The Story of Carrie and Big
Fare thee well into thy bell!
The fortunes of fables are able to sing the song
Now witness the quickness with which we get along
To sing the blues you've got to live the tunes
And carry on
The afternoon slap continues to chap as the critters debate which way they will snap. Pavarotti, suave as he is, has had his share of issues today as the tenor continues to struggle. Still, and on the heels of the biotech trek, the bulls remain hopeful that the last coupla sessions are a simple rest before the zest. We've seen delayed reactions before and the folks from Matador City are praying for that slow motion potion.
I've been dancin' to the big picture blues for a while and it's produced its fair share of wins, losses and nothing dones. I'm now balancing both sides of the minxy mindmeld as I wrap my paws around the near-term cause. There's a case to be made both ways--for now--but the deciding factor will seemingly be the "carry trade" and the agendas of those who have it on. That, in a nutshell, is why the psychology surrounding rates is more important than rates itself. If this puppy starts to unwind, it could create quite the stir during the crimson blur.
With that said, I see what the bulls are looking at. S&P 1150/60 and NDX 1500/10 can only withstand so much pressure before finally giving way to an upside fray. If (and this is a huge if) we breakout like a school girl, tight corporate spreads, better than expected earnings and the "rolling" correction (SOX/BKX) will be viewed as catalysts. That trade, if and when, would set the stage for a final capitulation (read: blow off) for all those leaning against these potentially stale levels. And yes, it could happen.
Given my well-documented concerns, Hoofy has to understand the dangers involved in playing such a strategy. All of the guides that have been deemed defunct will eventually trap a LOT of bulls. And while I'll again circle back to the itinerary of the "carry trade" holders, my sense is that a genuine gut check will occur before, rather than after, the election. Why? Simple--it is the path of maximum frustration.
I nibbled on some cheapie QQQ calls as an upside hedge for if (again, big if) we "go," it'll likely be fierce. I've also "traded" around my core silver position as it seems as if some longs are still trapped. It's a difficult juncture so don't beat yourself up for not seeing the crystal ball. The smarter (and healthier) course of action is to incorporate the crosscurrents and look for a strategy that is an extension of your view (while allowing for a margin for error).
As always, I hope this finds you well.
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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