The Hair Club for Bears
There's no such thing as easy money!
Good morning and welcome to the food for thought. With yesterday's smack of the upside attack, the bears found their way back into the black. It looked for a while like the bovine would smile but they didn't prepare for the hostile guile. "You thought I was sleeping, didn't ya boss?" said Boo with a dose of sarcastic sauce "but this is a road you don't wanna cross 'cause I'll send you all home with a big meaty loss!" Has the day finally come for the bears to get some or are they just beating on the same drum? It's a most freaky Friday for Minyans and critters so let's get to work and shake off those jitters!
For six straight sessions, the bulls have tried to busta move above S&P 1160 and, each time, they were beaten like a redheaded Fokker. While resistance (support) surely weakens with each attempt (as it chews through supply (demand)), there was something fishy about yesterday's flounder. Maybe it was the sharp semi reversal...or the punk action in the Russell 2000...or the funny feeling that everyone and their sister was long to the gills. Whatever the case, we power up with a very similar dynamic in play--if we don't get jiggy, this tape will get piggy.
Hoofy, for his part, would rather quote his favorite gangster movie. "Once in a while, everyone's gotta take a beating." He's right, of course, and he doesn't seem all that concerned (repetition will do that to ya). From his standpoint, we've simply filled the gaps that needed to be filled and storing energy to take out substantial resistance. As we edge into today's fray, he'll be keeping a close eye on S&P 1143/NDX 1480 (Friday's low) and S&P 1120-1125/NDX 1450-1460 ("better" support). While he's chart reading, he should also note that both the NDX and SOX are now sitting directly on their 50-day moving averages.
There was some talk that yesterday's pressure (and sizable QQQ selling) was expiration related. We flagged the front end of the order and, by the time it was done, it had morphed into a meatier source of supply. For what it's worth (and this may not be much), I did some sniffing after the close and found that it was a long liquidation that prolly cleaned up into the bell. That's not to say that the itchy trigger fingers have all been scratched but that one, from what I can tell, is back in its pocket.
As we wiggle and giggle around these trippy inflection points, I wanted to quickly touch base on style and approach. No, I'm not talking about Fokker sportin' his Naf Naf sweatshirt and eyeballing the blond in the corner, I'm simply referring to trading methodology. Each Minyan has an individual style, unique risk profile and distinct time horizon. Some prefer to scale into positions (nibble into weakness, parcel out into strength) while others have defined stop levels set (rip cord). I've used both techniques throughout my career and can tell you, without question, that adaptation (and knowing which to employ) is half the trading battle. So ya know, I prefer the former during trends and the latter when at important technical junctures (as we are now).
Professor-to-be Jason Roney, who will debut during Monday's massive Minyanville re-launch, offers the following tidbit as we saddle up for today's pup: "On Thursday, the Dow made a new 100 day high and the S&P future made a lower low and closed lower on the day. We've isolated the same pattern occurrences since the March low to see the next day's results--and each of the four sessions closed higher. Will Friday's (today's) action mark a change in behavior? Since both the S&P and NASDAQ futures posted outside days with closes below the prior day's low, we looked for the same pattern since the March low. There were four--and the close was higher in three of the four instances." Noted.
We power up this freaky expiration Friday (and the last day with the current Minyanville format!) to find a firmer greenback (highest level in a month vs. the Yen), Hewlett Packard (HPQ:NYSE) marginally lower on it's "ho hum" report, gold gettin' sold (down $3) and the Minx pretty much flat on the week. I would also point out that the volatility index is casting a wishful eye towards VXO 18 (where it's struggled repeatedly). If there's a spark of fear in the dry forest of laughter (and we push through that level), Boo just may find his Propecia after all.
Good luck today.
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 email@example.com.
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