Around the Monday Horn
Hit 'em where they aint!
My "better late than never" take on Friday's payroll data? I was sitting on a plane when I saw the number and muttered to myself "Oofa--this is gonna leave a mark." As the pre-market futes giddily skipped ahead, the reason assigned to the pale green rhyme was that Elmer would continue to accomodate (read: perhaps he'll lighten up on the tightening).
There should be no confusion on this point--the Fed will do whatever they can to allow for legitimate growth to emerge and ketchup with current prices. As my fellow professors so aptly transcribed in my absence, there are two simultaneous forces in play here: inflation in input costs (weaker dollar) and deflation in income and job growth.
Mr. Webster would humbly point you to his definition of "Stagflation" as a proper context of this dilemma.
Speaking of Jobs...
The soap opera that is Morgan Stanley (MWD) got a bit jucier over the weekend as chatter of a $75 billion bid by HSBC made the rounds. This shouldn't come as a shocker given the confluence of events, particularly when we factor in the juxtoposition of the greenback.
Stateside assets, be it real estate or dollar-denominated financial conglomerates, are relatively more attractive after a 30%+ haircut in our once noble currency. These rumors have been around for a while but given the current focus on Mother Morgan (and the "need" to maximize shareholder value), I would expect this name to remain in the rumortrage game for the foreseeable future.
Oinks R' Us...
With all the focus on the piggies, it's hard not to notice the 7.5% sizzle (BKX) since the start of our new year. We've long believed that this sector held the keys to the broader vault as 1) the financials are the highest sector weighting in the S&P, 2) they remain a proxy for a wide array of potentially problematic issues (flattening yield curve, accounting issues, derivative contagion). We flagged the dandruff in Citigroup (C) a few weeks back but Hoofy still got soap in his eyes. He would be wise to watch XBD 144 (brokers) if he hopes to avoid a repeat performance.
Speaking of levels...
I offered on Thursday that my humble "best guess" was a retest of resistance at S&P 1200 and, if the ducks aligned, that would be a decent risk/reward for Boo. I'm unsure if S&P 1190 qualifies as a retest (if it does, Snapper may be in trouble) but we can still watch the big picture as a series of little pictures as we trudge ahead. Along those lines, please join me in monitoring DJIA 10,378 (200-day and multiple support), S&P 1150-60 (200-day and '04 acne that held the first "sorta" test last week), XBD 144 (yes, it's important enough to repeat), BKX 95 (99), NDX 1482 (new resistance), TRAN 3674 (50-day) and CYC 740. Naturally, the breadth (single best intraday tell), macro movements (dollar, crude, fixed income) and intramarket rotations will also remain squarely on our radar.
A whole new level...
Congrats to Minyans Mark Bloudaek, Biren Patel and Brendan Haley for taking the top three spots on the March Madness Minyan Bracket heading into tonight's final. The winner will have his choice of a number of snazzy critter gifts while the "non-winners" (there are NO losers) will have the option to make a donation of their choice to the Ruby Peck Foundation for Children's Education. As I'm officially out, I'm gonna make my gesture today in the form of a $1000 check. Please know that there is no such thing as too small (or too big) of a gesture. To each our own, and it's all good!
Is it really all good?
The question on the lips of the critters is whether we're looking at a legitimate wall of worry. Between the Amer Int'l Group (AIG) scare, General Motor's (GM) hair, Aunt Fannie's (FNM) affair and Elmer's huge prayer, it's easy to see why some wanna take the other side of the recent slide. While certain traditional measures are oversold and others bang a decidedly downbeat drum, I think it's important to maintain perspective.
In the context of a range bound tape-an environment that we've been conditioned to accept-buying dips and selling blips has been the money trade. We must remember, however, that the script sometimes writes itself independent of traditional oscillators or technical levels. Old school Minyans will remember the Russian Ruble and Thai Bhat as important lessons in the caveats of assumptive trading. We may not be there yet but, given the smoke that seems to be spreading through certain sectors, it never hurts to hear a reminder.
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 firstname.lastname@example.org.
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