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Live from Central Park


I know a man, he came from my home town
He wore his passion for Hoofy like a thorny crown
He said Delores, I live in fear
My love for you's so overpowering I'm afraid I might disappear

(Paul Simon)

A new session is born and, once again, we find ourselves in the middle of the muck. The early flow was skewed considerably to the sell side as Macro funds and a few gorillas (institutions) greeted the opening with red tickets. Now, there's two ways to look at this: Either it's a clear sign that there's supply in the street and traders are selling the news OR the market absorbed a lot of supply and, once again, shrugged it off. These are the types of questions that are open to interpretation and only seen clearly with the benefit of hindsight so, if you're unsure, trade a little "in-between."

I've learned two things during my career as it relates to Fed days. First, the early action is relatively meaningless as the entire tenor of the tape will change after the fact. Secondly, the immediate knee-jerk move on the heels of the decision is typically a head fake (and will reverse itself before the close). There are a few ways to approach this event and your course will be a function of your individual style. However, the constant for everyone is that it doesn't matter where we begin-it matters where we finish-so factor the daily catalysts into your methodology as you find your way.

With the understanding that the world will change at 2:15 (and then again after the close), let's take a peek at today's action thus far. Morning breadth is constructive across the major indices with winners outpacing losers 3:2. In a role reversal from yesterday, banks are noticeably weaker while the saucy semis are somewhat sticky (There is some low level chatter that a European brokerage house has earnings issues but that's conjecture at this point). Soft goods (like my belly) have also been weak this morning and their cyclical counterparts are acting relatively better and, finally, the drugs are catching a bid on the heels of the Republican victory and that's buoying the biotechs in the face of Amgen's weakness.

As is often the case during sessions like this, I'm going to be jockeying between the trading desk and our office couch as we map out a strategy for the rest of the day. I know I said it this morning but I must again mention the importance of putting limits on your orders as the announcement hits at 2:15. There are going to be air pockets galore in the marketplace and the last thing you want is to get sucked into a vacuum. This tape is tough enough without having to battle bitter brokers.

I'll be back. As always, I hope this finds you well.
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