The Right Stuff
Just call me Carmello!
I've paid my dues, time after time
I've done my sentence but committed no crime
And bad mistakes, I've made a few
I've had my share of sand kicked in my face
But I've come through
Alright Minyans, please indulge me for a moment. As a proud graduate ('91), I've gotta give it up to Coach Boeheim and his crew for gutting out last night's game. It was a bit closer than I would have liked at the end (wow!), but they came through big time. This young squad won it for guys like Rafael Addison, Dave Bing, Roosevelt Bouie, Derrick Coleman, Sherman Douglas, Lawrence Moten, Louis Orr, Billy Owens, Leo Rautins, Danny Schayes, Rony Seikaly, Stevie Thompson, John Wallace and Pearl Washington. And they won it for the students and fans. Syracuse University, 2003 NCAA Basketball Champions. Wasabi!
It was a very exciting game but, as is often the case, we must put our emotions on hold and focus on the task at hand. Chatter that Saddam & Co. were taken out last night has given the pre-market futes some early zing and, with yesterday's nasty reversal fresh in our memories, it will be interesting to see how traders approach the gap higher. One thing for certain, these nuances are fraught with two-sided risk so stay tight and on your toes!
In company specific news, RF Micro Devices (RFMD:Nasdaq) and Microchip Technology (MCHP:Nasdaq) preannounced last night; Morgan Stanley booted Sony (SNE:NYSE) and cut numbers on Disney (DIS:NYSE); UBS Warburg downed Marvell Technology Group (MRVL:Nasdaq) and Mellon Financial (MEL:NYSE) while upping Broadcom (BRCM:Nasdaq); Lehman was cautious on BRCM (somebody call Duke & Duke!); Pru cut numbers in Novellus Systems (NVLS:Nasdaq) and Lam Research (LRCX:Nasdaq); JP Morgan punted Cablevision (CVC:NYSE) and CS First Boston upgraded McDonald's (MCD:NYSE).
As Snapper said last night, technical beauty is in the eye of the beholder and despite the nasty late-day slippage, there's a bull case in chartland. The S&P and NDX both "filled" gaps into the close and IF (big if) they can hold and go, it will be viewed (in hindsight) as a half step back before a full step forward. On the other side of the coin, that was the type of action that can plant a seed of doubt in the mindset of the trading masses. If we factor in the extended stochastics (financials) and the candles that are lighting up my screens, the mojo MAY have shifted somewhat yesterday. Stay tuned.
The "hope trade" has run wild the last few weeks and gaming its ultimate exhaustion is guess work. As such, I've been looking for stocks with twisty upside stochastics (extended) and legging into May puts. When (if) I get the upside itch, I'll identify the leadership sector and delta hedge with E.T.F's (QQQ or SPY). This lets me set up gamma when needed, define my risk and use my (humble) stock picking skills. Sectors I've focused on are the financials, retail, consumers and tech -- so you know.
Like it or not, the market drivers right now are the news and the macro rotation trade. I miss the old days when solid technical work and fundamental research yielded a discernable edge, but we've got to play the hand we're dealt. In that respect, continue to monitor the fearsome foursome (dollar, bonds, crude, gold) as the primary trading tells. Peripheral guides should include the financials, semis, retail, IBM (IBM:NYSE), Microsoft (MSFT:Nasdaq), GM (GM:NYSE) and the breadth.
I strode to work today with both legs in my metaphorical bear costume (50% conviction on the short side) and my right hand up. I must admit that I was tempted to do the Texas two-step with yesterday's appendage but, with them closing as they did, I wanted to see the follow through. Regardless, we'll take our journey one step at a time and see how today tickles us.
I'm gonna jump and toss my trading hat back on. The market is thin, whippy and reactive but the onus is on us to adapt to her moods. Take a deep breath, remove emotion and define your risk whenever possible. If you're not seeing the ball, call time and step out of the box. If you are, stroke the ball and hit for average rather than power. Either way, remember that it's a long season and we've only just begun.
See you after the opening -- and play like an Orangeman 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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