Hittin' the Hole!
Where's the love?
A close friend who is the strategist for a top-tier broker once told me that "where he stands is a function of where he sits." While that vibe reads relatively innocuous at first glance, it belies a troubling trend in play today.
The fallout from the bubble seemed to spur a seismic shift in the collective thinking of the analyst community. Yet, despite the regulatory reform and front page headlines, the financial fabric remains bifurcated.
I discussed this dynamic with John at last night's Succofest and we noted disparity between the "haves" and "have nots." There is a steady stream of information designed to shape the collective thought and induce commission payers.
The goal of Minyanville is to play salmon to that stream and provoke thought regardless of your position on the powerful totem pole.
We noted the Karachi Krunch in yesterday's column and we should keep the emerging markets on our radar. As we toggle between the 'flations-inflation in input costs and deflation in earnings power-the stagflationary reality will manifest in a number of asset classes and marketplaces.
One of the reasons I monitor the greenback so closely is that it serves as a liquidity proxy for the reflation effort. I remain of the view that we can have buoyancy across the board (soy beans, metals, Brazil, crude, schnitzel, equities) coupled with a devalued dollar or a stronger currency and a collective pffft!
Pick your poison, Elmer, and please be careful.
The Hairy Affair...
With tensions quite high and earnings on tap, the bulls will attempt to avoid the bear trap. I mentioned to Collins late yesterday that I was starting to get an old familiar feeling and I wanted to share the vibes as we double down on our cup of jo.
We've seen heavy selling on the way down following by a light volume lift back to resistance. That's traditionally trouble although Hoofy is quick to explain the absence of participation (snazzy weather, hand-sitting in front of earnings).
Still, with the structural hair out there (General Motors (GM), Amer Int'l (AIG), Aunt Fannie (FNM))-and the delicate dominos that separate them-we must remain diligent in our risk assimilation. Toss in the conditioned dip shtick, touting teletubbies, pre-teen volatilities and "obvious" support and the path of maximum frustration seems to run through Red Dye.
Levels, levels everywhere...
Hoofy has a long road ahead of him that begins with the NDX 200-day (1482) and extends through NDX 1500. A snapshot of a six month chart shows a classic "churn" under the latter level.
With earnings on tap, we must respect that catalysts loom that can shift psychology on a dime. Be that as it may-and it may be important-a ton of technical inflections are nestled in our midst.
Please keep XBD 144, SOX 420, S&P 1200 and BKX 99 on your radar. If we shtick starts to slip, NDX 1460 would be the first sign of trouble while S&P 1160 (50) will be the "back to the wall" support for the Matador Crowd. Also, please keep in mind that the bungee chord support (as a function of the oversold conditions) has been largely alleviated by this recent run.
Substance and Style...
As most Minyans know, Boo has patiently waited for S&P 1200 as he wanted to see non-confirmations accompany a low volume lift. While he's still staring at that level, my sense (from talking to him) is that he may look to scale into some short-side exposure and set his stop above S&P 1205.
There are alotta ways to skin a potato, he knows, and his style may not be suitable for many Minyans. As always, however, he's happy to share his process (both thought and trading) with the hopes that he adds value to your own.
Good luck today, Minyans, and hit 'em where they ain't!
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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