Cody Willard:
Indices Hide Gyrations Under the Surface
6/15/05 8:03 AM ET
The broader markets keep churning, but underneath the surface, as is usually the case, there are some pretty exciting movers. Small-cap and high-beta stocks haven't just been flatlining -- they've been both popping and collapsing.
Take Nvidia (NVDA:Nasdaq) for example. I've owned some NVDA calls for a few months, and I'd shorted some common against them to take most of the exposure off the table as the stock ran into the high $20s. On Monday, I was kicking myself for not having enough exposure to the stock as it popped to new 52-week highs on a 5%-plus move higher. Yesterday I watched the stock drop like a stone, giving back all of Tuesday's gain and then some.
And the catalyst for each move? Well, you can point to rumors of this, that or the other, or you can point to technical-analysis breakouts and rejections or whatever. As reported by TSC's Troy Wolverton, yesterday's selloff was probably based on rumors of price cuts. I'm not even going to bother pointing out that price cuts enable that great creator of wealth in tech -- elasticity -- to kick in, meaning that such rumors, in a different time and place, might be considered very bullish for the stock. No, the point here isn't about NVDA's fundamentals. But the action this week in this stock underscores that there are some serious moves being made in these markets.
It's moves like these that have had Rev Shark saying that momentum money and speculation are prevalent in this market. And while conventional wisdom dictates that momentum money and speculation are bearish developments for the market, they can last for very long stretches, and they can drive multiples higher as they create feedback loops of buying on top of buying.
More rumblings of EU problems arise as Chirac and Blair battle over decades-old protections and tax-provided subsidies. Viacom takes another step toward splitting itself up, as its old-world media empire continues to lose its foundation. J.P. Morgan Chase(JPM:NYSE) finally settles its Enron debacle for $2.2 billion, or about two Tekelec market caps (phrased that way to underscore how big these settlements really are). And T. Boone Pickens is on Bloomberg TV this morning calling for $60 oil, while OPEC continues to pretend it has got any control over the pricing right now at all by saying it's looking to raise its output ceiling.
I've got a quick 8 a.m. breakfast. Be back in a bit.
Long NVDA calls; short common
Gary B. Smith:
