Sniffy the Dog
Define your time frame and trade to win!
The Minx springs to life and Hump Day in Minyanville is underway. The focus on every trading desk? The center of Baghdad, naturally, and it's diverting attention away from the Minx. We must surely monitor the developments (psychology) but, please, don't lose sight of our mission -- we've got a battle of our own brewing.
The early test lower (thus far) held our technical levels and you can almost see the tension in the air. They "want" to trade higher -- the breadth in the NYSE is steadily improving, the banks found bids below and they seemingly can't get them down. There are a handful of ways for you to approach this action and what you choose -- and how you choose to do it -- depends on your individual trading style.
While the pre-market futures searched for her lithium, I walked through the potential outcomes today -- stiff lift, moderate rally, wax and wane, marginally down, meltage -- and devised my strategy. I see all sides of the coin and, as such, I'll widen the scales a bit on my put purchases. As it stands, however, I do want to use rallies as an opportunity to add cheap May puts.
There's been a lot of chatter regarding the VIX as it violates 30 and I wanted to quickly touch base on it. Yes, it appears as if the chart is breaking down and yes, there's a chance it's searching for a new trading range. I would remind you, however, that each and every time we thought the VIX didn't matter, we end up looking back and realize that it did.
Finally, the Investors Intelligence bull/bear ratio came out this morning and the bulls have increased to 51.1 (vs. 47.2), the bears have decreased to 31.1 (from 34.8) and the correction camp remained basically unchanged. While this isn't an actionable day-trading tool, it's yet another "flag" that we'll point to (in hindsight) should the market get smacked.
Do I think it does? Yes, I most certainly do. Can I tell you from what level? No, I'm sorry I can't... but I'll always tell you what I'm doing and these are my current thoughts. While we all want to catch every move, it's unrealistic to think we can. I continue to sense that the market is edging towards a compelling set up (lower) and while I can see a continuation higher, I'm gonna be very tight with my approach.
Keep an eye on bonds (slipping) and the dollar (flat) as we continue to find our way through today's muck. And 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 email@example.com.
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