The Bearded Slam
When are my cousins gonna get to the greenback?
Good morning and welcome back to the sneak attack. After the requisite rise of the equity prize, the outsized bids got Saddamized. The lift was a gift for those that were swift and, after a drift, the momentum did shift. "Those techs just reversed--it was sort of perverse!" said Hoofy after the turn for the worse, "If good news gets sold and the bears become bold, I could spend my white Christmas out in the cold!" Is it true (could it be?) that the bulls now have fleas? Or is this a short pause in the bull jubilee? It's a spankin' new day in the Minyanville fray so let's settle down for the critter soiree!
Yesterday at this time, with the futures in the stratosphere, I observed that there wasn't one prognosticator--not one--who thought the Saddam rally could fail. That (in and of itself) would have been a cutesy (and nonsensical) reason to fade the parade and, while it woulda been savvy, it wasn't necessary. Instead, paying close attention to our trading tells offered more "edge" in that regard. We opened right at initial resistance, the dollar started to give it up, the Nazz breath faltered and, finally, the semis got punked. The resulting profits may not have been as juicy, mind you, but they would almost certainly have had a better risk/reward.
While the question yesterday was "Do we close our eyes and buy 'em?," the question today is whether Monday's action was a telling precursor to further downside. There are some signs that it might have been: the Nazz never "confirmed" the rally (by putting in a new high), the NDX and SOX are back below their 50-days, four-letter breadth was somewhere between garlic and vinegar and the inability to rally on good news is telling (just as is the ability to shrug off bad news on the way up). Granted, we've seen more head fakes this year than a rookie point guard but these are inputs to respect.
I've offered that the only catalyst that could motivate the sellers is lower prices and I continue to feel that way. With so many active traders trying to squeeze water from a stone, there's a tendency to buy up and sell down. Proof positive? Look at the action (and reaction) between yesterday's bookend bells. When they couldn't rally 'em and the futures got lethargic, traders punted exposure. That phenomenon works both ways, mind you, and it's gotta be respected from the North Pole to the South Shore.
Levels to watch today include S&P 1075 (acne point), NDX 1365/1445 and SOX 475/490 (support/resistance) and BKX 937 (50-day). Obviously, the macro tells will also be a factor as the dollar continues to act as a thermometer of American perception. My thoughts on the greenback are well documented (see ya, wouldn't wanna be ya) but those are big picture observations and, as we've learned, the most important aspect of trading is making sure your risk profile and time horizon jibe.
Last, but certainly not least, today is the final day of the Minyanville charity auction and the highest bid that is time stamped before 4:00pm will emerge victorious. A "Mistere" bid of $5000 emerged late yesterday and has set the current bar. The winner, as you know, will join the Minyanville professors, my very best trading coverage, the world's snazziest menagerie and--are you sitting down?--FOKKER for our holiday Festivus tomorrow night. I often joke in an effort to make you smile (a little levity goes a long way) but, if I may be serious for a moment, this is important stuff. We're raising money for the kids via the Ruby Peck Foundation for Children's Education and, when the dust settles, that's the most profitable trade of all.
Good luck today.
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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 email@example.com.
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