Leggo My Eggo!
Excuse my burp--I'm just digesting.
If you twist and turn away
If you tear yourself in two again
If I could, yes I would
If I could, I would let it go
The morning fray is underway as the critters tussle, trade and play. The action is unremarkable and after the requisite tests--first down, then up--the Minx is settling into her Hump day hustle. After yesterday's rippage, there is a fair amount of anxiety in the marketplace and that's adding to the pressing and guessing. With a rather important economic report due tomorrow, today will likely be all about posturing.
I just called Fokker over to my desk for a quick tutorial on the recent gaps. I pulled up a 21-day chart of the S&P (for Bloomberg users, that's SPX INDEX GIP 21) and pointed out seven occurrences when the market "gapped" higher or lower. In each and every instance, the Minx filled those gaps before resuming her direction. Friday's downside test of S&P 1020? Filled the gap (from October 3rd) before rallying. Monday's downside test of S&P 1030? Filled the gap (from Friday's opening) before rallying. Yesterday's equity ecstasy? That's right--the upside test filled the gap (from October 22nd) before...
If form holds (and there's no guarantee that it will), the late day gap fillage was a necessary precursor to a Boo spew. Further, S&P 1050-1060 (NDX 1420-1440) has yet to be violated and until it is, the "broadening top" pattern is still alive. With that (humbly) said, it's important to note that tomorrow's GDP data will trump technicals in a big way. The bar has been set pretty high (6%) and an outlier (either way) will spur the herd. Boo has yet to decide whether he wants to see tepid growth or an insanely high number (bear market rallies typically end on good news).
Today's tea leaves are nondescript as breadth is flat and most sub-indices are plus/minus. A few trusted traders are telling me that as long as S&P 1036 and NDX 1393 hold, there's nothing to worry about from a short-term trend perspective. In other arenas, gold is bouncing, bonds are belly soft and the greenback is at a three year low. I'm hearing that large macro hedgies had (have) the short Euro vs. long equity trade on and when the Euro broke (intraday) yesterday, the race picked up in pace. Just an FYI...
As always, I hope this finds you well.
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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