The wobblin' goblin
There will be a fair amount of post-expiration posturing this morning!
Good morning and welcome back to the rack. After the ursine hex stuffed the Intel (INTC:NASD) flex, the critters went home feeling a bit perplexed. What, prey tell, is our destination and was this paws just an aberration? As they assessed the situation at frustration station, they wondered aloud about the next formation. The conversation went a bit like this:
Boo: Only a few more weeks until Halloween and you know what that means. "Boo" is gonna be on everyone's lips and the Minx is gonna get pretty scary!
Hoofy: Why? Because we just had a flat week? Bro, when you start crowing because the market failed to rally, what does that tell you about the strength of the tape?
Snapper: He's got a point, Boo, I mean, earnings generally beat expectations, right?
Boo: In the aggregate, yes, they came in better but I will remind you of a few salient points. One, currency gains are massive and they're putting a green tint on all the prints. Two, the "compares" are relatively favorable as last year's climate was so dire. Three, the market has rallied smartly into these numbers and there's a decent chance that the uptick has been priced into current levels.
Hoofy: There may be a little profit taking (after a sharp rally) but every dip this year has been an opportunity, right?
Sammy: This year? Yes. Pull it back four years, however, and every BLIP has been a selling opportunity. It all depends on your perspective, time horizon and risk profile. You're both right, to a degree--now you just have to ascertain where we are in the cycle.
Boo: Toddo is still playing with his Burned Razor, right? If he's correct, there will be some beef to this next pullback that shakes out a lot of the bandwagon fans. That could potentially set up for a Snapper (that's a trapper) into year end but, as he always says, one step at a time.
Sammy: In that vein, there are a LOT of earnings this week that will clearly impact the action. I'll be watching those reports and how the Minx reacts. Remember, S&P 1050-1060 is decent resistance and that's where the bears have set up camp. With a lot of the internal measures "lofty" and volatility still cheap, protective puts and/or stock replacements may be worth an eyeball.
Daisy: Why do you guys always try to beat your chest? Is it because you'll never beat my chest? (winks) Just do me a favor and watch the daily tells. The financials (Citigroup (C:NYSE), the semis (Merrill negative), the cyclicals (3M (MMM:NYSE), General Electric (GE:NYSE), Caterpillar (CAT:NYSE), retail and the breadth should all tell the tale. Also, watch IBM (IBM:NYSE) at the 89 level...it's kinda important.
Boo: I'll watch all that, Daisy (winks back), but I'm telling you that I wanna use any strength to scale into some trading puts. If the Minx powers through our resistance, I can always buy some underlying stock as an upside hedge (or find cheapie calls--they're out there). But, I don't think that'll be an issue. Monday may provide some higher prices but, as always, the goal in trading is to view price as an opportunity.
Hoofy: Come and get it, baby, but understand one thing--if you mess with the bull, you're gonna get the horns mister.
The critters sat in silence for a moment and let all the chatter sink in. They were well aware that this was gonna be another hairy week and that tensions are high. Further, expiration was now in the rear-view mirror and any "stickiness" that it might have provided was no longer in effect. Spooky? Perhaps, but it is, after all, that time of year.
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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