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Hump? What Hump?


Patience, cookie, patience.


"Are you saying that I put an abnormal brain into a seven and a half foot long, fifty-four inch wide GORILLA? IS THAT WHAT YOU'RE TELLING ME?"

--Dr. Frederick Frankenstein, Young Frankenstein

Good morning and welcome to the swarming. The mother chip misread her script and prices slipped as traders flipped. While there's a shot that they get whipped, Boo's pullin' out the Red Dye crypt. "It's just the icing on the cake," the bear said of the semi shake, "and while there still might be a fake, the ursine crew is wide awake!" Can Hoofy take it on the chin and argue that it's all priced in? Or is this where the pain begins much to the Matador chagrin? It's here and now so don't sit still and join us as we cruise the 'Ville!

A wise man once said that if enough people tell you that you're drunk, you'd better go lay down. I suppose that could explain why breathalyzers have started popping up all over Matador City. With Intel (INTC:NASD) and Kla-Tencor (KLAC:NASD) stumblin' in the semi space, Wamu (WM:NYSE) and Merrill (MER:NYSE) flunkin' the financial test, software flaccid and lotsa retailers shopping for customers, the front end of the bender has certainly been sobering.

The psychological catch-22 that traders are now debating is whether this was priced into current levels. I would argue that they aren't--not by a long shot--but, at the same time, will respect the fact that fundamentals may not be the current driver of the price action. We constantly discuss how our primary trading metrics assume a different weighting at different junctures. The question now becomes whether Elmer's structural support system can prop up the slop without much of a drop. Further, we must also respect expiration as it'll serve as an undertow during the rest of this week's ebb and flow.

Last night, while chatting with Succo and Professor Gula, we discussed the current dynamic and the notion of compression. I'll let John walk you through the dicey details but it has to do with the "pressing for performance" that litters the current landscape. You've got 8000 hedgies, countless mutual funds and newbie day traders all chasing the ever-decreasing tail of performance (i.e.selling cheap vol to capture marginal returns). There will eventually be a point of maximum tension which will, in turn, serve as an inflection point for volatility. I can't tell you when it will happen but it's clearly only a matter of time.

First things first, we've got an ornery Minx on our hands and alotta traders with their fingers on the trigger. We know that some folks (Hoofy included) were trading from the long side and using Monday's low as a stop. Those levels (S&P 1107 and NDX 1418) are being probed pre-opening and remain on the radar. Should we slip through that zone, S&P 1102 (200-day) and 1080 ('04 low) will be the next technical price objectives. Other points of interest include DXY 88 (dollar shoulder), Russell 651-4 (50/200-day), gold $400/silver $6.25-30 (held and bounced) and SOX 434 ('04 low).

We power up this stuffed up pup to find Asia chewin' on some spoiled sushi, Europe under peripheral pressure, telecom better bid (Juniper (JNPR:NASD)), most of our stochastics twisty (potentially bullish) and a whole heckuva lotta earnings hitting the wires as we speak. It promises to be noisy and whippy, Minyans, so trade smart and remember that discipline is the common denominator of any successful trading strategy.

Good luck today.


position in klac

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

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