The Short Stop
If they close the S&P under 850, a lot of technicians will turn bearish!
Well, beat the drum and hold the phone
The sun came out today
We're born again
There's new grass on the field
It's opening day in Minyanville and the critters are psyched for the new season. Daisy, wearing her favorite Derek Jeter #2 jersey, just sashayed into my office (with the rest of the Menagerie in tow) and said "Wasabi, Toddo, it's a beautiful day for baseball -- let's play two!" I promised the udderly stunning cow that she could head out to the stadium for this afternoon's game but she'd have to fly solo. I need the other critters to help me sort out today's action. Let's take a look.
We power up our systems this morning to find a heavy world. Europe is down 4% across the board, the stateside futures are down a deuce, the dollar has slipped 1% and crude is higher by 3%. Got all of that? Good, now wipe your nose with these numbers and toss 'em in the trash. It's quarter end and chances are that today's price action will move these markets substantially by the time the closing bell tolls.
The lethargy is being attributed to the perception that this war might take a bit longer (and be a bit harder) than expected. We've spoken about the importance of the psychology metric and that continues to be the motivating factor on the street. The SARS virus is also getting louder in trading circles as a few high-profile companies have shut down their regional offices (and cancelled trips) over there. Does anybody else think it's odd that this "mystery flu" was discovered during a time when we're on high alert against chemical and biological agents?
Looking at today's tape, S&P 850ish is a fairly important level as the Minx works off her overbought condition from a few weeks ago. If she can find traction around here (and the NDX can do the same at 1020), the "successful retest camp" will get loud and declare the pullback a necessary (and fleeting) evil. If, however, we close below those levels, you're gonna have a lot of nervous longs who own stocks because they "acted well."
For my part, I have one leg in my metaphorical bear costume (25% conviction on the short side) and a handful of May (out-of-the-money) puts on my sheets. There are two ways that I can approach the opening. I can punt the puts and lock in a (marginal) profit or I can buy some underlying stock against them (on a ratio) and set up some gamma. I haven't finalized my strategy yet (it's a function of price) but I just wanted to give my fellow Minyans a heads up.
You guys know my big picture bent (Boo!) but for purposes of this trading column (and in front of quarter end), I'll likely get naked this morning (sans costumes). I still believe that the October lows need to crack and I continue to feel there is substantial downside risk to this market. However, trades are made to be taken and I wanna step back, grind out some performance and stay on my toes. I can always suit up if I smell a compelling trading opportunity.
Finally, snaps to Carmello Anthony and the Syracuse Orangemen for their upset win over Oklahoma yesterday. I honestly approached the game with very low expectations and was pleasantly surprised that they showed up and played as a team. You're in the Final Four, boyz, and you're two games away from getting Jimmy his first National Championship. Good luck!
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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