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Beeks and Freaks

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Duck, duck....

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Little boy sitting in the corner and cry
Big man come and ask him why
He said "I can't do what the big boys do"
The man sat down and he cried too.


(Grateful Dead)


Good morning and welcome back to the Friday snack. The Minx tried to bounce for the first time this year as the bovine stepped up with an effort sincere. The rally was thin but the screens ended green as frustrated traders surveyed the scene. "The NASDAQ supply caused my brethren to sweat," said Hoofy the bull of his upside stock bet, "but after the carnage and constant bear threat, I'll take what they give and I'll take what I get!" Will the payroll report let the techs hold support or will Boo and his crew soon begin to hold court? It's freaky, it's Friday it's sure to soon thrill as we roll up our sleeves for a romp through the 'Ville!

I think it's safe to say that the first week of '05 has been the mirror image of conventional wisdom. The widely anticipated equity inflows got stuffed, the greenback has enjoyed the best rally in recent memory and metals have been crunched like Halle Berry's belly. It caught the bulls leaning long, the bears less than short and indices grasping for lasting support. Now, with Beeks clearing his throat and vacations a distant memory, we ready ourselves for a the first big number of the new year.

After watching the tape slink lower for most of the week, did the Texas two-step in and out of my metaphorical bull costume yesterday. It was quintessential "dimes in front of a bulldozer" as the ducks were as confused as any other critter. The genesis of the "long side try" was double support at NDX 1560, the steady action in the financials and the aforementioned shake out of blind believers. As caveats remain (complacency still, macro concerns, trapped longs, falling knife) and it was a "trade for the day," I erred to the side of prudence and flattened into this morning's big bad voodoo daddy.

With all this said, the fact that many--myself included--have been conditioned to buy dips is worthy of a nose scrunch. I'm intimately aware of the bear case but it hasn't mattered and has therefore been rendered inconsequential. Still, why some have offered that we've seen genuine panic this week, I think that's a bit A.D.D. The dip shtick has been so thick the last two years that folks forget what true fear is. There is a marked difference between giving back gains and capital preservation angst. We may have seen speculative unwind but that is a far cry from outright capitulation.

Hoofy will offer that the new year's hangover is a passing fancy that was necessary to alleviate lofty field position and the lopsided lean. He may be right--the uptick in M&A and continuance of buybacks is "good sign" and will remain so until it exhausts itself (news is always the best at the top). Further, taking a gander at Jason "rolling with the" Roney's morning vibe, the NASDAQ has a "historical draw" higher today, a vibe that aligns with Scotto's always excellent technical assimilation. The key, as always, will come in how we approach this new leg (if and when). Active Minyans may try to scoop it with a "sell stop" under NDX 1560 while more patient types may count to ten and feather in (still cheap) put options.

While I'm not sure of the relative value add, I'll again offer that the '05 dime turn smacks of macro allocation. Those agendas are always tough to trade as we won't see the end of the order until price validation. That said, the dollar looks like its got some room (DXY 87) and metal charts are the definition of fugly. I view both of these moves as "counter-trend" but the Minx has a way of making timers look silly. That is why I've choked up on the risk bat and shorted the horizon on my active exposure. The hounds are still in the yard but they won't be released until a discernable edge (or disconnect) emerges.

We power up this Friday pup to find a pink (slightly red) Asia, flattish bourses, a little give back in the greenback (still above the 50-day), quiet metals and bated breadth in front of Beeks. He'll stop by for an 8:30 breakfast to release the unemployment rate (exp. 5.4%) and the change in non-critter payrolls (exp. 175k) (among other things) and the games will officially begin. NDX 1560 is a focus, as is either side of BKX 102-104, and breadth will likely dictate the sustainability of the intraday action.

Eight hours 'till the pigskin playoffs, Minyans, so let's end this week with some jingle in our jeans. Good luck today.


R.P.

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