Does One Need Any More Reasons To Stop Trusting This Company??

Yes, I am talking about my favorite short GOOG. As suggested a few days ago, I expected the stock to retest the $385-$400 resistance area before making its way down to the low $300s. What I didn't expect is for them to drop a bombshell like this on the market and make the whole "going down" process easier -- and all this happening just 2 days before an analyst day. Their CFO Reyes (who, by the way, is the namesake of a very good Spanish soccer player at Arsenal with a tendency for diving... hint... hint!) dropped the ball today announcing [in the middle of the trading day] that Google's growth is slowing, and that the company needs to find new sources for revenue. Whoever didn't know that already and was long the stock because they thought it was er.. "cheap".. must have lived in a cave for a while. Welcome back to Earth, mate. As this blog has long claimed, you will be hard-pressed to find a more obscure and arrogant company than GOOG (as far as its communication with the investment community is concerned), masking in false humility. Oh well... the market always "gets" those in the end.

Better Late Than Never...

For this one, I am going back 4 months. After a classic accumulation pattern on the charts, CVC is finally starting to wake up. I was a buyer @ $24.25 back then. Not my best trade, but, hey, if CVC is starting to deliver on its fundamentals (primarily new customers growth) -- trading at $26.50 today, I'll take it, in the absence of any M&A worldwind storties.

I am also taking profit on the short EURISK vs. short USDYEN (or long yen calls in other words) trade -- for a net gain of over 6% in just 4 days (81.75 to 78.50 and 118.60 to 116, respectively). Not bad in FX land for a funky carry trade, which is not really a carry trade.

What A Disaster Of A Trade...

I seem to remember (with some trepidation) that I wanted to go long property and casulty insurers (S5PROP) against shorting the banks (BKX). I've had much better ideas than that lately -- such as shorting GOOG and the short EURISK vs. long JPY trade. We live to fight another day, as they say.

Speaking of GOOG, as I expected, it's getting to the resistance area of where most bears would love to sell it again. More on that later, but until then, stay alert!! And of course, have a good weekend! Yeah, that includes all of you, Chelski sore losers, as well...

Short EURISK vs. Short USDJPY Revisited...

This trade is up well over 4% in just over a day (short EURISK from 81.73 [trading at 79.30 today] and short $/yen from 118.60 [trading at 117 today]). This is huge in FX land. I repeat -- one of two things will happen this year: EITHER 2006 will see the end of ALL carry trades OR 2006 will see the end of the YEN carry trade. Hence, this trade makes sense, especially from an ISK oversold level (as indicated in my posting yesterday).

(Possibly) A Nice Little Trade...

Let me jot this down before I forget it. I think all kinds of carry trades this year will be unwound, but not before the marketplace has a chance to see what Helicopter Ben is really up to. Until then, it's perfectly alright to have something like this: short EURISK (euro-icelandic krona which is up 8% in the last 2 days because of a Moody's downgrade) against long some out-of-the-money yen calls (against the $). ISK (the Icelandic Krona)'s carry is something like 8%, which in the short-term is going to compensate investors for the risk of being long the krona against the euro, especially after a big, big ISK selloff as the one which we saw in the last 2 days. Should anything happen though, the cheap out-of-the-money yen calls should provide adequate protection against a more sustained liquidation of carry trades, because the first major currency to benefit from the carry trade unwinding is going to be the yen.

CNBC Starting To Tick Me Off...

... with their biased (bullish) coverage. WMT reports crappy earnings. But no, let's talk about HD (which is a smaller component in the retailers' index) instead, which had fantastic earnings. Little wonder pre-market futures were completely on the wrong side as cool heads came in and sold this market as soon as it opened. What is CNBC playing at? I know they are a crap network with moronic talkingheads who have no clue about anything, but it's one thing to be a cheerleader when there is something to cheer about, and quite another to basically "hide" or "under-report" negative news. One more reason to be bearish longer-term as inane retail investors will for sure swallow the bait and buy this market at the top. Still, I stick to my 1,310 target in the SPX before we see a significant correction in the marketplace. We are heading up full speed toward a massive cement wall. I will enjoy the resulting wreckage. Buy 18-month volatility.

