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Tee it up!


There are a ton of conferences kicking off today in tech, pharma and the financials.


Good morning and welcome back to the track. Yesterday's race was a minxy tail chase that bounced towards the close and saved Hoofy's face. The Snapper was small (akin to a crawl) but it saved the red Minx from a more severe fall. Will the dip shtick prevail and spin a green tale or is this feeble bounce just waiting to fail? We won't be long before the new song so let's take a look at who's right and who's wrong.

With the Asian markets setting the tone, yesterday's session had all the makings of a outright melt. To be sure, the laundry list of potential flies was buzzing from soup to nuts. The breadth was horrific, the internets were under (further) distribution, near-term support was broken and a fair amount of money was seemingly trapped between good news and the inability of stocks to react to it. While there were a few signs of life early, the signs of death were much louder. So why didn't we fail and, more importantly, what does that mean as we trade ahead?

Actions speak louder than words (and the late action found traction) but I'm hesitant to read too much into the Monday Minx. Yes, the tape acted a lot better than most would have thought--and we've surely seen these kind of dips before--but we know that bottoms are typically points while tops are usually processes. When we first discussed the potential for the Burned Razor, the notion of a sell-off was a foreign concept. The news was getting better, higher prices was boosting confidence and Hoofy was sprouting acne. The only risk to the market, it seemed, was not having enough exposure.

The forward thought process (at the time) was that after a few dips failed to hold, psychology would shift from squeaking out a few more shekels to locking in the gains to date. While the volatility indices are starting to reflect some concern, we're still a stone's throw from the year's high. Thus, as investors start looking at the calendar to plan for the holidays, the natural question is begged: Is anybody really worried yet?

I made some covers into yesterday's muck with the intention of layering some exposure back out into the (perceived) lift. I was admittedly anxious that Boo was gonna throw a party without me but I wanted to see what kind of muscle the bulls could muster. If they took it in the teeth, I would have "stopped out" that tertiary exposure at a new low (as I did Friday). Instead, a sanguine Snapper lifted and drifted back towards initial resistance and I adjusted my risk profile accordingly. I am of the opinion--and this is the severe minority--that this rally try is counter-trend. The charts will tell you otherwise--and they must be respected--but if we're in the earlier innings of that paradigm shift, it would still be stealth.

I'm not gonna draw a stubborn line in the sand but, as it stands, I want to trade from the short side (read: short to buy rather than buy to sell). I will once again key on the financials which, in my opinion, act as a microcosm of the broader market. The liquidity driven assent is now squaring off with the most significant threat to the psychology bubble yet. If they can shake it off, the tape will once again challenge S&P 1060 (and possibly beyond). Until that time, however, I'm gonna let the banks prove that they've got the moxie as they approach resistance at BKX 942. Heeeere piggy, piggy, piggy...

Away from the financial fray, the semis filled that gap and (intuitively) bounced in front of Lehman's semi conference, retail should key off of this morning's hot dog earnings (HD:NYSE) and both the S's and N's bounced off their 50-day moving average support (yawn). A couple of small gaps remain (from yesterday's opening) and once (if) those fill (S&P 1050/NDX 1407), we'll get a feel for any pent up supply. Overnight, the Jinx scraped back 1% (meow), gold and the greenback are flattish and Europe is holding tight in front of Dubya's afternoon tea.

Good luck today.
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