Tuesdays with Story
By Todd Harrison Dec 03, 2003 8:57 am
Hey Hoofs--toss me the black card!
Good morning and welcome back to the shack. Yesterday's ride failed to provide a meaningful clue in the overall tide. "I'm feeling no threat on my large upside bet," said Hoofy while reading the Minyan Gazette, "it's the bears turn to sweat (while feeling upset) and fumble around in despair and regret." "How cocky we are," said Boo from afar, "I'll bet you your gumption will soon leave a scar!" It's Hump Day anew in the Minyanville zoo so let's settle in as we search for new clues!
Last night, while nursing a brew at the Birdland, I overheard Hoofy and Boo having a heart to heart. I cocked an ear in the general direction and tried to casually eavesdrop on what was going on. This is what I got:
Hoofy: ...and I'm telling you as a friend, Boo, you've gotta stop focusing on the big picture issues. Haven't you heard the phrase "never let an opinion get in the way of making money?"
Boo: (sullen and soft) I know what you're saying but I can't shake the feeling that as soon as I capitulate and climb aboard, I'll get whipped both ways. Even worse, I'll lose money betting a way that's against everything I believe in. That's the main problem--I've got no pain tolerance on the long side.
Hoofy: You don't have to blindly bet, Boo, you can stay a bit more balanced until you see whatever it is you're looking for. Look, you're a bear and it's your nature to look on the dark side. But don't confuse stubbornness with conviction. Pride has no place in trading.
Boo: (nodding his head) You're right. I know you're right. The signs are always obvious in hindsight. Elmer's liquidity, corporate bonds remained (relatively) tight, the technicals have been supportive and the performance anxiety is palpable. For three years, fading the herd was the money trade but this year? Oy!
Hoofy: Just look at the big picture as a series of little pictures. For instance, you know that there's probably a ton of "sell stops" below S&P 1060 and that's a scant six handles away. On the other side, S&P 1075 is a level you've been watching and that, too, isn't too far from here. If you use your technical levels as a backdrop and pay particular attention to your tells, the market will help--not hurt--you.
Boo: I know--it's just that if, one year ago, somebody told us that the averages would be at these levels, there would be a trip fest to get out of exposure. Now, as we're here, there's panic to get long! This is one strange business man. Oh, by the way Hoofs, have you seen some of the flow lately? Over the last few days, there's been a pretty substantial increase in put buying (S&P and NDX). As the "crowd" reluctant to sell volatility at this level, dealers are short almost all of the downside paper. There's two ways to look at this. One is that it's a contrarian tell and those new shorts will be forced to cover (particularly above S&P 1075 where there's decent short upside gamma). The other is that any small spark of fear could exacerbate the downside as dealers race to cover their short downside gamma/volatility.
Hoofy: I hear ya, with a few weeks left in the year and the markets particularly emotional, there's a decent shot at some outsized moves. You know we get the Intel (INTC:NASD) mid-quarter update tomorrow and a bevy of Beeks on Friday, so put those on your trading radar as we edge through another week. Also, when you get into work tomorrow, check out the snazzy new holiday items (and E-Commerce solution) that's been added to Main Street! It makes for an efficient critter!
Boo: Dude, I'm on a tight budget these days but thanks anyway. (getting up to leave) I'm outie, bro--this round is on you.
The frumpled bear got up from the table and stumbled towards the front door. Hoofy could only shake his head as he watched his once proud friend find his way. It wasn't that long ago that he was feeling the same pain but he knew--as do we--that fortunes can turn on a dime. He reached into his black cashmere jacket, peeled off a couple of twenties and tossed 'em on the table. Life was good for the bull--at least for the time being.
Good luck today.
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