|The Legend of Turnaround Tuesday|
By Todd Harrison MAY 11, 2010 10:30 AM
Will the tape turn tail and follow the nonsensical script?
“Well, he started with a bank in Colorado, in the pocket of his vest, a Colt he hid.
And his age and his size, took the teller by surprise and the word spread of Billy the Kid.”
-- Billy Joel
We don’t “do” acrimony in the ‘Ville, which is easier said than done in today’s day and age.
What we’re pretty good at, however, are metaphors, which are very much like similes.
When I stumbled into this writing thing—ten years ago in July—it was on a lark, filling in for my partner as he took a much-needed respite. I never wrote more than a letter to my mom from camp, and that was because we were told to; suffice to say I “took” to the catharsis of assimilating the complex crosscurrents of the financial machination in real-time.
I started scribing just as the Internet bubble burst, using pop culture references and musical lyrics as double entendres intended to communicate trading thoughts and ideas. Hoofy the bull and Boo the bear followed shortly thereafter and the rest, as they say, is history.
Throughout the last decade, a litany of nonsensical idioms materialized including contra-hour, the Sleep-O-Meter, Out-of-Office Indicator, First Move-False Move (after the FOMC) and of course, Turnaround Tuesday.
Last week, a new dynamic emerged and staked a claim to Minyan fame. In mid-January, “Crash” the cat was adopted and the S&P dropped 5% in three short sessions. Last Tuesday, the young feline went to the vet and the market immediately dropped almost 1300 points while he was getting ‘snipped and clipped.’
He was slated to return last Thursday evening -- the day of the crash -- and we openly mused that if the market miraculously recovered, we would throw the four-legged freak a ticker-tape parade. He was a wee bit early with his predictive prowess but then again, he’s my cat -- are you really that surprised?
But wait, there’s more! Yesterday, as several staffers from Minyanville did the final walk-through of our old digs, it was discovered that behind where my desk used to be was a retired mouse. When I asked Super Sarah, our do-it-all office manager to send me the picture, she responded, “Eww, Really? It’s Dead!”
"Crash" the cat
"Scraps" the mouse
That rattled around in my head for the better part of the afternoon until last night, it finally hit me. “Eww, Really,” translated in southern speak, is pronounced, “EU rally!” It remains to be seen if the epitaph will translate to the broader tape.
The Legend of Turnaround Tuesday
Last Monday, as the tape rallied into resistance at S&P 1200 and Goldman Sachs (GS) $150, we donned a more bearish posture for a trade; better lucky than smart, Turnaround Tuesday delivered -- and then some.
Yesterday, following the European version of Shock & Awe -- which are words, not warheads -- we focused on two tells on The Buzz & Banter. The first was Goldman Sachs, which we flagged as laggy from the opening bell, and the second was a dollar, which came thisclose to trading higher on the day despite a trillion reasons why it shouldn't.
We posed the question in real-time on the Buzz:
“If Goldman is under distribution -- and it was the more oversold than the rest of the tape -- would it really be a shocker if others use this manic monster as an opportunity to lighten up? Or is that Turnaround Tuesday's business, as it was last week?
All the while, S&P 1150—past support and near-term resistance—was front-and-center following a monster Monday rally, similar to what we saw last week. While we closed a bit above that level, a technician with a fat crayon could make strong case; particularly into Turnaround Tuesday.
And then there’s this nugget of information, courtesy of Professor Jason Goepfert of Sentimentrader.com:
"There have been six other times when the market has gapped up more than 4%. Three of those occurrences were in 1987 and three were in 2008. In every case the gap up was eventually filled and usually pretty quickly.
"In 2008 the gaps were caused by similar news to what we have today (yesterday) such as the announcement of TARP. The gaps on 9/19/08 and 10/13/08 were filled two days later while the gap on 10/28/08 took eleven days before it was filled. The one big difference now is that the market has been in an uptrend until last week and we have this strong tendency toward V-ish bounces. Nonetheless history suggests that this strength fades pretty fast"
To Jason’s point, check out the charts below; if S&P 1150 breaks, it “works” to S&P 1110, and should NDX 1925ish crack, the tech proxy has room to NDX 1850. There are no golden rules in trading -- past performance is no guarantee of future results -- but this should most certainly be on ye radar.
Click to enlarge
Click to enlarge
It should be noted that Europe is off roughly 2%, with Spain -- also flagged yesterday given the 14% rally directly into the downtrend -- off 4%. The dollar is 50 bips higher this morning -- above where it was when the EU rescue package was announced -- the opening prints for stateside equities are to the downside.
Sovereign spreads, for their part, are mixed, with Greece (-4%) and Italy (-1%) slightly tighter and a host of Eastern European dominoes, er, countries wider, with Slovenia (+11%), Belgium (+9%), The Czech Republic (+9%), Poland (+7%), Russia (+7%), Ireland (+6%) and Egypt (+5%) leading the way. And yes, I understand Egypt is in Eastern Europe!
There are battles and there are wars and global leaders surely have ammunition left in their arsenal. For my part, I reloaded on some short-side exposure yesterday at S&P 1160 (vs. covers made into Friday’s malaise) after the VXO shed 40% of its recent rally. That doesn't make it right, but it certainly makes it honest.
S&P 1095 (200-day)-S&P 1150/1200 is the range; Mr. Valentine has set the price.