Getting Over the Hump
Europe down across the board, AMAT fumbling again, UN meeting Friday....man, it just never ends!
Good morning and welcome to Hump Day in Minyanville! The Minx pulled the Jedi mind trick yesterday and flummoxed the bulls who thought that they were FINALLY gonna get their upside respite. Unfortunately, the combination of triple resistance, anemic volume and jittery critters proved too daunting for the bovine and they high tailed it out of town. With the averages flailing and the weak hands bailing, we're left to wonder: what can turn the tide?
We've been kicking around the Shim Sham thesis for a few weeks and, as it evolved, S&P 810 began to crystallize in my crowded keppe. Why? Well, the original thesis was that the initial trade would rally the S's (from S&P 850) to 870--and fail, thus creating the Shimmy down the slippery slope (to shake out the bulls and suck in the bears). Once that occurred, I thought, the stage would be set for a stiff lift that would last longer and go further than most (including me) would expect.
While it's (thus far) followed the script, it's unrealistic to believe that we can consistently outthink the Minx and we must remain adaptive (and humble) in our approach. This is as difficult a market as I've ever seen and I've choked so far up the bat, I'm almost holding it backwards! With that said, I still think the Sham will play out--we just need to be careful with the timing/price point.
Two things concern me--well, a LOT of things concern me but let's discuss these two for a moment. Yesterday, during a rather nasty reversal, the VIX was lower, the wires were quiet and the trading rooms were shhhh! In other words, the decline was entirely too orderly and that's not the stuff trading bottoms are made of. The other thing is the historical inability of a triple bottom to hold. With each test, support becomes weaker and if we grind towards the lows (as opposed to a whoosh), it'll throw a wrench in the entire thesis.
While there are constructive signs--the stochastics remain coiled like a cobra and that's the most glaring positive on my board--I'm admittedly nervous about the geopolitical situation. I know that walls of worry are typically scaled by the bulls but I can't shake the negative vibes that something is 'out there.' As someone who watched 9/11 unfold before his very eyes, I could very well be too sensitive to the threats--I admit that. However, it factors into my thought process (whether it's conscious or sub-conscious) and I need to communicate that concern to the good readers of Minyanville.
One step at a time, my friends, as we walk our path together. I often opine that we must sell hope and buy despair and, well, the world is becoming a desperate place. Trading a market that doesn't yet know it's destination is frustrating, to be sure, and it's certainly not for everyone. If you're unhappy, make changes that better your lifestyle and allow you to focus your time on the important stuff. As my grandpa Ruby used to say, time is the most precious of commodities--and truer words have never been spoken.
Good luck today.
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