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Material Spirits

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Don't forget, Toddo, oversold conditions can linger in a bear market.

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There is no political solution
To our troubled evolution
Have no faith in constitution
There is no bloody revolution


(Sting)

Another session has sprung to life and the Minx is dancing in the streets. Initial thoughts include the relative weakness in the biotechs (BTK 330 is the December low), the lethargic action in the brokers (although the stochastics are beginning to pretzel twist on the buy side) and the tug of war in MSFT (oversold but acts heavy). Meanwhile, the consumer confidence came in at 79 (vs. exp of 78.4) and, on the number, I saw shorts scramble to cover. That "pop" was intuitive--now it's time for the bulls to stand up or step out.

A quick check of the morning breadth shows winners trumping losers 3:2 in the Nazz and 2:1 on the big board. While this is surely a constructive (early) sign, I want to see how the Minx acts if/when she gets up to S&P 865 (resistance).

As a zagger, I'm aware that the short side isn't a lonely existence anymore. A few weeks ago, when we first discussed the schnitzel with Boo, the VIX was at 25 (now near 40), the stochastics were giving sell signals (now approaching buys) and the tape was overbought at resistance (now oversold near support). The question I'm wrestling with is whether the current environment merits dancing with Hoofy or, as a function of my big picture concerns, counting to 100 and picking spots on the short side.

Lemme hop and make some calls to my crack trading coverage. I want to sniff out what kind of short base is in the market and what the nature of the flow is. I know a lot of traders are in "watch mode" but if anything jumps out and bites me, I'll pass it along.

Fare ye well, cookie.

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