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3 O'Clock High: Making a List


"Hey, at least things have gotten much less tedious."

I was going to spend my space today taking some long-overdue shots at various Shareholder Activists of note. Then the market got all hideous and the tension got high and the tape suddenly seemed worth discussing again.

Days and weeks such as this, when the tape suddenly reverses course in what looks to be a meaningful way, are hard to keep in context. If you came into the week Long you're getting dragged naked across a glass-strewn alley. Your position sheet looks like the aftermath of Pickett's charge. The natural responses are either shell-shock or dumping everything and weeping.

Which is why you can't always listen to your instincts.

If you've been laying out shorts the whole way up, today feels like the long-awaited start of the Massive Crash for which you've been positioning. You may be trimming shorts (if you're smart) but it would probably feel better to get even more short. That or you've already left the office to get that Hummer you've been craving (and maybe go shopping for an SUV after that).

When it's moving fast and the emotion is running hot I like to try to back-up and review the larger picture, reviewing what we know, what we don't and what the tape could be telling us with the price action. The goal is to cut through the noise and try and "hear" the tape.

A quick and dirty list of what seems to "matter" and what it may mean...

  • It's axiomatic that the best earnings come early in the reporting season and the reports this week have stunk.

When Intel (INTC), Yahoo (YHOO) and a fist-full o' blue chip banks stink up the joint to kick off the earning's season, traders are going to start drawing horrible conclusions about the companies who have yet to report. That makes all the sense in the world, actually.

Advanced Micro Devices (AMD) gets much of the credit for Intel's trainwreck but, truthfully, if the economy were remotely humming then Intel would have figured out a way to hit their numbers, just through intertia.

  • The stock-buying orgy which kicked off 2006 was the last gasp of an aging bull.
I've read this a few different places over the last week. I'm not sure how many folks really made a ton of money getting, and staying, long from the lows of 2002. Still, it's disquieting when markets rush up towards new highs and Big Levels then pullback hard. We didn't really break out of the Large Range, suggesting we are about to move right back to the low-end.

  • Yield Curve: Inverted

Can't be a good thing.

  • Ex the outstanding Prof. Francis Succo, there aren't many folks mentioning the fact of this being expiration at all, let alone "the biggest expiration ever".
There are busted strike prices all over the place. At the very least, this has made today one of stunning reversals of fortune in the opions pits. It's not much of a reach to suggest that the weight of this flow would tend to cause some dislocations.

  • The World: Going to Hell in a Handbasket
Yeah, I know Iran is bad. But the world is always screwed and has been since we let Nixon get us off the Gold Standard.

And it will still be on Monday morning, regardless of what stocks do. To paraphrase the mighty Jeff Saut in closing, "the sun's going to burn out one day but it's a lousy trade." Stay as cool and Fonz-like as possible and take some time to chill over the (unfairly short) weekend.

The battle will resume on Monday.
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No positions in stocks mentioned.

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