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Minyans and Metrics


Wait for your pitch, Minyans--it's out there!


Good morning and welcome back to Frazzlerock. With yesterday's slippery drip, Hoofy's heroes once again failed to overcome the Minxy hump. For the third day in a row, they scaled the wall of worry and peered over at the promised land--but it was not to be. Boo's bandits blasted the bulls and chased them right down to support. Will the bountiful bovine bounce back and stake their upside claim? We wont have to wait long to find out, cookie, for it's expiration in Minyanville and the games are set to begin!

With the great debate dominating the trading chatter, I thought that it might be helpful to take a quick walk through our metric base and peruse the lay of the land. Obviously, the collective focus isn't necessarily centered on conventional methodology. "Geopolitical" has become a buzz word that will find it's place alongside other historical catch phrases such as "contagion," "page views," "paradigm" and "malfeasance." Still, we must continue to honor thy process, assimilate our inputs and incorporate them into our daily read.

Fundamentals: The muck continues to cloud the outlook and, for the most part, corporate America remains in a fog. While there's a case to be made that it's always darkest before the dawn, there's no edge in gaming whether we've reached maximum black. The most bullish aspect of this metric is that expectations continue to be lowered and, eventually, something of nothing will be perceived to be better than nothing at all. Other than that numbers game, there's not much there and valuations remain loftier than historical troughs. Edge: Boo.

Technicals: S&P 850-855 and NDX 1015ish continue to constrain the Minx as she attempts to digest the recent (reflex) rally off the lows. They'll act as first resistance, S&P 870ish is the granddaddy ceiling on the upside and BKX 725 (and SOX 295ish) will give the bulls some agita as well. On the downside, S&P 835, 820 (recent low close), 805 (trading low) and 775 (October low) are levels to watch and, for the techs, NDX 990 and 950 are areas of stickiness. That's what we have level wise. Indicator wise, the oversold condition that acted as a bullish backstop has been alleviated and the intermediate stuff that Tony's been watching aren't at compelling levels (for the bulls). Edge: Boo.

Psychology: Last Thursday, when we were flipped our lid and gave Hoofy the nod, the fear was palpable and the markets were coiled. All we needed was a seed--any seed--to be planted in the mindset of the masses. The combination of DELL earnings, the prospect of war avoidance and the lack of "terrorble" news was more than enough and the northside stampede began.

A funny thing happened on the way to the bank, however--hope filtered into the Mix. The TV guides got loud in saying that we turned the corner, pundits proclaimed that we saw THE bottom and giggles could be heard all over Wall Street. In our never-ending attempt to secure an edge, the only consistent money trade over the past few years has been to sell hope and buy despair. We're not at an upside (hopeful) extreme yet --but we're certainly nowhere near the downside despair we've seen at other trading lows. Edge: Even.

Structural: There's a lot of crosscurrents currently in play and it's difficult to address all of them in one sitting. While I'm certainly no expert on the virtues of the dollar, gold, oil and fixed income, my (humble) opinion is that their aggregate action is NOT bullish for equities. Further, CEO's and prognosticators alike are quick to pull the Iraq card when asked why business/the market is so bad. We saw similar rationalizing in the past--Y2K, the electoral debacle, accounting irregularity--but, for the most part, those have passed and trouble remains. Don't get me wrong, uncertainty IS bad and clarity on the war front WILL help equities--but this market has deeper issues. Edge: Boo

So...with Hoofy pretty much shut out, does that mean I blindly want to short the tape? Not on a bet! With so many balls in the air, it's too risky to put 'em out and let it ride. The anemic volume is telling you that there's a lot of players watching and there's risk--real risk--to both sides of the tape. While my posture remains furry (and will likely remain so as long as we're under S&P 870), I am defining my risk via stops and/or option plays.

I know that many of you aren't afforded the opportunity to trade the tape aggressively but that's ok. If I wanted to gear my writing purely for professionals, I would have done so. The goal of Minyanville is to educate, enlighten and inform--no matter who you are and regardless of how much you make. If you walk away from the city of critters with a new thought, better perspective or clearer understanding of what makes the flicks tick, then we've surely done our job.

With that said, it must start from within--so clear the mechanism, think positive and approach each day with the right attitude. This is a difficult game and it promises to get worse before it gets better. Baby steps may take longer to get us to our destination but we've got a better chance at arriving there safely. And that, my friends, is the most important aspect of any journey.

Good luck today.

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