Leave the emotion to me, sweetness.
Over the last month or so, the S&P has formed an "ascending triangle" (higher lows, constant top). These flags (pennants) are typically resolved to the direction of the overall trend (in this case, up). Having said that, a breach of the lower band camp (around S&P 1150) will break those flutes in a hurry. When you factor in the non-confirmations (tech, trannies), negative divergences (stochastics, MACD), crowded longs and upside ripcord (if breached)...well, it's setting quite the stage.
Early vibes are pretty much as expected. The first move was (is) higher, led by the knee jerk buy siders in the SOX. Breadth is better than 2:1 positive and the other sector tells are trying to fall into place. Meanwhile, the rumortrage continues to spur the "shoot first, ask questions later" crowd as merger mania has lathered into a frenzy. Remember, Minyans, if you're playing take out stories via options, chances are the (fat) volatility reflects that froth.
Watch Applied Materials (AMAT:NASD), Cisco (CSCO:NASD) (and the rest of the telecom space), General Electric (GE:NYSE) and your back. The tape is particularly emotional and that makes for a potentially volatile (and whippy) marketplace. Jamming a bit, so lemme hop. Hit 'em hard and stick to your disciplines.
I'll be back.
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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