The Much Maligned [Lately] GOOG Bounces While PXRE Group Slides 70%...

Predictably, after getting "leaned on" in that spoof-financial magazine called Barron's, GOOG bounced from $335-$345 after cleaning out the weaker hands who bought at the very top (above $450) and then panicked when the going got tough... The stock looks destined to retest $385-$400 in the short run before eventually heading lower towards the low $300s.

How about that reinsurance former hedge fund darling called PXRE Group (ticker: PXT) though? The stock is off some 70% after S&P cut the company's debt rating to 'junk' on greater-than-expected hurricane claims. Consequently, some of the biggest names in the hedge fund industry (who had bought loads and loads of the stock during the fourth quarter of 2005), took a big bath today -- we are talking about [among others] DE Shaw, Och-Ziff, Perry Capital, SAB Capital and the bluest-bloods of them all -- Eton Park Capital, founded by ex-Goldman prop traders. The lesson is that bad stuff can happen even to the best investors out there... especially in a crowded long name such as PXT (which might have looked like a "value buy" only 3 weeks ago). Unless of course you are Chuck Norris. :-)

Pour Some Suuugggaaar On Me....

Sometimes, it does seem easy (but, I assure you, it ain't!). I did mention yesterday that I expected base metals (such as aluminum, nickel, lead, copper, etc.) and sugar to take a tumble soon as the fools who purchased at the top are getting themselves carried out, feet first, by an inexorable force called "late long liquidation". Those futures are all down 4+% today. It ain't over!

I would be interested in purchasing silver at $8.95, crude oil at $57.50, and sugar down around $14.50. And yeah -- equities, just like I had predicted, are not ready to go down yet -- there is too much stupid money around...still!

Bernanke Speaking More Plainly Than His Geriatric Mumbling Predecessor

What a relief there is someone at the Fed helm who actually doesn't sound as if he is from another planet! For now, he is sticking to the party line -- but does he have a choice? Imagine that you, an academic type, just stepped in and filled Mr. Irrational Mumbling's shoes -- would you want to scare yourself, let alone the market by uttering anything dramatically different from what was being said before you came on board? I didn't think so...

Anyway, nothing really is happening in the market, so I guess that's 1:0 in favor of Bernanke and the Fed. Even the FX and fixed income markets moved up and down and ended up pretty much unchanged. Pay attention to the base metals and a few of the soft commodities such as sugar -- I smell another wave of long liquidation coming. There is never just one cockroach...

Barron's Kicking A Sick Dawg While It's Down...

I hate GOOG with a vengeance. The readers of this blog will know that I was calling for a decent correction as far back as early November. But what Barron's doing here is quite untoward, to put it mildly. They are ganging up on the name and raising old issues which I had raised myself but which all of a sudden "gained tremendous importance" -- pressure from competitors, lofty valuation, ballooning costs, blah, blah, blah! Come on! This is not sensible financial journalism, this is sensationalism! There is nothing new there and I am going to be the first to ask 'Where were you, Barron's purported GOOG bears, when the stock was soaring in the high $400s??' Now, all of a sudden they are calling for the stock to go down 50% from here. Yeah, Queen Victoria died... fyi.

Nikkei is down 2.5%. See my comments from Friday. This is a bit more "real-time" than Barron's articles, I would say.

Nikkei Poised For A Dive?

Strong fundamentals [going forward] in the Japanese economy do not necessarily translate into a continued strong Japanese stock market... In fact, it may well be the case that the Nikkei has already priced in the Japanese recovery during the past 12 months -- just take a look at its chart which resembles the chart of GOOG before its recent fall.

