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Bowling for Dollars

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If everyone is thinking Santa Claus rally, is it self-fulfilling or too easy?

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It's a chilly morning in Minyanville and the critters are scurrying about as they attempt to get a handle on this morning's action. Mr. Beeks danced by this morning for some schnitzel and to drop off mixed economic numbers. Meanwhile, the tone from retail land is marginally negative as Circuit City and Best Buy released "blah" earnings this morning. These reports, coupled with Target's downbeat assessment last night, could color the holiday spending psychology. Watch this group!

Perhaps more important, the dollar continues to get smoked despite yesterday's rally. I'll be the first to tell you that I'm no currency maven but this action certainly raises an eyebrow. We've been discussing the macro influences and the greenback, coupled with the sneaky rally in crude (above $29!) must be on your radar regardless of your bias. Remember, you always want to get into the head of the person on the other side of your trade and you can be sure that the bears are focused on these developments.

Meanwhile, the bulls held serve yesterday as the S&P, Dow Jones and SOX all held right on their 50-day moving averages. That, coupled with the oversold condition, was enough to spur the tape towards resistance (NDX 1050 and S&P 910ish). As a function of the light volume rally to resistance, I slipped an arm into my bear costume yesterday to join the two legs (75% conviction on the short side). I want to be relatively tight on this trade for three reasons. First, my stochastics, while not there yet, are closing in on a buy signal. Two, I want to honor the technical patterns and IF the NDX can rally above 1070 (and the SOX can push convincingly through 330) it seems like there will be no more tears for the head & shoulders in that complex. Finally, I am leaving for vacation this weekend and as I won't be here for two weeks, I will likely unwind my exposure before I leave. When you're not there to manage risk, you shouldn't have risk-it's that simple.

We'll be watching the usual suspects this morning (financials, semi's, retailers) and keeping half an eye on the macro influences. It's been uuber-quiet on the trading front and, as such, I haven't had that much flow to pass along. The most notable trade yesterday was the pukage of the 55,000 QQQ puts which, from a contrarian perspective, is bearish. Other than that, it's been hedge fund hot potato as traders scramble for some last second performance points. Pick your spots and don't press, my friends, as overtrading has a way of biting you in the can.

Gonna hop for the opening. Remember, the auction continues (see below) and it's for a most worthy cause. My grandfather sends down a wink.

See you after the opening.

R.P

position in qqq
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