Thataboy Toddo--way to strap 'em on!
A new session springs from the gate and another day in Minyanville has begun. The pervasive chatter pre-opening wasn't centered on whether we would rally-the only question was how much. That struck a chord with my alter-ego, Zig Zaggler, as he hates conventional wisdom. Almost on cue, the call buyers walked into the pits and bought multiple thousand lots of DIA and QQQ calls. I surely see what they see (down a LOT in a short time) but remember-if something seems too easy in this market, it probably is.
That, of course, is not to say we can't lift-it's likely only a matter of time before a counter-trend rally occurs-but I'd suggest mapping out a game before you run onto the field. In other words, if you were schvitzing yesterday because the tape was down, remember that feeling when you're swimming in the seas of green. Spending your day wishing you were longer (when they're up) and pining to be shorter (when they're down) makes for a miserable trading existence.
A check of the morning breadth shows winners beating losers 3:2 and our super-tells (SOX and BKX) are holding their own, thank you very much. My inclination continues to be use rallies as an opportunity to add short exposure but due to the recent carnage, discipline dictates using "wider" scales. I've been steadfast in my belief that the downside is a function of "when" not "if" and I continue to feel that way. This leads to an obvious and natural question: if I want to be shorter higher (and use prices to my advantage), why would I set a buy stop on my exposure?
My concern (and the reason for the initial "stop") was the short-term trading nuances (ebb and flow) and, upon further review, I'm going to remove that stop level. My time frame, and I will be clear on this, is through year end and I would prefer to add appendages (into my bear costume) at higher prices-not remove them. At first glance, this may seem to conflict with my earlier post but I'll argue that you must always adapt to the market and, as traders, we can call audibles at times.
Six-two stacked monster, baby...and let the games begin.
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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