I liked it better when we were approaching support rather than resistance.
I need a photo opportunity
I want a shot at redemption
Don't want to end up a cartoon
In a cartoon graveyard
Hey Sidney, guess who's coming to dinner? That's right -- the one and only Mr. Joisy is due to swing by Minyanville to shake my hand and break some bread. We may not make it to dinner -- I just polished off a bag full of cookies -- but we'll certainly find time to chase a gaggle of Grey Geese through the Four Seasons! YO -- somebody call Tony Soprano!
The question on everybody's lips is whether Daisy is natural or whether she's "enhanced." Oops, wrong question. THE question traders are asking is whether this sell pressure is a respite (before resuming her rally) or if we've seen the near-term top. It's a good question, to be sure, and rather than make assumptions, I wanted to walk through our process of finding the answer.
First things first, today's south-side reversal caught a lot of traders leaning the wrong way (deja vu). That explains the vicious spill but it doesn't resolve the great debate. The state of the tape won't be determined by the short-term types, it's gonna be defined by the reaction of the dip buyers to the second or third sell-off (which we've yet to see). What the bulls view as confidence the bears see as complacency and, before it's all said and done, one of those critters is gonna give.
In the meantime, I'm content to leave my May puts on the sheets and my leg in the fur. It's only one appendage, mind you, and if we look back from lower levels it'll likely seem obvious. Still, I want to keep plenty of dry powder and allow for a margin of error. I'm leaning short, trading around that posture and keeping my right hand up. To each their own -- and I wanna own puts.
Watch S&P 875 and NDX 1045 (if and when) as past support will become future resistance. Through objective eyes, I'll admit that there's an underlying bid to the tape and I respect (but won't defer to) that fact. The brokers, who are a tremendous sentiment proxy, hang tough and it's hard to get too bearish while that's the case. Do I think they'll fail? Yes... but I also understand that timing is everything.
The macro tells, meanwhile, are equity negative today as the dollar is lower while crude, treasuries and gold are all higher. The structural element is still very much in play and it still feels like somebody "wants" this tape higher. Again, I'm of the view that rallies can be used to add to defined-risk May puts but I'll always try and communicate both sides of every trade. They may not be ready to roll yet... but I want to be there when they do.
Yahoo! (YHOO:Nasdaq) paints the tape tonight and officially ushers in earning's season. That's too bad -- I was getting accustomed to the lazy days and lax sessions that we've collectively navigated over the past month! The question, in my mind, is one of psychology and whether companies will get away with blaming Saddam for their poor results. Time will tell -- and we wont have to wait long to find out.
Good luck into the close!
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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