A Minyan Say What?
Respect--don't defer to--the technicals.
"Oh I like this one... One dog goes one way, the other dog goes the other way, and this guy's sayin', "Whadda ya want from me?'"
Tommy DeVito, Goodfellas
"Toddo, If you believed that a move through 1250 was necessary to set up a decline, why were you not wildly bullish when we were below that level? I thought at lower levels you were saying the bears should use a 1250 stop for their bearish bets." Minyan Mark
Yes, we spoke about using that level to define short-side risk as it was the most obvious inflection point in the financial markets. Multiple tops. '05 highs. Fibonacci retracement. Heck, it was even a nice, round number.
While it was an intuitive ripcord, however, technical pivots tend to cloud when 8000 hedge funds stare at the same chart. So, taking a step back and watching the gunfight from afar, I wanted to let the dust settle a bit in the "I'm OK, you're OK" Corral. Why wasn't I wildly bullish into that level? Mixed signals, among other things, and the unfortunate reality that I'm not smarter than the market.
To be clear--and to be fair--I got more constructive on the tape when Boom Boom was annointed and we played that way--with Hoofy no less--near the October lows (into around S&P 1225). And while we opined that the breakout through NDX 1640 would likely lead to a test of S&P 1250, the extended nature of the tape (twisty stochastics) ushered me to rotation station (short select financials vs. long tertiary longs) on this last leg of the journey. It wasn't as overtly bullish as I would have liked (in hindsight) but given the performance of the piggies since I traded this way (the BKX is relatively flat), I'm not gonna stick a fork in my nose. Particularly since the metals and energy have enjoyed the benefit of the rising liquidity tide.
Just as the Minx is dynamic, so too is the thought process that I try to communicate. As I noodled the tape over the weekend, I began to synthesize the simple fact that everyone is squarely focused on the same level. There was a decent shot that the bears made a stand at S&P 1250 but given the spate of short-side bets that were (are?) leaning against that level, the notion that they must be cleaned out (before a meatier retreat started) began to crystallize.
The way I see it, one of two scenarios will likely unfold into year-end. Either we get a bit more upside follow-through that exhausts itself--and turns the pop into a drop--OR the fear of missing continues and the performance anxiety self-fulfills the bovine thrill. Both are possible but as it stands, and for what it's worth, I'm currently vibing 75% on the former and 25% on the latter. The dicey part of this proposal is that, with the technicals breaking out and psychology steaming, there isn't a lot to lean on from a short-side risk definition standpoint.
Anyway, those are the thoughts that preceded this juncture, the reason I shifted slightly yesterday and some ideas going forward. Much like last week, and as it's turnaround Tuesday, I would think that Boo tries to turn the screws today (S&P 1250 is newbie support and provides a tight backdrop for the bulls in the hood). For my part, I'm gonna take a close look at all of my risk (both ways) and make sure that I'm not the turkey that gets carved up this week. I sincerely hope you do the same.
Good luck today.
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