NEU Update

The $81.90 bid got hit and NEU promptly took off on increasing volume. Watch it around a hundred. Is the volume buying it or selling it?

NewMarket Corp., nice breakout, strong volume, $81.90 bid.

Iconix buy point

Hey buy point of $18.40 from a pretty flat base. Strong volume on a break out would be a really good sign. As always use a tight stop below entry.

Snow Creek

Triquint Semi

Ater seven years, TQNT is finally looking good again. Here's a 10 year chart:
It was quite a ride during that red hot blowout year, and even more so for those that got too attached and didn't know the music stopped. Ouch.

But that trade is history. This one is new. Two-year chart:
Of late things seem to be firming up. Let's keep this just between you and me.

The old P-coast lives

Nina Mehta on the coming shakeout among options exchanges in the U.S.

She sees two factors which give an advantage to the NYSE and the ISE: deep pockets and a scalable trading platform.

There are two reasons behind the NYSE threat, according to Perfumo. First, NYSE can afford to buy another exchange-and the CBOE is preparing to go public. And second, NYSE has a scalable trading platform, which allows for consolidation. Without a scalable electronic platform, consolidation makes little sense.

"Clearly, New York wants to increase its market share and may have to buy an exchange and merge it with the P-Coast," says Meyer ("Sandy") Frucher, chairman of the Philadelphia Stock Exchange. "If Nasdaq wants to get into the game, they will have to buy somebody as well."

Repetto calls NYSE Arca Options a "new competitor with deep funding." Its recent aggressive fee reductions for market makers are a sign of its ambition.

The old PCX trading floor in San Francisco once on it's last legs, is alive and well under the NYSE banner.

Checking yesterday's IBD, the NYSE Arca (PCX) trading volume was solid with about a twenty percent share among all the exchanges. They were number one in call volume, with 1.8 million contracts traded there out of 6.8 million total. That never happened in the old days.

Hustle and Flow

A briefing from cnn on the exchange wars:

That deal sparked a wave of consolidation -eat or get eaten. The name of the new game is volume: The more trades flowing through your electronic platform, the more revenue. Now the mega-exchanges are each trying to dominate its niche of global trading. The result will be monopolistic empires that keep adding complementary pieces. "The way I think about it," says S&P analyst Jason Willey, "it's a huge land grab."

The barriers to entry are high so this industry will give you few to choose from if you want to own a piece of it. It's all about the stodgy SRO's going public, being disassembled and rearranged; creative destruction.

Hewlett Packard

Hpq. A good buy at the fifty-day moving average (blue line). Continuation of the uptrend with support at forty. They must like this Hurd guy.

Microsoft

Msft. resistance just above thirty. Once it breaks through on volume, thirty will become support. Release of Vista just around the corner in January. You'll be competing with institutions to buy it at the fifty-day moving average (blue line).

American Express

AXP. Sixty; resistance becomes support.

The Gift of October

Hey volatility is low as the market continues to rally, and it will stay low as long as stocks rise. But will it go much lower than this? Probably not.

With vol low, options prices--both calls and puts--are cheap. So making directional bets on a stock by buying options, is less expensive than normal.

Betting on the downside by buying puts has the added benefit that when stocks go down, implied volatility goes up, kicking up the prices of the puts higher than you would've expected. So if the rally has given you some profits to protect, consider buying the puts to hedge.

October can be full of nasty surprises.

Let that be the other guy's problem.

This Ain't no Party...

Fleckenstein gets it right in his May 23 article on MSN:

...For now, folks may actually think that the Fed will fight inflation. So, days like last Wednesday lead to "Fed's gonna be tough" talk. Which is why metals can go down in a session when inflation fears are running on the high side.

Setup for metals' gain, stocks' pain

Nevertheless, as the vise tightens down the road -- i.e., inflation is still not under control, but the economy is clearly slowing down -- you can be sure that the Fed will opt for rationalizing inflation, in the (futile) hope of not presiding over a nasty downturn. That will be the moment in time when the metals (and foreign currencies) really go wild to the upside.
Meanwhile, I believe that the path of least resistance for equities will now be down in the short run. And when we get the next rally, I would expect it to fail, since I firmly believe that the top of this three-year-long bear-market rally has finally been seen.

Sell in May and go away. Especially during a mid-term election year. Rates around the globe are going higher; the equivalent of cutting the purity of a junkie's fix--someone out there is gonna start shaking. I wonder which hedge funds will be going belly-up this year.

