God bless the brave men and women in the armed forces.
Well he never traveled heavy, yes he always rode alone
And he soon put many older guns to shame
Well he never had a sweetheart and he never had a home
But the cowboys and the traders knew his name
It's another brilliant morning in Minyanville as the sun is shining, the birds are chirping and the critters are smiling. Yes, each day in the market is a stressful step but the Menagerie has their priorities in order and they're thinking positive. They know that, above all else, profitability begins within and they're practicing what they preach.
The research bus just drove by to tell us that Monty punted Best Buy (BBY:NYSE), UBS Warburg downed Honeywell (HON:NYSE) and Guidant (GDT:NYSE) while upping Andrx (ADRX:Nasdaq), Goldman cut numbers Micron (MU:NYSE), Morgan Stanley said "see ya" to CDW Computer Centers (CDWC:Nasdaq), Prudential upgraded RadioShack (RSH:NYSE), Bear spanked the Baby Bells and Solly downed Whole Foods Market (WFMI:Nasdaq). Not to be forgotten, Monsieur Beeks delivered the durable goods report and, ex-transportation, it came in weaker than expected (-2.1% vs. exp. -.1%).
Despite the weaker-than-expected economic news, the early morning futures remain firmer than a college cheerleader. This reinforces the notion that the market "wants" to rally into quarter end, but it remains to be seen if she's got the juice. One thing for sure, traders will (once again) reactively trade the news flow and that'll contribute to another whippy thin environment. As such, this is your friendly neighborhood reminder to put limits on your orders.
The S&P has formed a tight little range between 860 and 880 and traders will (likely) be gunning for the upper band tag. As we discussed yesterday, a "gap" exists (from Monday's opening) that "works" to S&P 895. If (huge if) the Minx can fill that gap, she'll be within spitting distance of the 200-day moving average/trendline intersect -- and you can be sure that there are plenty of "buy stops" above there!
For my part, I respect the action but I've chosen to approach it with a slightly cocked right hand. Rather than short into the wind, I've been scanning the globe for cheapie "underneaths." I've picked up some "dollar kind" puts out to May that provide me with a downside "spec" while also enabling me to rent some stocks intraday (should I be inclined). With volatility slipping towards the lower end of it's recent range, I think there are a couple of ways to win with that trade. Again -- and I must say it -- this isn't a recommendation for you to do this, I'm simply explaining what I'm doing with hopes it adds value.
My trading tells today will continue to focus on our macro guides (dollar, crude, gold) while monitoring the stateside reads (financials, semis, retailers, cyclicals). I'll surely let the tea leaves guide my intraday posture but please know that my "concern" is to the downside. As such, I have one leg in my metaphorical bear costume and my right hand firmly up.
While hairs on the back of our neck and feelings in the pit of our stomach are admittedly low rungs on the trading totem pole, I must communicate a "fear" to my fellow Minyans. Please take this for what it's worth and understand that it's probably nothing --- but I've got a bad feeling in my trading bones. I can't put my finger on what it is and my angst, in and of itself, might be bullish (as a contra-indicator) . Are "gut feels" actionable? No. Am I respecting my own instincts via my approach? Yes, I am -- through very defined risk (out to May) and deep breaths throughout the day.
I'm gonna jump so I can get this to you before the opening. I sincerely hope you all have a fine day and, more importantly, find your way to a few smiles and a proper perspective. Don't take time for granted -- it's the most precioius of commodities
See you after the opening.
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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