If you're truly a bear, higher prices are a gift!
If "manners maketh man" as someone said
Then he's the hero of the day
It takes a man to suffer ignorance and smile
Be yourself no matter what they say
It's an active morning in Minyanville as we prepare for the week's final session and the animal spirits are active. You can't blame them. These have been stressful times in the land of flickering ticks and there's a lot riding our decision-making process. As the collective mindset shifts its focus from the Middle East to the muddled beast, strategy and lucidity will become our staunchest allies. Let's get this party started. Right?
In this morning's corporate news, JP Morgan upped Varian Semiconductor (VSEA:Nasdaq) while punting Advanced Energy Industries (AEIS:Nasdaq), Prudential downgraded Wal-Mart (WMT:NYSE), Morgan Stanley raised Juniper Networks (JNPR:Nasdaq) numbers and lowered Schering-Plough (SGP:NYSE) numbers, Goldman pushed Nike (NKE:NYSE), CS First Boston raised numbers Brocade Communications (BRCD:Nasdaq), First Albany downgraded Microsoft (MSFT:Nasdaq), the mighty Bear lowered numbers Motorola (MOT:NYSE) and Ericsson (ERICY:Nasdaq) while Dain booted Lam Research (LRCX:Nasdaq) and Applied Materials (AMAT:Nasdaq).
The first batch of this morning's economics numbers were released and both the producer price index and retail sales were stronger than expected. The equity futures have found some early zest and bonds took a beat down on the report. Next up, the University of Michigan Confidence number (expected at 79) and the whispers on the street are for a better release.
Our Minxy technical levels held their ground yesterday and S&P 860/NDX 1020 remain the downside lines in the sand. On the upside, S&P 875-880 and NDX 1045 are first resistance although, looking at these futures, those might be in jeopardy on the opening bell. Through there, S&P 890 (905) and NDX 1060 (1090) are the next zones to monitor.
I've made a ton of calls this morning (before the release) and there's a growing consensus that we'll see one more spurt higher before a (potential) roll over. We discussed the potential for this yesterday and it's been factored into my chosen strategy. As my friend Grandpa Neil points out, the last time the VXN (Nasdaq volatility) was this low (40) was March 2002. It proceeded to drop a tad more before reversing higher and ticking north of 70. And yes, the low readings that March coincided with a rather substantial trading top in the indices.
The dollar has been firm all morning (the Swiss safety unwind is on), bonds, as discussed, are heavy, crude is indicated lower and gold has lost some luster. These inputs are equity friendly and must be factored into our trading thesis. I'm also wanna watch the brokers such as Goldman Sachs (GS:NYSE), retailers (Wal-Mart), semis (wedge formation), Microsoft, IBM (IBM:NYSE) and our breadth.
Am I fading the opening? I'll likely make some disciplined picks on my May puts and then implement a slightly wider scale out of respect for the macro influences. We've got a week full of earnings approaching and, as such, we can't rule out posturing (either way) in front of those numbers. As it stands, my strategy remains in tact and I want to use the low volatility levels to accumulate short side exposure (puts) into stiff lifts. Hey, not always right, but always honest.
Good luck today.
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 email@example.com.
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