Lotsa markets are competing at once--stay focused!
"As I stand here this afternoon, it is impossible not to think of the Babe; not to feel his presence here even now. He was more than a ball player. He was everything that is special about this game. He was everything that is special about America."
--Commissioner Ford Frick, 61*
Good morning and welcome back to the beantown sack. Before we begin today's trading spin, I gotta give snaps on the big Boston win. If you're gonna break a curse, you might as well end it in historic fashion. The gritty, gutty and tenacious Red Sox squad never stopped believing in themselves or each other and they deserve the pennant. As I said to Minyan Michael Santoli right before Johnny Damon's grand slam, 86 years of frustration may lead to a big Boston blow-off top. And indeed it did. Congrats on a great series and good luck in the next round.
The drama on the field gives way to the story on our screens as we ready for a brand new fray. We've spoken at length about the technical landscape and the crowded nature of the actionable levels (S&P 1100, NDX 1440, RUT 570, XBD 130, BKX 96.50). While these areas of sector contention provide a viable framework with which to trade, they've been diluted by an overcrowded hedge fund community pressing for returns. With year-end looming, patience is wearing thin and trigger fingers have become itchy. The drama may pale when compared to the playoffs but the plot will soon twist as we reach for the payoffs.
Last night, while dining with an array of market mavens, we discussed our currently complicated juncture. I always enjoy talking tape, particularly with folks who've been at the game longer and can lend the proper perspective. I can't extrapolate an underlying theme, per se, but there was a general consensus that energy and the metals offer more attractive long-term dynamics. That's not "news" to ye faithful, I know, but in the grand scheme of public perception, they're still considered alternative investments.
So what's my sense in the near-term? With the election eleven days away, the environment will likely be choppy and haphazard. The tails of the probability spectrum--huge rally or nasty melt--are possible but a more muddled and frustrating tape is probable. My strategy is to play my hand close to the vest , read my "tells" for daily guidance and keep my risk nice and defined. The simple truth is that the script is still being written and lotsa variables will soon litter the landscape.
The tape wanted to rally yesterday (N's over S's) but was weighed down by the baggage of the financials. That complex remains a focus as Citigroup (C:NYSE) and American Int'l Group (AIG:NYSE) remain in the spotlight. Competing for investor attention will be the cyclicals (Caterpillar (CAT:NYSE)), internets (eBay (EBAY:NASD)) and trannies (United Parcel (UPS:NYSE)) while crude and the internals will help scribe the vibe. Information overload? You betcha--take it step by step and understand that there is a lot of "friction" out there.
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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