Remember--respect the price action but don't defer to it.
You may say I'm a dreamer
But I'm not the only one
I hope some day you'll join us
And the world will live as one
Where were YOU on March 11th, 1983? If memory serves, I was attending Bar Mitzvahs and wading my way through adolescence. It feels like a completely different lifetime and, at the time, stocks were the furthest thing from my mind. However, it was precisely that day when the Japanese Nikkei last touched these levels. Think about how long twenty years really is--it's an astounding situation.
Beeks dropped off the economic data and the change in nonfarm payrolls were abysmal. I've already gotten a handful of calls claiming that the number was skewed by the reservists being called up and I can't offer insight in that regard. What I will say is that we closed yesterday sitting on some important technical levels and the bulls were holding out for good news overnight. Intel wet the bed, Duyba was hawkish and Beeks had nothing good to say. In other words, it was an 0-fer for Hoofy.
With that said, PLEASE stay on your toes today. My better coverage tells me that shorts (or longs) haven't pressed this latest leg lower as they've been sidelined and handsitting. That could change this morning and, as such, our antennas for a Snapper have to be raised. I'm not saying he swings by, mind you, I'm just wary of a directional trade when it seems "too" easy.
I continue to feel that a better (deeper) low needs to be put into the market before a sustainable turn. Where? We discussed the potential for 100 handles of downside risk yesterday and that would bring us to S&P 725. Will we get there? There are so many unknowns right now, it's really impossible to say. However, I continue to be of the (humble) opinion that a sustainable upside stampede will have it's best legs if we take out October's low. That's not today's business, however, and if we're to find our way to the ultimate destination, we must focus on our journey at hand.
In early news, there's been a slew of number cuts in Intel, Deutsche Bank upped NSM, Cowen was cautious CSCO, Lehman feels the same about the semi-caps, the greenback is at a fresh four year low (and through dollar/euro 1.10) and the European bourses continue to slide.
I'll be focused on the financials this morning as the BKX clings to the October lows. There was some negative news out in WFC last night (lost a district court decision in California) and it should be noted that Wells is the third largest component of the BKX (10%). That, coupled with ONE's guarded commentary late yesterday, may color the action in the financial complex.
While our pennant formations will likely be resolved to the downside this morning, keep an eye on S&P 806 (February 13th intraday low). That level has been on the lips of traders for some time (since February 13th!) and the bulls will likely try to defend it. IF they violate it, S&P 775 (October low/triple bottom) will come squarely into focus. In four-letter land, NDX 975 (through there now) and 950 (February closing low) are areas of support.
I hopped to work with one leg in my metaphorical bear costume and my right hand up. So you know, I will likely be making partial sales on my defined risk April puts (semis, cyclicals, financials) into the opening slippage. Why? Discipline, Mon Frere, pure and simple. I "think" the market has more work to do on the downside but as I've said before, the mechanics of the swing are more important than the results of the at-bat.
It's been a difficult period for everyone and trading this market only adds to the stress. I implore you, please, remove emotion from the decision making process and make lucid choices with regard to your financial exposure. The world is an uncertain place and, by extension, the markets are whippy and volatile. Think before you act and take deep breathes whenever possible. There's less than seven hours before our requisite two day respite--let's get there safely.
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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