-Louis Winthorpe III
Good morning and welcome to the eye of the tornado. Over the last few weeks, twisted traders have battled the gusty crosscurrents with hopes of forging a path to profitability. Today, the perfect storm will center directly over our financial landscape and we'll get a first hand look with what we're dealing with. The skies appear clear at present, but our friendly Minyanville weather center is predicting heavy winds and a flood of information. Pull up those galoshes, button down that raincoat and take a deep breath...we're going in.
There are rare times on Wall Street when a convergence of catalysts align on a single calendar day and we're inundated with information. Typically, during Fed days or in front of a bellwether's earning report, the market is drifty with anticipation until the news hits. However, with the market digesting last night's Election results and a string of conferences spitting out information all day, there's no telling how the Minx will decide to spin this story.
The Soundview Tech conference, Merrill Lynch Software show and Lehman Retail gig will all be doing their thing today, but they're going to have to yell if they hope to attract investor attention. All eyes will be on Elmer watch as the Fed chief and his merry Minyans debate the merits of the economy (hits the wires at 2:15pm). Conventional wisdom is calling for a 25 bip haircut, but there have been outliers on either side of the fence. The late chatter yesterday of an imminent 50 bip snippet seemed to spur the futures into the bell. Closer to home, my trusty sidekick (and resident Fed watcher) Bucky seems to think the FOMC doesn't cut and saves their bullets for a later date. Paunchy!
I've been kicking around the potential market reaction to each scenario and, while I love piecing together the puzzle, today's event is unusually saucy. As we've discussed, psychology has been the driving force of this market and, at first glance, it seems as if Elmer can do no wrong. However, there's always two sides to every trade and we must respect the other side of the coin. If he cuts 50, what is he seeing that's so dire? If he does nothing, will the attention turn back to the flailing economy? Will 25 be the perfect tonic for this market...or is that too easy?
There's a fine line between paranoia and skepticism and we'll need to straddle that today (are you talking to me?). In our continued effort to view the big picture as a series of little pictures, we'll be juxtaposing all of these inputs against the technical backdrop. The bulls will, once again, point to our previous breakout levels as support while the skittish bears will be watching the August highs as (potential) resistance. All the while, the gods of irony beg the question: If this rally started in the face of bad news, is it destined to end with good news?
It's going to be thin and whippy at times today (particularly on the heels of the announcement) so please put limits on your orders to mitigate any unwanted surprises. Speaking of orders, we'll be calling for a cut of our own today as we prepare for the festivities with a pile of protein. That's right, sports fans, sharpen those chopsticks as it's a special Elmer edition of SushiWednesday in Minyanville. Wasabi!
Good luck today.
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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