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Fades 'R Us

By

If you're gonna be a bear, be a grizzly baby!

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If you hear that same sweet song again
Will you know why?
Anyone who sings a tune so sweet
Is passing by


(Grateful Dead)

Another session springs to life and Hoofy started the day with his game face on. As a matter of fact, I just walked by the conference room and saw him having a serious conversation with our resident alligator! Indeed, my early checks indicate some asset allocation as funds swap out of bonds into equities.

The retailers are standing out and standing tall and, as we discussed yesterday, the short side was crowded heading into these numbers. As such, the group is getting jiggy and they've buoyed sentiment in the early going. The buying has been broad based and the internals are reflecting that (winners trumping losers 3:1). Man, what a difference a day makes!

The flow I've seen is primarily futures led and the talk of the allocation is getting loud. Toss into the mix an "off-sides" by the trading community and you have your reason for this early spike. In hindsight, I suppose I shoulda slipped my one leg out of the bear costume yesterday (added around here) but, with the market closing heavy on on it's lows, I am comfortable with my thought process at the time. The question remains--what do we do from here?

There will be no rationalizing in Minyanville and my "tells" are pointing north (for the time being). Still, I can't shake the itch that these levels will prove to be better sales than buys. We know that I'm always early on my feel so, the issue for me is one of style. Do I unwind the trade and take a fresh look or should I scale into short side exposure (and use these prices as an opportunity)?

We've got a big economic release tomorrow morning and that adds a level of complexity to this decision. We've also got a looming level in the BKX (800) and, invariably, there are buy stops set there. However, with the stochastics giving me sell signals in the S&P, BKX and DJIA, I'm going to call an audible and add a leg rather than stop it out. This makes 50% conviction on the short side and leaves me room for a higher fade.

Engine room, more steam!

No positions in stocks mentioned.

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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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