Dig my stems!
She cuts you hard, she cuts you deep,
She's got so much skill
She's so fascinating that you're still there waiting
When she comes back for the kill
Good morning and welcome back to the sneak attack. It was deja vu all over again as the bears emerged from the Red Dye den. For the second straight week they caught Hoofy nappin' and proceeded to give him an old fashioned slappin'. "I know last week is fresh in your mind," said Boo to his crew of the previous grind, "but if this tape begins to unwind, the dip shtick approach will soon be maligned!" Is he sniffin' glue in search of his due or will the downside now follow through? It's freezing outside so shake off the chill and ready anew for our dance in the 'Ville!
Last week, after a rather rude brush back pitch, Hoofy stepped up and connected for a line drive triple into the gap. His moxie surprised many professionals who felt that he was overdue to step in pooh. Perhaps he was aided by a combination of thin markets, an aggressive gorilla (who bought 5000 Spooz) and a benign Beeks. Whatever the case, we waltzed into work yesterday to find a tape without legs and the bulls laying eggs. All eyes on you, Snapper, as the entire world awaits another curtain call.
I'm unsure if the analyst community was reassured by the recent rebound but the morning news is loud in Terrapin Station. JP Morgan (JPM) upgraded the semiconductor sector (watch SOX 440 for dandruff confirmation), Merrill jacked Johnny John (JNJ) (4.5% of the DJIA, 17% of the DRG), Bear and Deutsche Bank went shopping in Federated (FD)/May (MAY) and Bank of America raised numbers and price targets for the homies (implying a 13% total return upside for the sector). On the heels of last week's "close your eyes and buy 'em" spree, this news is being gobbled up by the blind believers.
There are, as we know, a few reasons to be suspect. The financials, arguably the most important sector in the stock universe, couldn't mount BKX 100 last week. That was the "right shoulder" of the daunting dandruff and has lent further credibility to non-confirmation concerns. While this may prove to be knee-jerk rotation in the face of rising rates (we saw 4mm XLF (financial spiders) sold yesterday), this complex may hold the key to the broader vault. M&A fever is sweeping the Street--this we know--and the action of the financials deserves a constant eyeball as we fit together the puzzling pieces.
Taking a quick step back before we all step forward, I will again draw your eyes to the uber-low levels of volatility. In the annals of Wall Street, Single Digit Vols is a horror show for the active traders in our midst. This screams of compression and frustration, two dynamics that will remain silent until they're called upon for hindsight explanation. They haven't mattered--and they're not causation--but it would be myopic to ignore the potential ramifications regardless of which way this cookie (c)rumbles.
We power up this Tuesday pup to find firm bourses across the pond, a mixed Asia, slightly sluggish metals and some green futes. Please keep one eye on the CRB--its getting a bit nutty--and understand that psychology will dictate reality until Beeks peeks on Friday (payrolls) and the mid-quarter updates arrive next week. S&P 1212 (1218) remains initial resistance while NDX 1476 (200-day) rests below. And please remember, Minyans, it's not important to make every trade, it's only necessary to win the trades you choose to make.
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.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter