The Minxy Marionette
Joisy?!? I wonder if he knows Tony Soprano!?!?
Let us put men and women together,
See which one is smarter,
Some say men, but I say no,
Women got the men like a puppet show
Good morning and welcome back to the great stage. The bulls performed admirably in yesterday's production and, despite some afternoon schvitz, managed to pull out a virtuoso performance. The effort was the latest in a string of zig zag efforts--Monday's melt, Tuesday's Snapper, Wednesday's bull trap and finally, Thursday's bear scare. Will Boo hold serve and spank 'em into the weekend? Ladies and Gentleman, Minyans of all ages, welcome to Freaky Friday in Minyanville--it promises to be a really great show!
This week's tape, while filled with emotion and intraday volatility, has really done little to solve the great debate. From 40,000 feet, this action is little more than noisy churning under critical resistance. In the wacky world of technical analysis, stocks are better higher and worse lower--something that I'm diametrically opposed to. Still, I've found this metric to be a useful backdrop with which to juxtapose a trading thesis. In that vein, and as I that feel that the Minx will have difficulty overcoming the traunched resistance, I'll continue to give Boo the benefit of the doubt until the bulls prove me wrong.
What is that level? That's a question that I've been internally debating all week. The obvious first stop is S&P 846, which is the downtrend line from mid-January. In a perfect technical world, we'd be able to view that as an inflection point and play long above and short below. However, there is further resistance in the S&P 850-855 zone (double top in February) and, even more daunting, the motherlode of all resistance resides at S&P 870 (THE break dating back to Halloween time). How are we supposed to know which one really matters?
I suppose the answer lies in your choice of time frame and trading style. There's no wrong answer, per se, and there are different strokes for different folks. The uber-short term types may choose the first zone, the wiggle room bears might opt for the second zone and the scalers may prefer to deploy an appendage at each of the levels. It's really a unique decision and one that's a function of your particular taste.
Of course, there's the other side of the fence too--the long only crowd. The "nice" part about this juncture, if you can call it that, is the stair-step pattern of higher lows (since February 13th) and lower highs (since early January). We've already discussed the upside levels, but there's points of reference on the downside as well. S&P 827ish is the latest "higher low" (Wednesday's close) and that can be used as a stop level for the bulls among you. If you'd like to provide a tad more wiggle room, the previous "higher low" (Tuesday's opening) resides around S&P 820. Finally, if you've got the tolerance, the Duct-tape lows of February 13th reside at 806ish--and if they break that, every technician and their sister will be hittin' the eject button.
I know many of you don't key off of the S's, per se, but the levels and vehicle aren't as important as the style and risk management technique. You could pretty much plug in anything--NDX, BKX, Soybeans, Orange Juice Futures, Gold, Pork Bellies (I knew it!)--you name it. The point is, you want to define your risk in some capacity and using technical levels is one of the few tangible metrics that allows you to do that.
Anyway, I think you get the drift. These are the types of lessons that I envisioned when we started Minyanville--one's that enabled you to bait the hooks and catch your own dinner. It's our hope that you'll walk away from our community with a better understanding of the mechanics of Wall Street and why things happen as they do. It's surely a lot to digest but if you're reading this, you've already demonstrated the desire to learn--and that's awesome!
Speaking of awesome, and before I go, I wanted to announce that the Minyanville Charity Auction will be closing it's doors today at 4:00pm sharp. We were planning on keeping it open through tonight but upon further review, we've decided that the fairest way to choose the winner is, simply, the highest bid time stamped BY 4:00pm--and the winner will be announced live on the site after the close! Currently, Mr. Joisy has the top spot with his generous bid of $12,250 for a day in Minyanville. The Ruby Foundation for Children's Charity and Jacob's Cure thanks you for your most wonderful gesture!
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 firstname.lastname@example.org.
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