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Minyan Mailbag: Anatomy of a Trade


Things are getting sticky...


Hello Toddo,

Thanks for the "fur" yesterday as it always helps to 'see' your thinking. I have been patiently waiting for an entry point to sell this market. Your move in the "face" of the strong seasonality (March expiry) is Brass! I was also thinking the minx would anticipate the anticipators and buck the Ides of March. But, I couldn't pull the trigger (although I'm close with some Q's). Some questions for you:

1. Will you double down or surrender @ 1305?

Brass.....tacks? It sure felt that way yesterday as my eyes spied some intraday divergences that spurred my metaphorical agenda. Breadth was laggy, Google and the Generals (Electric and Motors) seemed sick, Aunt Fannie had a fresh faux pas and there were geopolitical smoke signals (Iran, Iraq, mad cow, bird flu, locust, vermin, blood...). The thorn in Boo's paw was the stickiness in the financials. I've long maintained that 'as the piggies go, so goes the tape' and the brokers built on their gains rather than wilting in the rain.

The moment of truth, for me, was when my intraday tells reversed (as a function of a meaty call buyer in the S&P late in the morning). I saw the subtle shifts that preceded the upside validation but chose to ride it out rather than cut and run. In hindsight, that might have been a mistake although it remains to be seen as we ready to hike up the Hump.

Regardless, as defined risk is the common thread of any disciplined trading try (not to be confused with longer-term investment approaches), I set my stops above the recent (multi-year) highs and won't rationalize if/when they trigger. My sense continues to be that the back half of 2006 will be Boo's time to shine but technicals provide a tangible (not absolute) framework and I'm gonna practice what I preach.

2. With the buy stops @1305, do you have another SELL level above that massive resistance?

With 8000 hedgies staring at the same levels, they often become convoluted and lose their predictive prowess. The risk of using S&P 1300-1305 is that there are a slew of "buy stops" on the other side and, thus, may create a (brief) vacuum that sucks in the towel-tossing demand. I'm conscious of that but again, I won't rationalize it. If and when we get there, I'll recycle my risk and take a fresh look. The beauty of the market is that she offers you fresh opportunities on a dynamic basis. That doesn't mean we have to play them all, it simply means we gotta live to trade another day.

3. Why don't some of the professors give us more updates throughout the day?

Our model in Minyanville is to "feature and brand" our professors in a way that highlights their mad skillz but doesn't cannibalize their service (if they have one). The Buzz & Banter has become the center channel of finance and we're constantly working to improve the content, style and service of that feature (be on the lookout for a new and improved Buzz coming soon to a 'Ville near you!). If you're diggin' a particular professor, feel free to click on their branded links and check out their service. They're here for a reason, Mon Frere, and we stand by each of our own.

5. The Raiders aren't getting Vince Young.

You may be right--I may be crazy--but smarter sports folks than me have the Longhorn QB dropping in a silver and black lap. I understand there's an element of "be careful for what you wish" but I'm willing to give the kid a shot, particularly with the offensive weapons that would surround him. The QB position (Collins) and chemistry on defense have been my biggest concerns. Landing a young gun and punting Charles Woodson go a long way in stepping towards the commitment to excellence.

6. Last week you said; "Can Syracuse win it all? I don't care!" after their win over UCONN. We then saw with one of best four-day runs in the history of college roundball . WOW! What happened to Ruby's mantra of "thinking positive?"

I've followed Syracuse hoops for a very long time and, given the squad they have this year, I woulda gladly taken the win over the #1 team in the country and called it a season. But then they beat the dreaded Hoyas (our arch-rivals) and snuck past a gritty Pitt squad to cut down the Big East nets. Very nice--very unexpected--and very much why March Madness is the best time of year for the serious sports fan.

Do I think they'll make a deep run for the roses? If we can get past the Aggies, we'll likely pull a tough LSU team in the second round and the Dookies thereafter. So, forgive me if I've set a rather low bar for the Orange --it's time tested and well deserved. We'll know soon enough, however, and I encourage all Minyans to participate in this year's Minyan March Madness brackets. The winner will snag a very special prize from Minyanville while the "non-winners" will have the choice (but not the obligation) to make a donation to the Ruby Peck Foundation for Children's Education. This is a community that cares and if we can have some fun doing it, everyone will emerge with a little self-wealth!

Good luck today.


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