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Nothin' But a Fed Thang

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Trade to win--never trade not to lose...

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Well Ben's peepin', and he's creepin', and he's creep-in'
But he damn near got caught, 'cause his rate hikes keep sneakin'
Now it's time for him to make his impression felt
So sit back, relax, and strap on your seatbelt


(Dr. Dre)

Good morning as we ready to start rollin' down the street, reading info and looking for words obtuse. In a little more than five hours, Boom Boom Bernanke will bounce to the mike and ratchet rates for the fifteenth straight time. Over the last two days, the newly appointed Fed head has likely lobbied to further his oft-stated anti-inflation policy of finding a price target to make the FOMC more transparent. While that debate won't abate for quite some time, trigger happy traders will be eyeing the text for language, clues or hints regarding future bias.

From a trading perspective, we've mapped out our current juncture. Since piercing the all-important S&P 1300 level on March 15th, the tape has been basing or, perhaps, flagging above newfound support. Each Red Dye try to roll this puppy over has been thwarted by bovine beasts intent on keeping the technical metric underfoot. Supply has been absorbed via rolling rotations rather than outright migrations, a stealth yet steady moxie that has slowly shifted sentiment somewhere between confidence and complacency.

I'm somewhat torn by the action as my "eyes" and "gut" are at odds. On the one hand, as described above, the action has been made to order for the bulls. The only difference between basing and churning is field position and, as we're above support, this is an incremental positive. Boo's crew continues to toss a lot at the Minx but she simply blinks, winks and holds tight. But something has been nagging me as I read the rhetoric and watch the world around us. One of the first lessons I learned in trading is that uncertainty is bad for the tape. So, if our central bank is admittedly confused by this continued conundrum, how can that possibly bode well for the bulls?

For my part, I've been actively trading the "near-term" bucket of my pad while "trading around" longer-term holdings in metals and energy. In the former faucet, I pared a bit of my Intel long-side schnitzel near my cost basis (it was a tad oversized) as I continue to pick up soft data points on the quarter. I'm still there with a defined risk stop (slightly below) and will play the game much the same. I don't foresee carrying risk into the quarter (gap risk renders stop losses obsolete) but we'll cross that bridge when we get to it.

On the longer-term stuff, I added back some drillers yesterday as I watch the OSX tickle 203. My names of choice include Weatherford Intl (WFT), as it seems to be basing after a winter run and Nabors Industries (NBR), as it looks to be breaking out of a base following a winter correction. I've never claimed to be an energy analyst but I've made an attempt to further familiarize myself with energy (and metals) over the last few years as I've been of the view that they're secular winners in the new world. I continue to believe that they'll jockey the leadership baton and put the performance of tech and financials to shame and, while I understand there's a bit of redundancy in this view, I'll share it until I stop believing it to be in our collective best interests.

With all this said, and said humbly at that, there's nothing wrong with trading light and tight into unknown catalysts. I've long offered that the ability not to trade may be as beneficial as trading ability. With 9000 hedge funds standing in a circle shooting at each other, there's nothing wrong with letting them clear the field a bit before swooping in to snatch some snacks. Inherent in that approach is a proper perspective and proactive mindset, one that will remove the wouldas, couldas and shouldas from your inner vernacular. Trade to win--never trade not to lose--and let's make this journey a profitable one.

Good luck today.

R.P.

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position in intc, wft, nbr, metals
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