year low of $0.98 -- erasing all of its year-to-date gains. Short-term speculators, meanwhile, have been more put-heavy than usual, per Sunesis Pharmaceuticals, Inc.'s Schaeffer's put/call open interest ratio (SOIR) of 0.50, which ranks higher than 74% of all similar readings taken in the past year.

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