Reinventing the Wheel
I haven't taken a beating like that since I put a banana in my pants and turned the monkey loose!
The wheel is turning and you can't slow down,
You can't let go and you can't hold on,
You can't go back and you can't stand still,
If the thunder don't get you then the lightning will.
Good morning and welcome back to the scorning. The Hump was a dump for the Matador Crowd after starting the day feeling brazen and proud. They figured that Tuesday had turned a new leaf but they sat there last night in pure disbelief. "What happened to all of the bids that we saw?" asked Hoofy the bull with his jaw on the floor, "by the time the bell chimed and we hit the back door, the bears had unleashed a beating hardcore!" Will Boo turn the screws and finish the job or is it his turn to be lynched by the mob? We'll know soon enough as we get set to thrill and ready ourselves for a roll through the 'Ville!
The late Tuesday Snapper caught traders nappin' as buy programs and complacency combined to create one of the more vicious lifts in recent memory. The mainstream media scrambled to assign reason for the upside rhyme but the effort was futile. The simple truth is that there was a collective agenda to buy the FOMC "catalyst" and the quickly improving landscape sucked in the blind believers and bandwagon bulls. By the end of the session, optimism overflowed on the airwaves and the popular consensus was that we saw a "tradable low."
While yesterday morning was quiet and difficult to game, our tea leaves weren't supportive of the upside follow through. Breadth was bunk, the semis opened heavy on the heels of ASML (the supply was evident on Tuesday as well), the financials were frazzled and a multitude of resistance levels rested overhead. Soon thereafter, NDX 1482 (200-day) and XBD 144 (our inflection point for the brokers) gave way and the rout was on in the city of critters. Hindsight is 20/20, we know, but the crumpling compass was chronicled on the Buzz and offered quiet clues before Boo lit the fuse.
Last night, while enjoying a stellar Succofest, I was talking tape with CBOE legend Mark Kellner and his fantastic son Asher. I offered that yesterday afternoon was the "easy trade" for those who managed to skirt through the previously painful equity enema. With an afternoon bogie to point to and with the internals getting worse, the trannies and semis melting, fresh smoke in the financial arena (AIG) and more than a few bears already squeezed out, the chances for Snapper diminished with each passing tick.
We now arrive at a tweener of a Thursday as we edge through the expiration week. On the one paw, we have downside momentum, a tape that's no longer oversold, structural smoke (still), fugly action, nosty internals and a growing acceptance that the economy isn't as snazzy as some might believe. On the other hoof, the NDX is at the bottom of the recent range (1460), S&P 1160 remains staunch support until proven otherwise and we saw a nifty pick-up in put buying into the close. And of course, we have a three-headed monster tomorrow in expiration, Citigroup (C) and General Electric (GE).
I offered early yesterday that my "best guess" was to fade (read: sell) rallies and that remains my humble assertion. If we breach this level in the NDX, the "churn range" that we've slumbered through for the past month will be our new ceiling (and risk-definition will get much tighter). In the interim, any semblance of strength today will keep us in tweener mode (read: not an optimal set-up) and the fate of the tape will likely rest with tomorrow's tri-fecta.
Keep an eye on the internals, respect the undertow of expiration and, above all else, maintain your discipline. Pressers and guessers have a way of weeding themselves from the Minxy fray.
Good luck today.
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