With all the seeds I've been planting, I feel like a farmer!
Wooden ships on the water very free and easy
Easy you know the way it's supposed to be
Silver people on the shoreline leave us be
Very free and easy
(Crosby, Stills, Nash & Young)
It's a surprisingly mild morning in Minyanville and I gotta say that it's good to be home. Despite the media frenzy, the trek north was surprisingly simple--and that was with a plane full of critters! The Menagerie always raises eyebrows when they rumble through the airport but last night we collectively zipped from Rubyville to Minyanville with ease. Love that!
After 2 1/2 days of Snappage, the seeds of green are firmly planted in the mindset of the masses and, as we know, psychology can be a powerful animal. Surprisingly (wink), the recent rally awoke the analyst community and research is net/net positive this morning. Morgan Stanley upgraded select semis (they have a semiconductor conference starting March 4th), UBS Warburg upped CAT and IR, CS First Boston raised the telecom equipment group to neutral, Goldman upgraded WY and Wachovia, in an act of solitude, downgraded NOK.
With Europe under early pressure (watch the DAX!), I awoke this morning to find some pre-market slippage. Sure enough, Morgan's semi upgrade (INTC, TXN, XLNX) hit the street, the hedgies lifted QQQ and the tape popped. Then, chatter of Iraqi ships (filled with weapons of mass destruction) made the rounds and hedgies sold SPY. Is it me...or is this nutty?
In chartland, there is an S&P trendline resistance right around 853ish and a Fibonacci "38% retracement" at 855. The Minx spent the better part of yesterday trying to poke through those levels and they remain in play. If we can garner some jig, all eyes will turn to S&P 870. On the downside, watch S&P 845 as the first (marginal) support and S&P 835ish (Tuesday's low and short-term trendline support) as a more significant level. It's also worth noting that the banks continue to "do work" around BKX 725ish.
Over in four letter land, the NDX has some previous tops to contend with at NDX 1020 and NDX 1040. IF they can push through that level, there is a gap from 1040 to 1060 before the Razor Burn trendline resistance comes into play at NDX 1070. On the downside, NDX 990 (Tuesday's low) is first support and NDX 970 (the upper end of the previous downtrend channel) will be the next level. In the semis, SOX 305 is trendline resistance and, although we poked through the neckline, I'm not convinced that the dandruff has cleared up.
Tells today include Citigroup (resistance at 34), the Semis (on the heels of Morgan's upgrade), the retailers (hibernating shoppers), the macro gauges (gold, crude, dollar), the horsies (telling yesterday) and our internals. I would also like to point our Snoop's excellent morning post--it's a must read before you play today's hand.
For those following the recent "puntage," there are a couple of strategies that can be explored if we get any slippage today. We could roll the capital out to March (dollar neutral) and have fewer puts of longer dated paper (remember, time is money) or we simply scale out of our position if the price action allows it. As I've said, front month paper is always "gun to head" heading into expiration week and, for this reason, I typically choose options "a month out."
It's a new day, my fellow Minyans, and it's fresh with promise and opportunity. Remember how you felt when the tape was slip sliding away and, if you were too big to breath, attempt to use prices to your advantage. Getting bullish higher and bearish lower is no way to trade, Mon Frere--stay proactive, think positive and always keep that right hand up.
See you after the opening.
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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