The Friday Guide
General Electric should be the tell of the day.
Good morning and welcome back to the hack and sack. Yesterday's ride was an upside glide that quickly died and started to slide. Traders took it in stride then stemmed the tide and ended the day in the great divide. Did the supply fill the gap and set the stage for a new bear trap or was the slap a new road map that we'll see selling on every snap? It's freaky Friday in the city of critters so saddle up and shake those jitters!
The Thursday burp, while ultimately contained, served notice to traders that risk remained. Once the hump (S&P 1040/NDX 1406) was overcome, Hoofy beat the breakout drum and players raced to pick up the pace. As we edged closer to S&P 1050, however, a quick and vicious sell program caught the bulls flat footed and evaporated the lion's share of the day's performance. The averages finished just fine, thank you, but the spill sent a chill through all of Minyanville.
As discussed above, there is a positive spin to yesterday's action. We effectively filled the opening gap (necessary), the internals remained jazzy all day, the transports portend higher prices (for the broader averages), plenty of good looking charts remain and, in a way, the averages feel like they want to try and put these levels behind them. On the flip side, we're edging ever-so-closer to stochastic sell signals (they worked on the upside), the long side is crowded (more so after the acne pop), big unknowns remain (earnings), insiders continue to dump and the big picture bearish backdrop remains quite troublesome.
You can't really argue with performance and, as the bulls have racked it up this year, the ball is theirs to drop. I've never been very good at the bandwagon trade (jumping on because everyone else is) and that style will clearly underperform in a momentum driven tape. Still, I can't help but cringe when I hear the teletubbies urging investors to sit back and enjoy the ride when that's the exact mindset that has buried so many. I read an excellent article yesterday regarding how atypical this recovery is and, as you always want to see both sides of the equation, I urge you to give it a once over.
First things first, a new day in the fray is staring us in the face and we know our journey is made up of individual steps. We power up this morning to find General Electric (GE:NYSE) marginally lower (earnings), the dollar giving back most of yesterday's (counter-trend) rally, Europe mixed, gold a tad firmer and the futes mildly green. With this week's major catalysts behind us, today will likely marry two primary motivations: posturing in front of next week's nuttiness and technical tetherball (further downside gap fillage vs. acne attempts). Watch the breadth for internal affairs, the semicaps (negative call out there), the financials (breaking out vs. stochastic sell signals), GE (to see if they can bring good things to life) and the clock. We've got seven hours until our requisite two-day respite and a weekend full of baseball, football and family. Let's make 'em count.
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 firstname.lastname@example.org.
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