Juggling the Chainsaws
Sorry Toddo, I didn't mean to press.
It's a rather hectic morning in Minyanville and the critters (dressed in black) are frantically scurrying about as they get their bearings. While many of yesterday's (after-market) earnings surprised to the upside and the pre-market futures are pointed north, there remain many moving parts in today's tape. The fundamental backdrop is surely coloring the early psychology-particularly after five straight losing sessions in the S&P-but keep that right hand up, cookie, we've only just begun.
TXN (three upgrades) and QCOM (stellar quarter) highlighted last night's releases and, on the aggregate, the fundamental picture was "relatively" solid. That's a boon for the bull camp, at first glance and, juxtaposed against current psychology, it's largely the reason why the NASDAQ futures are looking up 2%. The issues for the bulls are deeper than a handful of "better" earnings, however, and we would be remiss if we didn't acknowledge the substantial risks to the market.
The dollar has been on the lips of many of my trading brethren and that needs to be monitored closely. With the war drums beating incessantly in the background, global support (opinion) of the United States dissipating and Latin America seemingly getting worse (not better), this is a fragile time for the macro landscape. Last night's releases were fine, thank you, but it doesn't offset the string of nasty outlooks or alleviate the structural pressures. There remain plenty of reasons why the market should be lower and, regardless of your posture, we must respect that.
Tells today include the greenback (naturally), the semis (neckline looms below), the financials (been getting hammered), software (signs of traction), General Electric, crude and our internals. The breadth has steadily deteriorated this last week and it's been the single best trading tell each session. If the guts of the tape start to fade today, it'll likely be an ominous sign. In level-land, S&P 865 remains THE line in the sand (breakdown) while S&P 900, 910 and 930ish (past support zones) are current resistance. Over the hill and across the bay, NDX 975-1000 is support (NDX 1050ish is resistance) and, if the SOX can stay above 280, there will be no more tears.
I woke up in a most unfamiliar position this morning and found myself wearing both legs of my metaphorical bull costume (50% conviction on the long side). As I wrote in this morning's first missive, I will look to undress today (win/lose/draw) as I'll be out of commission the next two trading days. I've always been of the belief that if you're an active trader and your not there to watch your risk, there's no reason to have exposure. Further, as I'm a bear in bull's clothing, I'm conscious that this current long side schnitzel is just that-a schnitzel-and if my goal is to hit for average (not power), taking quick hits is consistent with my style.
One step at a time, Raider fans, and in this environment, we've gotta make sure we're on solid footing. While I have strong conviction that this market will ultimately fail, I can't (in good conscious) offer a time frame. I've got further thoughts on this (more later) but I want to get this post up before the opening bell wrestles away your attention. I will leave you with one final thought: when the green seas are swelling, don't forget the lessons learned during the red mess. The goal, as always, is to view prices as an opportunity and let the market work for you. That's easier said than done-but that doesn't mean we can stop trying.
See you after the opening.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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