By Todd Harrison May 26, 2004 8:44 am
The Iron Horse? The Iron Chef!
"Was that seat hot or what? I feel like a Whopper. Turn me over, I'm done and ready. I'm afraid to look at my ass. There'll be grill marks!"
--Del Griffith Planes, Trains & Automobiles
Good morning and welcome back to the bovine snack. Yesterday's drill was a matador thrill as Hoofy ran loose and speared a quick kill. By the time he threw his stew on the oven, the minxy dynamic was huggin' and lovin'. "Point to the volume and fret as you will," the bull offered smugly from up on the hill, "but rather than sit on top of the grill, why not join my friends for a stomp through the 'Ville?" Is it just that easy to make the bears queasy or will we soon melt for the bovine so cheesy? It's Hump Day, my friends, so clear those stock jitters as we dance with our favorite Minyanville critters!
So what was yesterday all about? Is the rate environment suddenly benign? Did the bulls stumble upon newfound liquidity? Has world peace broken out? Not likely, my friends--the sudden burst of energy (while rooted with structural influences) was likely exacerbated by the hedgie road kill. With 8000 funds reactively chasing performance (and more than a few pressing the downside), the light volume hugfest reeked of a wrong sided bet. I'm admittedly using a limited sample study but I speak with alotta trading types and precious few were feelin' pa nub last night.
Hoofy will argue that upside trading phases typically begin with fur burning and, to be fair, he has a legitimate point. What makes this juncture tougher to digest is the simple fact that skeletal crews are manning the trading turrets and liquidity, by and large, is nonexistent. Think about it--you're a junior trader at Merrill Lynch when--all of a sudden--a nervous (and moody) gorilla races in to buy futures. You A) facilitate the customer and preserve the relationship B) Sell them a token amount (to "work" the balance) or C) step aside and save your arse. There was a lot of that going on yesterday and the higher (longer) the rally (lasted), the less committal precious capital became.
When we factor in the reactive nature of the tape, the paint begins to dry on the minxy picture. There are a ton--a TON--of reasons the market should trade lower which, in a perverse way, makes the upside more attractive. We know that perception is reality in our world and the two-sided dynamic has been bandied about for the last few weeks. When one side of the scale began to tip, the fence sitters became emboldened and drew in the additional flow. It doesn't always jibe (nobody said it was gonna be easy) but the onus remains on us to adapt and adhere.
We power up this morning to find previous resistance acting as initial support. As such, S&P 1108/NDX 1140/BKX 95 become intuitive backstops for the newfound bovine. The seeds of green and the fear of missing seem to be in vogue (deja vu) but at a point, the specter of the "unknown" (into the three day weekend) could quell the swell. With volume sure to emaciate, we'll have to be uber-careful as we edge into the holiday weekend. Pay careful attention to breadth (single best tell), the financials (encapsulates most fears), tech (leadership qualities) and oil (secondary psychology trigger). And play smart, Minyans--we've got a requisite respite on tap and the last thing you wanna do is pepper it with undue stress.
Good luck today.
No positions in stocks mentioned.
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