The Morning Cup of Jo
I just hate it when Boo crashes the party!
In my younger days, I was told if you play "Stairway to Heaven" backwards there's a hidden message in the underlying garble. Following along that same theme, I wonder if there was a hidden message in yesterday's music when Boo started playing Hoofy's "Bust a Move" and "Pump up the Volume" backwards.
It's almost hard to believe that only a week ago yesterday Hoofy was jammin' to "Let's get this party started" and yesterday afternoon Boo busted out and started playing the same song. (A gap higher, a run for resistance, then WHAM, right in the kisser just as Hoofy and the boys were countin' their money.) Seem somewhat familiar, except backwards? "There's a whole lotta shakin' goin' on;" and let me tell ya, that's not what the bulls in the corral wanted to see as they were lining up to bust out of the gate.
Actually, for the first couple of hours of trading it looked as if Hoofy never lost his seat over the last couple of weeks. It was almost as if he knew the market was preparing to rally the whole time and just wanted to suck in a few more of Boo's friends before takin' off. Looking back, yesterday morning was a fantastic start to a potential, technically powerful, follow-through day. As the markets gapped higher at the open, the first hour run rate on the NYSE showed an impending 1.9B share plus day. Excellent for the bulls, or was it?
By noon Hoofy couldn't push any higher and the rate dropped back to about average. By 2:15 P.M. Boo stepped in and took over this little Jam session. Snapper, with a tear rollin' down his shell, put the sax back in the case and sat on the chair next to Hoofy as Boo started doin' his own Jig.
Can't ya just see it? It's like Baloo dancin' with Mowgli to "Bear Necessities" In Disney's "The Jungle Book," except you'd have our big hairy fat bottom bear shakin' his backside right in front of all the other critters.
Nonetheless, however bad things seemed to be in the afternoon, believe it or not, yesterday was still technically indeterminate. Most of the major and the secondary indices still held their respective ground. Don't get me wrong, it was a huge feather in Boo's cap and this is definitely not how new potential bull rally's get started - with large afternoon sell offs. However, the SPX is "Still holdin' on."
Which brings me to my next point, "What if the SPX does finally break its 200-DMA at 1,080? Will this become the straw that finally broke the camel's back?"
Let's look at what we know. The markets are in a downtrend with the technical possibility of a countertrend rally. There are 3 major converging resistance points just above and Hoofy can't seem to get his act together. The majors have all broken their IT up-trends and March lows. So let me ask the question again, "What could be the ramifications of the SPX finally breaking the 200-DMA?"
I believe that since the SPX has tested the 200-DMA (three times), a break now could become a self-fulfilling prophecy. Todd and Succo have been talking quite a bit over the last week about Gamma and its effect going into this weekends "Option Funeral." Let's, for one second, forget about the present gamma pressure, which is definitely a major factor in flip-flopping the markets all over the board, and focus on what might come to fruition if this level is broken.
Why is the 200-DMA so important? You can think of it this way... when the index is at the 200-DMA there are 200 trading days worth of assets who, on average, own the market at higher levels. Many major institutional investors, as well as individual, place stops just below this level because of the long time understanding that this is the level in which hoofs turn to paws. Now think about the amount of ST money in Hedge Funds who play this level as an entry point for a possible market bounce and are not willing to stick around if something should go wrong.
Looking at the possibilities can be quite frightening. This is the level where selling begets selling. I'm not saying it will be an absolute freefall, but being the last index left toein' the line, things could get ugly fast!!!
Until next time...
Bonus... Lyrics from a song called "Huricane" written by a very dear friend of mine, Andy Kuncl. I was listening to this song this morning while writing this 'Jo.'
Interested in the song, log onto http://www.missingstring.com/
I'm movin' fast and pickup speed
And I'm not sure what I'm gonna need
I might eat all of your property
I might eat everything you can offer me
Cause I, I'm in this state
And I hope you can relate
It might take more of me
It might take more of you
But beware there maybe a hurricane, passin' through
The information on this website solely=
reflects the analysis of or opinion about the performance of securities an=
d financial markets by the writers whose articles appear on the site. The v=
iews expressed by the writers are not necessarily the views of Minyanville =
Media, Inc. or members of its management. Nothing contained on the website =
is intended to constitute a recommendation or advice addressed to an indivi=
dual investor or category of investors to purchase, sell or hold any securi=
ty, or to take any action with respect to the prospective movement of the s=
ecurities markets or to solicit the purchase or sale of any security. Any i=
nvestment decisions must be made by the reader either individually or in co=
nsultation with his or her investment professional. Minyanville writers and=
staff may trade or hold positions in securities that are discussed in arti=
cles appearing on the website. Writers of articles are required to disclose=
whether they have a position in any stock or fund discussed in an article,=
but are not permitted to disclose the size or direction of the position. N=
othing on this website is intended to solicit business of any kind for a wr=
iter's business or fund. Minyanville management and staff as well as co=
ntributing writers will not respond to emails or other communications reque=
sting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.= span>
Daily Recap Newsletter