S&P 1044 (1050) now becomes initial upside resistance.
Want to put my arms around you
Feel your breath in my ear
You can bend me, you can break me
But you better stand clear
(John Cougar Melloncamp)
The morning wood has caught fire and, after a quick look up, supply swarmed the buyers. Indeed, Snapper poked a toe into the initial flow but quickly removed it (for fear of impalement). Breadth never bounced (4:1 negative), initial support got trounced and, aside from the eyebrow raising traction in the semicaps and brokers, the crimson tide is widely applied. Are the seas destined to be angry today, my friends? Let's take a swim.
There are exactly three reasons for Snapper to harbor hope right now--the semicaps, the relative traction in the major brokerage stocks and the slippage in gold. The first two led us lower and they're trying to establish a toehold into the downside draft. The metal, after some stunning running, has seemingly stopped to appreciate the big round number that is $400. Away from that, there's some stinkage around the globe. Europe has slipped anew (think tail to the stateside dog) and the dip shtick is getting its first real test in some time.
As it stands, the NDX is sitting directly on its 50-day moving average and the S&P is within spittin' distance of the same line (S&P 1035). A breach of either (both) of those zones will give serious paws to the dip buying cause. Again, chicken little has been belittled and until the pain swells, he'll continue to be viewed as an alarmist. As I write, the liquidity continues to pour into the market (via overnight repo's). It remains to be seen if Elmer can soak up the supply.
I've been "trading around" a short thesis and have made some sales (discipline) on my puts and rolled down the stops on my day trading exposure. Bounce attempts are to be expected (old habits are hard to break) and I wanna be in a position to fade (read: sell) strength (if and when). I keep reminding myself, however, that we remain fairly close to the year's highs. In other words, if (when) there's sustained selling, we've got plenty of room on the downside.
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 firstname.lastname@example.org.
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