Monday Morning Quarterback
Past resistance is newfound support.
It was a good year last week as the Matador Crowd started '06 with fresh pep in their step. When the dust (and trades) settled, the DJIA tacked on 2.3%, the S's added 3% and the tech-laden NASDAQ pinned 4.5% on its donkey.
The spirited sprint lifted the tape above a slew of resistance (S&P 1275/XBD 200) but failed (thus far) to prod the all-important piggies past BKX 106. The reason for the upside rhyme was attributed to the wide-spread belief that the Fed is lappin its lips for last licks although the relaxed risk grip, fresh inflows (to start the new year) and negative gamma (as short calls were covered) likely contributed to the circle smirk.
The weekend press read rather well, as you might expect, as the Street readies itself for earnings season. While psychology ruled the metric roost through year-end and technicals have been the focus since, it will be interesting to see how the fundies (and the outlooks) mesh with the minxy brew.
While we're seeing fresh signs of acne in a slew of sectors (we must respect this), the "buying stampede" has absorbed a fair amount of energy to get us here. And as field position is an important context in trading--good (not great) news is sold in extended tapes, bad (not horrid) news is bought in oversold tapes--we must remain conscious for the potential of the dreaded bull trap.
Motion and Movement
I started '06 conscious that a confluence of elements could lead to a strong first half despite, what I feel, are growing risks and a widening chasm between perception and reality. While I'm "better positioned" for the downside (in the financials), I added a slew of gamma last week to capture (what I perceive to be) an imminent uptick in volatility. I'm a big believer in defined risk (via price points or option strategies) and my current book reflects that discipline. You never wanna be one trade away from a new profession, we know, so I'll again remind ye faithful that the mechanics of the swing will ultimately trump the results of the at-bat.
Speaking of "new positions," we discussed SunMicro (SUNW) last week after President Fish mentioned the once-proud leader of the new paradigm. Pepe and I added some technical flavor to the mix (it popped 10% and broke out) and collectively cast an eye to the Consumer Electronics Show (to see if this sucker would get Googled). It didn't--at least not publicly--and Bernstein responded by punting this puppy. I'm still involved, so you know, and Mr. Wassong offered his two cents in a morning mailbag for those looking to keep current. Real-time education isn't always easy but it will always be forthright when you chill in the 'Ville.
New Phonebooks and Fresh faces
We're slated to launch the new and improved Minyanville digs next week and MVHQ has been busy behind the scenes. This will be an entirely new look for the critters and we're excited to lift the curtain.
As with any new launch, there are bound to be some unexpected glitches so please feel free to communicate your thoughts and input (either way). We pride ourselves on our sense of community and look forward to taking this next step together.
Good luck today.
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 email@example.com.
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