We'll see how well Bernanke can dance when he is presented with the " this one is too big to fail" argument for Central Bank "intervention", i.e., print up billions of new money or credit in order to save chequed-pants multi-millionare hedge fund inbreds from taking one on the chin, and oh, by the way send the bill to Johnny blue-collar's children, so they have to drop out of college and learn "a trade" instead of attending Hops & Barley U. on the six year "undecided" plan. What a system.

Currencies markets are starting to get rocked. Bank of Korea surprised the markets and raised rates.

"With the Asian markets all slumping, recent bearish sentiment, which initially began with caution over more (possible) U.S. rate hikes, has gotten worse and worse," said Samsung Securities analyst You Sung-min. "The (BOK) rate hike was just one more on top of layers of negative factors."

South Korean banks were hit hard by the rate hike, fueling worries of a possible cooldown in South Korea's sizzling property market and concern over whether the economy is strong enough to sustain higher borrowing costs.

The losses came after stocks dropped on Wall Street Wednesday, extending investors' losses for a third straight session and pushing the Dow Jones industrial average below 11,000 for the first time since March 9.

Yeah, Central Banks around the world are tightening up, the Fed has been bumping up the Fed Funds rate for a while now claiming it will continue, and you want to be net long this market? How stupid are you?

At least wait till October. Until then, enjoy the volatility.

Gulliver?

Apparently my prior post here on The Moon and the Sixpence has forced a lot of people to go public about the next step in the expansion of the NYSE, beyond Europe--towards Asia.

As long as they don't mention my HEx, we're cool.

NYSE Euronext, Inc.

The deal is closer to being done.

If it happens, the NYSE will have a worldwide exchange reach of a 22-hour trading day, with exchanges in San Francisco, New York, Lisbon, Paris, Brussels, and Amsterdam.

The future of the Pacific Exchange in San Francisco just got a little brighter.

Now, if I could just get a little help with my own startup--The Honolulu Exchange. Perhaps the NYSE would eventually want to buy us out and add the HEx to it's collection. Remember how the NYSE got started.

Are you in?

A Bit Uncertain

Just a picture of the recent spike in Nasdaq volatility. You weren't expecting a slow summer doldrum kind of trading season, were you?

Amex to Join the Living

The Amex, faced with the question: "sink or swim?", changes it's mind and starts to paddle...

NEW YORK (Reuters) - The member-owned American Stock Exchange said on Thursday it intends to convert into a for-profit corporation and likely move toward an initial public offering -- becoming the latest exchange to revamp its structure as investor demand for the sector heats up.

Exchange Stocks Getting Spanked

After big runups since their IPO's, these stocks take a needed breather to shake out some of the weak holders and form sound bases. From a Yahoo.Reuters story:

CHICAGO, March 23 (Reuters) - The shares of two high-flying financial exchanges, International Securities Exchange Inc. (ISE.N: Quote, Profile, Research) and CBOT Holdings Inc. (BOT.N: Quote, Profile, Research), plunged on Thursday in profit-taking and worries about competition.

ISE, the largest U.S. equity options mart, led the way as it continued a steep decline from its March 15 high of $52.84.

But CBOT finished as the day's biggest loser on the New York Stock Exchange after analysts at Jefferies & Co. said some profit-taking should not come as a surprise for the parent of the No. 2 U.S. futures mart.

In the above article Frederic Ruffy comments that the NYX Group, which now includes the Pacific Exchange, could become a serious competitor for the ISE.

The ISE makes note of the NYX and it's potential for drawing away some of it's order flow:

"Consolidations and alliances among our current competitors may create larger liquidity pools than we offer. The resulting larger liquidity pools may attract orders away from us, leading to a decline in our trading volumes and liquidity, which would lead to decreased revenues," ISE said.

ISE also said that, with other exchanges now running hybrid open-outcry/electronic trading systems, "certain qualities of our market are becoming more common."

As competitors improve their market quality, "commoditization of electronic trading in the options industry may begin, which could lead to an increase in price competition," the company said.

Here is a quick look at the graphs for some of the exchange related stocks.

NYX, why look abroad?

Is New York losing it's market share in financial capital to the rest of the world? Daniel gross says yes over at Slate.com.

According to the most recent monthly report from the World Federation of Exchanges, the NYSE and Nasdaq combined had $16.9 trillion out of the world's $41 trillion in stock market capitalization in December 2005, or 41.2 percent of the world's total. That's impressive. But it's down sharply from January 2001, when the NYSE and Nasdaq combined held 48.4 percent of the world's stock market capitalization.

