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Tough Love

By

Whataya mean -- Tony's married?

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We are young
Heartache to heartache we stand
No promises, no demands
Love is a battlefield


(Pat Benatar)


It seems like only yesterday. Trends were discernable, metrics were tradable and Martin was serenading my old firm with help from Minxy Jill. The kid actually played a mean guitar but, unfortunately, she couldn't carry a tune if it had handles! While Martin is still bummed that she's gone (NOT!), Mattison Reinecke is stoked as he correctly nailed her (name) and won a free Minyanville tee. Wasabi!

Meanwhile, back at the ranch, Fokker and I are chowing cheeseburgers and walking though our current risk profile. I'll be the first to tell you that I was unsure if Boo could pull off the fade trade hat trick but, thus far, he's held his own. Either way, this morning was a real-time example of the importance of having a strategy mapped out before stepping on the playing field. While I didn't know the timing (still don't), I used price to my advantage while trading around a thesis.

Boo's biggest concern, other than finding his miracle for this summer's Dead show, is the continued traction in the financials. Yes, we had the same conversation on Wednesday afternoon right before they got waxed but, still, it warrants a mention. The BKX 738-743 zone is uber-important on a technical basis as the 200-day moving average and April trendline converge. Coincidently, the brokerage index (XBD) is flirting with it's 200-day support at 398.

I've been consistent with my big picture (bearish) concerns but, as I discussed this morning, I try to force myself to remain open-minded on a trading basis. While we can't defer to the price action (that would be reactive), we must respect the powers that be and factor them into our process. Recently, the structural metric has been driving the price action and, as a result, psychology steadily shifted to the bull camp. That's created a self-fulfilling bid to the tape but, as Hoofy learned this week, that'll work until it doesn't.

Earnings will take center stage next week and, as a result, the "balance" among our four trading legs might shift. I can't imagine that corporate America will have too much visibility but, then again, those very doubts open the door for a positive surprise. Don't get me wrong, I'm still hanging with Boo -- I'm just trying to see all sides of the trade before it happens.

The fun and games will kick off Monday with Bank of America (BAC:NYSE), Citigroup (C:NYSE), Fannie Mae (FNM:NYSE), FleetBoston (FBF:NYSE), Accenture (ACN:NYSE), Eaton (ETN:NYSE), New York Times (NYT:NYSE), IBM (IBM:NYSE) and Novellus (NVLS:Nasdaq) (among others). Bank One (ONE:NYSE), Check Point Software (CHKP:Nasdaq), GM (GM:NYSE), Gannett (GCI:NYSE), Johnson & Johnson (JNJ:NYSE), Mellon Financial (MEL:NYSE), Parker Hannifin (PH:NYSE), Wells Fargo (WFC:NYSE), U.S. Bancorp (USB:NYSE), Allstate (ALL:NYSE), Amdocs (DOX:NYSE), Cadence Design Systems (CDN:NYSE), CDW Computer Centers (CDWC:Nasdaq), Celestica (CLS:NYSE), Intel (INTC:Nasdaq), Johnson Controls (JCI:NYSE), Linear Technology (LLTC:Nasdaq), Microsoft (MSFT:Nasdaq), Motorola (MOT:NYSE), Teradyne (TER:NYSE) and Texas Instruments (TXN:NYSE) will highlight Tuesday's parade and, among other notables, Bank of New York (BK:NYSE), Caterpillar (CAT:NYSE), Coca-Cola (KO:NYSE), EMC (EMC:NYSE), Ford (F:NYSE), J.P. Morgan Chase (JPM:NYSE), Merrill Lynch (MER:NYSE), UnitedHealth Group (UNH:NYSE), Apple (AAPL:Nasdaq), Broadcom (BRCM:Nasdaq), Sun Microsystems (SUNW:Nasdaq), Biogen (BGEN:Nasdaq), Colgate-Palmolive (CL:NYSE), Cypress Semiconductor (CY:NYSE), Delta Air Lines (DAL:NYSE), Honeywell (HON:NYSE), Nokia (NOK:NYSE), PepsiCo (PEP:NYSE), Sears (S:NYSE), American Express (AXP:NYSE), United Technologies (UTX:NYSE), KLA-Tencor (KLAC:Nasdaq) and Xilinx (XLNX:Nasdaq) will follow in the days thereafter. In other words, enjoy your downtime this weekend, friends, we're gonna have our hands full!

Today's tape? Middle of the road right now and, since this morning's flurry, I've shifted into auto pilot. I'm scaling into more puts in names that are up and taking partial profits in the issues that are down. All the while, my bias continues to be to the short side as we wade our way through this considerable muck. Tick tock, baby, we're almost there.

As always, I hope this finds you well.

position in c, fnm, msft, jpm, unh
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