Freaky Friday Random Thoughts
We're almost there, Minyans!
- The Rubber and the Road (Buzz: 10 AM)
The critters just filed into my office to join me at my trading turret. What piqued their interest? S&P 1250, of course, as that seems to be the topic of choice all over the Street. I see it too, of course, and I'm chewing through possible scenarios as we speak. Hoofy is quick to note the traction in the semis (+2%), the snazzy breadth (2:1) and the potential that fresh shorts are being laid out (that will need to be covered). Boo, for his part, is looking at this juncture as defined risk in the context of an overbought tape with a spate of underlying issues.
They're both right--there are two sides to every trade--but I told my metaphorical friends that I'm inclined to err to the side of caution until we mount this technical hump. The mechanics of the swing (aka defined risk and discipline) always serve us in good stead and the onus is on Hoofy to prove this point moot. Is this a death knell for the year-end rally? No, it's simply a step on the journey as we find our way. And as we've learned, we've gotta take our trip one step at a time.
- Dead Ringer!
- Please keep an eye on Duke & Duke. The brokers (XBD) led this recent rally higher and they were the first sector to reverse lower when we kissed S&P 1250.
- Ten up Friday's in a row. Do I hear eleven? (I don't think I do).
- "There has been for some time a large short call position in the NDX held by one account. Normally this account has rolled these options. Yesterday the account began buying these calls, the Nov 1675 calls, back to close. The account started buying these back around 2:30 for $.80 when they were 10 points out of the money. The account finished by paying $7 when they were deep in the money. These options expire for cash. The account did much harm to itself by buying these back. The account would have been much better served by just letting them cash out. The rally has caused some more buying to be done on expiration this morning." -- John Succo on this morning's Buzz.
- Note the VXO as it eyes single digit vols.
- On October 13th, we were at Dow 10,156, S&P 1168 and NDX 1515. Now we're at DOW 10,725, S&P 1245 and NDX 1678. Random Thought: What if this was the year-end rally?
- Pork Bellies. I knew it!
- It's expiration Friday and you know what that means. Index services were held on the opening while individual equity option funerals will take place on the close. Keep your eyes peeled for pin risk, when the open interest (outstanding options at a strike) outsize the average daily volume of the underlying security.
- So what do Thursday meetings mean?
- "NYSE figures just missed the 3:1 A/D mark, but breadth on the NASDAQ eclipsed the threshold 3.37:1. Impressively, Thursday's distribution turned to accumulation on the NASDAQ with an expansion in volume and volume flows. Cumulative breadth continues to bother us, as does the persistent strength of gold, silver and their corresponding equities, but admittedly, there are good looking charts to buy. We continue to focus on Technology and Financials, and rounding off our eclectic interests are gold stocks on the long-side and Japanese related shares. In Energy, we continue to warm up to the space, particularly in names close to new price highs. Given the longer-term structural deficiencies such as breadth and new highs, this leg could become very dangerous. Our momentum model will improve based on yesterday's accumulation, and we do believe there is more fuel in the tank. An overly optimistic or euphoric attitude on the part of investors, however, will represent to us, an opportunity to be a seller." -- Lehman's aptly named technician Jeff DeGraaf
- Boom Boom!
- "Good morning. Strength was broad-based yesterday in front of today's expiration. The HMO and BTK reached new highs, and we believe they can continue to outperform over the short-term. AET and SIE have interesting setups, in addition to CEPH and GILD. In the medical device space, BSX may be undergoing a turnaround and STJ has bullish relative strength." -- Katie Townshend, Chief Market Technician, MKM Partners
- Orange crush!
- In housekeeping news, we've got some snazzy things cookin' in the city of critters. We're putting the finishing touches on the new and improved 'Ville, one that will be entirely more user friendly with added features. We're a coupla weeks away from the all-star guitar auction which, we hope, will raise a ton of money for children's education. And we're in the process of adding a few new scribes that will add to the scope and depth of the Minyanville content proposition. Step by step, brick by brick, Minyan by Minyan...
- Fare ye well into the bell and have a fantastic weekend!
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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