One of the reasons cited is Sarbanes-Oxley. A merger with the LSE could help this once geographically challenged institution get around that. Financial centers throughout the world are in competition with each other to attract capital, not only with the technologies and services that they provide, but also with the regulatory environment that goes along with it.

If the managment at NYX is smart, they will be looking for a way to limit the risk that the same idiots who passed Sarbanes-oxley will be coming back with even more well-intentioned legislation in the future.

An LSE merger would be a good start.

In the minds of politicians no one ever reacts to the regulatory burdens that they impose.

In the real world it's hard to find anyone that doesn't.

Maybe there oughta be a law against that, too.

NYX Rival Bids for LSE

From Reuters on Yahoo, the LSE rejected the Nasdaq's bid as too low as the NYX gets busy consolidating it's merger.

This was the third bid received by the LSE in 15 months and its rejection of Nasdaq's offer fueled speculation it might not be the last, with the New York Stock Exchange -- the world's largest stock exchange and Nasdaq's arch rival -- rumored as a potential buyer.

Nasdaq's approach comes just two days after the NYSE Group Inc. (NYSE:NYX - News), owner of the Big Board, went public by sealing its purchase of electronic rival Archipelago Holdings.

The competition for dominance of the International exchange market continues at a hectic pace.

But Repetto expects the NYSE to come up with a rival offer and thinks that among U.S. players the Chicago Mercantile Exchange Holdings Inc. (NYSE:CME - News) could be a "longshot" to put in an offer.

These newly public companies now have a pile of cash and their own stock, with which to buy other exchanges and catch their competition napping.

It's like a game of street basketball where the captains are picking their teams before the big showdown. Leaving the best players for the other guy to pick up could be the fatal mistake.

The Pacific Exchange's Future?

What will become of the options trading floor in San Francisco now that it is owned by the NYSE? Carolyn Said, from the SF Chronicle:

Margaret Nagle, a spokeswoman for Archipelago, said the Pacific's electronic option-trading, which now uses a system called PCX Plus, will change to an entirely new electronic trading platform in the middle of this year, to be based on Archipelago's technology. "The new platform that we're rolling out includes there being a physical (trading) floor," she said.

In response to conjecture that the trading floor might close this year, she said: "I know nothing of any plans of it being phased out in the near future, meaning anytime this year. That would be news to me. My understanding was that the floor, I can't say will remain in place in perpetuity, but there are no plans to phase it out this year."

So far it appears that the NYSE trading floor will remain in operation along side of it's "Hybrid" electronic trading platform, so the management of the NYSE Group, NYX, must see at least some value in physical trading floors.

But then what does this quote from cnn.com mean?:

Thain has expressed confidence in the hybrid program and appears to be poised to take advantage of the exchange's newfound independence from its seat holders. The former Goldman Sachs president hopes to expand the NYSE's offerings to include derivatives trading, including equity options side-by-side with sales of the stocks themselves, as well as corporate bond trading.

Will they be traded side by side in New York, or San Francisco, or both?

If both, wouldn't that be redundant? Perhaps San Francisco will be allocated some underlying products and the New York trading floor, others. Perhaps San Francisco will get to trade all of the Nasdaq stocks along side of their options...

In the future, it's possible that floor traders could not only trade NYSE-listed stocks, but also those listed on the Nasdaq. With NYSE-listed stocks already electronically traded on Nasdaq, as well as Archipelago, the NYSE could not only retain some of its own market share, but also eat into Nasdaq's.

Or perhaps foreign equity products along with their derivatives...

Thain has also said he is still considering expanding the NYSE's operating hours in order to compete with European markets, though that has run into some resistance from traders on the West Coast, who are already in the office at 6:30 a.m. Pacific time for the opening bell.

Foreign exchanges trade some of our equities, perhaps we will be trading more of theirs in a bid to capture more worldwide order flow.

But what would be the impact on the Pacific Exchanges trading floor if the following happened?

Alternatively, the NYSE could go after the Chicago Board of Options Exchange or the International Securities Exchange in order to get a bigger piece of the options and derivatives trade.

If the CBOE was aquired perhaps the two floors could once again divide up the optionable stocks like the days of old and reduce the competion between them for the same order flow, loosening up the sometimes very tight spreads on the more actively traded options.

The one underlying certainty for the options trading floor in San Francisco is this, out from under the thumb of the stifling "public-institution" bureaucracy, it now has at least a chance of finding it's niche, getting an edge, and joining the world of profit driven innovation that has been whirling around it for the past twenty years.