This week, the Nikkei posted a bearish weekly technical reversal with a close at slightly below 16,300 off the highs both earlier that week and earlier that day (Friday). If conventional technical analysis is to be believed, there is a better-than-50/50 chance of a minimum 10-12% correction toward 14,500 or so, which is where the inverted head and shoulders neckline pattern lies or, rather, lay -- before the market tried (and failed) to push through the highs at around 16,777 or so. Given the violent recent moves in the Nikkei -- a 23% volatility for the 90% puts in June'06, looks to be a cheap way to play this retracement/correction. Stay tuned for more a bit later.

Why This Market Refuses To Go Down...

...Because there are more buyers than sellers would be the smartass crack. No, it's because earnings are still good, there is just too much money around and people still refuse to believe that the U.S. economy is going to be in trouble soon. One can't argue with liquidity-driven buoyancy. Everyone witnessed that the SPX broke 1,260 the other day on pretty decent volume and threatened to take out the January lows to test an even bigger level down below at around 1,230-20. Yet the bulls simply crawled out again from the woodwork and bid up the market one more time on the back of some solid earnings/guidance out of CSCO (yesterday) and BBY (today). It's tough to be short, but if you can muster the patience you can relatively easily unearth short overvalued single-stock candidates-gems such as AAPL and GOOG, even if the momentum is initially against you. May the force be with you.

Buying Back Some GOOG Shorts...

I know I said my bid was down in the $340s, but a technical jock called in and pointed out to me that the last major breakout happened from the $350 level. So I am going to follow that advice, after today's stream of juicy downgrades, not be greedy, and buy back some of the GOOG short @ $356 -- a nice round number just above that area of congestion. What's a few % between friends when scores are at stake...

Speaking of shorts, another one of my perennial favorites -- AAPL -- seems to have broken some decent support levels under $70 here. The stock, while not in the stratosphere anymore, still doesn't look too cheap yet. So I would stay away from it for a while, and if you simply have to buy a tech darling -- you might just want to try your hands on GOOG for a $40-$50 bounce off these lows around $350.

Four Words: Bearish GOOG Technical Breakdown!

Finally, some of these longer-term GOOG longs are getting really stuffed. With the stock trading @ $365, I am going to tentatively put in a cheeky $340 bid to buy back 1/2 my short from $463. Probably not going to get there today, but there is a clear bearish pattern which is trying to establish itself, so let's give it some room to breathe!

Inflexion Point In $/Yen...

I seem to be calling inflexion points in $/yen pretty well. I was away for a few days and the first thing that I noticed when I came back was the horrible price action in the $/yen off its recent highs immediately after the NFP numbers this past Friday. $/yen rallied quickly, hit *a lot* of stops above 119 and then proceeded to completely reject that (higher) level, turn around and sell off for the next 2 days. Yes, there are some i-rate encouraging news out of Japan, but then again the FX market is notorious for going where it wants to go, rather than where people expect it to go. And all of this is even stranger given that the euro and cable continue to be quite weak against the dollar.

As far as the general equity market is concerned, the SPX continues to flirt with the possibility of a pretty disastrous technical breakdown below the 1,260 level, but so far it just manages to keep its head above the water. I am still holding on to my bullish March call... Time is my ally.

$/Yen Overshooting On The Way Up...

Why exactly is it trading at 118.50? Probably because people are still expecting higher U.S. yields (essentially the carry trade), stronger U.S. economy and stellar non-farm payroll (NFP) numbers tomorrow (Friday). These may all materialize, but if everyone is on the same side of this trade, it's difficult to justify a higher dollar this year with all its inherent structural problems. I was long the bounce, but now I am out. For choice, would be short here (118.50) again, but let's see how these NFP numbers pan out.

How Do You Like'Em Googles Now!!

The market has finally come to its senses and has indeed seen that GOOG cannot possibly maintain the earnings momentum from previous quarters. The math just didn't add up, which is why I had suggested to short the stock aggressively between $425 and $475. It was down about $80 after-market last night and now it's only down about $40 -- give or take about 10%. Still it's a start in the right direction. I will begin to get interested in buying this name somewhere around the low $300s. Until then, I am going to sit and watch the pain -- french for bread.