Stop the madness!
I make my living off the evening news
Just give me something, something I can use
People love it when you lose,
They love dirty laundry
There's a whole heckuva lotta noise this morning and the market hasn't even opened yet! We powered up our systems and they really hated those cans, Navin--and there were cans everywhere! Europe was in absolute melt mode and the stateside futures were punk . All of a sudden, a blurb came across the tape that Osama was caught and the futures ripped higher. Then, once a CIA source denied the report, we whipped back to the downside. Holy cow! I slit the sheet, the sheet I slit and on the slitted sheet I sit!
The early action encapsulates how reactive and jittery the market has become. Every news item is being traded by the hedge fund community and, in a thin tape, it's exacerbating the volatility big time. I will once again remind you that we're in unique times and that calls for unique discipline. Put limits on your orders, define a risk profile whenever possible and don't trade just to trade. This market is no joke.
We've been discussing the technical muck for a few weeks now and while this is clearly a news driven tape, we must respect the recent violations. A quick peek at the European and Asian bourses illustrates what happens when multiple bottoms get tested one time too many. All of these markets are trading at new lows and, IF (big if) the Minx follows suit, we've got some more work to do on the downside.
I've been weighing whether that's the scripted path or if, in fact, it's too "easy." The optimal trading scenario--get the October lows out of the way, let Tony's intermediate ducks align and morph ALL the hope into despair--almost seems too intuitive. Perhaps it's wishful thinking that the long discussed Sham (stiff lift) begins around S&P 725ish (I'm not sure). Nothing's easy in a bear market and this juncture is certainly no exception. Deep breaths Minyans.
In overnight news, Goldman upgraded AET, Monty cut numbers in TXN, Solly upped BRCM and raised numbers in ALTR, First Union punted LU and NT, Lehman was cautious CSCO and UBS Warburg upgraded F. The European bourses also warrant another mention as the DAX and CAC are down for the seventh session in a row.
S&P 775 is the October lows and that'll provide initial support while S&P 800-805 (former support) will act as resistance. In techland, NDX 950 (February lows) is support while NDX 970 (former support) is resistance. I've been watching the N's vs. S's relationship closely and my sense is that the relative disparity will revert. In other words, I think NDX has more room on the downside or the S&P has more room on the upside on a relative basis (depending on how you want to look at it).
These are dicey times, my friends, and our search for the elusive edge continues. There remains a ton of emotion in this market and that's making the tea leaves more difficult to read. Watch our macro guides (dollar, crude, gold), our stateside tells (BKX, SOX, Retailers, breadth, horsies) and monitor the levels. Also remember to watch Snoop Tone and the Minxy Rhonda on CNNfn at 9am--he's always got some salient insights!
Keep your wits about you--with a little luck and a lot of discipline, we'll wade our way through this muck and arrive at easier times.
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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