Hump Day Hop Scotch
We're losing our commodity trendline?
What goes up must come down
Spinnin' wheel got to go 'round
Talkin' 'bout your troubles it's a cryin' sin
Ride a painted pony let the spinnin' wheel spin
(Blood, Sweat & Tears)
There is a natural tendency when trading--and, in particular, when your thoughts are in print--to make "calls" that help shape one's reputation among financial peers. Some, like analysts and strategists, share those views in an effort to help (and attract new) clients. Others, in the financial press and the evolving Blogosphere, do so to gain notoriety. Both are subject to the benefits and pitfalls of their latest and greatest observations.
Invariably, we all surround ourselves with those we consider to be "smart." When I was running a large fund, there were always the four or five folks I called when I was lugging massive risk. I would then assimilate their views with my own and formulate a strategy. That mindset was, in many ways, the genesis of Minyanville--to create a community where we watch each other's back and attempt to add fragments of light to the spectrum of the marketplace.
There are few folks I respect more than Jeff Saut of Raymond James. When he opines, as he did, that "given our current mindset, we obviously think the markets are, or have, made a top," I sit up and take notice. And then I read Doug Kass, someone who is a Minyan through his eyes and heart rather than his fingers, and noted that he believes that "a market top is likely in place." Again, I nod my head slowly and factor his vibes into my daily routine. I read them both for a reason although, as I will always take responsibility for my own actions, I cannot defer to either.
To be sure, calling tops has put alotta folks out of business in the last few years, much like picking bottoms did in the preceding bubble trouble. Playing the "cusps" rather than the "in betweens" is a dangerous game and one that doesn't reward alotta players. But given where we are in the market and, dare I say this juncture in financial history, we must factor in the possibility of a sea change. The recent action, including the repeated inability to poke through new highs and the drop in the banks below the previous breakout level, currently supports those views.
Pork Bellies, I knew it!
I settled into the MVHQ digs this morning and powered up my eight screens. What jumped out? The slippage in commodity land. Front month silver futes are off 4% (below $10), gold is down ten bananas and crude is meandering back towards a 60 handle (-60 bips).
Does this "matter" given the eye-popping run (and quick and dirty corrections) we've seen over the past few years? It might....
We've been eyeing CRB $320 as an important technical level. Not just from a "stuff" standpoint, but in the context of our current conundrum. As my thinking goes, we must either turn the printing press on overdrive and flood the market with greenbacks (to keep asset classes inflated) or take our foot off the gas (which is dollar friendly but will deflate stocks, commodities, schnitzel, Ranger tickets and anything else "supply/demand").
Technicals are but one of four primary metrics (and therefore not absolute). But if CRB 320 falls, we will break both the 200-day moving average and the trendline that has supported the commodity craze since the 2003 bottom. And that could be an early flag the equity bulls may be caught offsides.
And finally, some Random Thoughts as we hike up the Hump...
- Minyanville will be competing in a basketball league starting next week. As our community "officially" includes you, we're holding a mock draft in a search for ringers. If you've got game--and, preferably, some college experience--please let us know so we can give it a go. I saw G-Mac on the street last night and asked him if he had an interest but, apparently, he still thinks we've got a shot at the NCAA's. I'm not as optimistic.
- Is March expiration already in play? It might be, wabbit, it might be. I've been trading IBM from the short side (against my SunMicro long) and it's been stuck in the mud near $80 for quite some time. I've also noticed that Intel is being drawn to $20 in recent sessions, a strike price that might become reality next Friday. I can't help but wonder if the former is being held up and the latter is being held down by mechanical influences.
- Hey Google, how're YOU doin'? The internet master beta has had a tough go of late. A month after their earning's miss, their CFO spooked the Street and sparked a retreat. The powers that be quelled those concerns last week but the stock has been slippy since. Last night, they oops again by disclosing internal financial projections on their website, including a forecast for $9.5B in ad revenue in 2006. Goldman has since cut numbers and the stock is off an evil Minyan ($10) thus far. And please note that the 200-day moving average is coming up quick ($344).
- On the heels my recent Syracuse trip, I'm freshly enthused by our university initiative. As I humbly said to the Dean on Sunday, I graduated with honors and a passion for finance but had difficulty transferring my book knowledge to street smarts. I'll maintain that Minyanville can help bridge that chasm and we intend on doing just that. If you would like to plug your college into our growing network of financial literacy, please let us know! We're not "selling" anything (it's a gratis trial) and, from past and current experience, I can tell you that college kids LOVE freebies!
Good luck today.
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