A little kiss of reality never hurts!
It's all right if you love me
It's all right if you don't
I'm not afraid of you running away
Honey, I get the feeling you won't
Well, alrightee then, it's Hump Day in Minyanville and it's rainng cats and dogs! I suppose we should expect nothing less in a city of critters but it's still pretty wet. As this morning's opening post was more abstract than usual, let's cut through the fluff and talk 'bout some stuff.
Morgan Stanley (MWD:NYSE) reported this morning and while the bottom line beat by 3 pennies (after charges), the top line (revs) was light. After the run that these brokers have had (see the tread marks), it'll be interesting to see how much shrug these names have left. We touched on the fact that when the financials run "into" earnings, they're often vulnerable to profit taking. As they're the horse to the market's cart, this complex warrants a watchful eye.
In sentiment land, the Investor's Intelligence survey was released and the tilted scale continues. Bulls came in at 60.2% (vs. 58.7% last) while the lonely bears registered a 16.1% reading (vs. 16.3% last). As Jason pointed out last week, these are ominous readings but NOT timing devices. Of note is that the rationalization crowd is out saying that these sentiment readings don't matter anymore. As we learned in the past few years, it's always a new paradigm -- until it isn't.
Last night, as hypocrite Toddo spent a few hours scanning the charts, the drug index jumped out and bit me. I've been schnitzeling around in this group and playing the rotation game (currently two-sided) but, as I pulled back the DRG index three years, I noted the spiky bottoms put in at DRG 350. The index spiked to 350 yesterday (before bumping it's keppe), so it's something to keep half an eye on as we trudge ahead.
Where do I stand? Right here, thank you very much. There are a lot of vicious crosscurrents in play -- technically, structurally, psychologically and fundamentally -- and I'm in stick, move, grind and find mode. I've long offered that trading is a cyclical mojo game and while I'm actively trading, I've left the costumes in the closet for now. I'll always offer my honest view -- this you know -- but it's gonna be a naked take for now.
Watch the breadth, the financials (huge), the semicaps (sentiment), the Generals (GE and GM), energy and pharma (S&P weighting) and Microsoft (MSFT:Nasdaq) (battleground). In level land, S&P 1000 is a psychologically support, S&P 975 trendline support and NDX 1200 (1175) is tech support. On the flip side, yesterday's highs can be used for the S's while the notorious exhaustion high still stands as resistance at NDX 1265ish. Finally, remember that expiration still looms and, as a function of the negative gamma, volatility may be exacerbated both ways.
Gotta hop, Minyans -- kick some proverbial tail 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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