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Conjunction Junction


Fare ye well!


This old engine makes it on time
Leaves Central Station at a quarter to nine
Hits River Junction at seventeen to
At a quarter to ten, you know it's trav'lin again

(Grateful Dead)

The afternoon breeze continues with ease as the bears try to press and the bulls try to squeeze. Just as I was giving Fokker the firing instructions--as in game plan, not severance--the front door flew open and the critters pranced into my office. I edged from my screens, turned off the machines and took a fresh look to see what it means.

Hoofy: Alright Toddo, before you jump on the Amtrak to join your family for the holiday, we've got some serious questions for you.

Toddo: (looking at my watch) Shoot guys--you have ten minutes.

Snapper: Alright--here's the beef. If your stochastics gave a buy signal yesterday and the internals are jazzy and snazzy, why don't you just climb aboard the upside express? The 50-day moving averages are in tact, the financials are strong and the market basically held where it "had" to?

Hoofy: Yeah, man, the S&P held the G-Spot congestion zone and the NDX held its March trendline. What's not to like?

Boo: Can I answer that?

Toddo: Sure Boo, go for it.

Boo: The set-up that my bearish brethren (what's left of them) are looking for is a "failing rally" that puts in a lower high. Yesterday's zip, while sharp and smart, wasn't as loud as the textbook technicians would like (read: low volume).

Toddo: That's true, Boo, but I will add that in a tape as reactive as this, momentum has the ability to build (as a function of higher prices). That's why I opined earlier that I wanted to allow for a bit of wiggle room. As long as the S&P stays under 1030ish (NDX 1360ish), there is a real possibility that a we're setting up for a more serious spill.

Daisy: I think that's udderly silly!

Sammy: Maybe Daisy, but it's certainly viable. Look at the action in Europe the last few weeks. The bounces have been met with supply on every try. While we're certainly the horse to their cart, it warrants attention (if nothing else). Remember, a stylistic approach is uber-important when trading and knowing when to "short to cover" vs. "buying to sell" is half the battle.

Hoofy: But what's the downside catalyst?

Toddo: I can't answer that. Maybe it's economic lethargy, perhaps it's something geopolitical or, quite possibly, these mutual fund investigations pin prick the psychology bubble. The truth is, if "it" were obvious, the market would already be lower.

Boo: I don't know either, but I'll promise you guys one thing: before this year is out, I'm gonna earn some respect. My name isn't Rodney and I ain't no car seat--I'm a bear--and I've been getting the short end of the stick for too long. Trading, like anything else in life, is cyclical. My time will come.

Toddo: I don't disagree, boss, but I'll say one thing and it applies to all of you. Discipline trumps conviction and there is legitimate two-sided risk here. That's why I'm eyeballing those levels so closely. Emotional tapes will always exacerbate the price action and they tend to last longer than most believe. If we're in the "migration" stage of the bullish rage, there's clearly some room left. If, on the other hand, we're in the "denial" page of the ursine rage, there's gonna be a bottleneck at the exit of the turnpike.

Daisy: Toddo, the time....

Toddo: Oh, I gotta run. Listen, I'll never tell you guys how to play or what to pay--that's not what Minyanville is all about--but be smart before you depart, alright? Now, if you'll excuse me, a hugfest anxiously awaits me in Baltimore and the only thing I know, with certainty, is that there's nothing in the world more important than family.

The critters looked at each other--glanced at Fokker--then back to me with a smile. They knew that we work to live--we don't live to work--and the down time is the fruits of our labor. As I picked up my bags and headed for the door, I stopped and turned to the room full of friends. "Congrats on your first year of cyberhood, fellas, the best is yet to come!"

Have a peaceful--and safe!--weekend and I'll see ya on Tuesday.
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