Munch and Crunch
It's raining cats and dogs!
So there we were Snoop "Hair" Dwyer, Brian Reynolds and I, chowin' down and talking shop when--all of a sudden--the door flew open and we were bum rushed by the critters! Evidently, word leaked that two of Minyanville's top professors were in the house and the menagerie wasted no time in wanting to pick their mind. Over some schnitzel and Diet Coke, a spirited conversation evolved. It went a little something like this:
Snoop: What caused this morning's bounce, Toddo, the chatter on the Hussein brothers?
Toddo: I don't think that news is influential, per se, but with the S&P tickling the 50-day moving average (first time since March), traders had itchy trigger fingers. Factor in some early pressage from the locals and voila!, the seeds of green were planted.
Daisy: What about the Eiffel Tower fire, does that mean anything?
Boo: Prolly not, I heard the French already surrendered!
Tony: You guys gotta be careful trading these headlines. Remember, there are all kinds of crosscurrents relating to our primary metric base. Hedge fund hot potato is a dangerous game.
Brian: Boo, I know you think that the level of debt and the scope of derivatives are a toxic combination. Lemme offer an analogy. There are enough nuclear bombs to blow the world up many times over but that doesn't mean they'll ever detonate. Just because it's "out there" doesn't mean it's an actionable catalyst. I'm not saying there won't be a melt...but what happens if it comes in 2007? Will you be around to capitalize?
Sammy: I agree that the timing is key. You don't have to respect Elmer and you may be right--he may be digging a hole for generations to come. But he's got an agenda, the support of global central banks and more liquidity than the Waterboy. You've gotta respect the potential for buoyancy, particularly with an election coming into view.
Brian: Yes, and as I've been saying, any structural cracks should appear in the corporate bond market before the equity market. That's what I've been keying off for a few years and it hasn't let me down yet.
Sammy: I'd take it one step further, fellas...we don't need to make those decisions right now. Just watch the support/resistance levels as a backdrop with which to trade. In the uber-short term, a move through NDX 1270 will break four tops (since last Thursday). If you're an intermediate type Minyan, watch S&P 1000-1015 as the zone of contention.
Daisy: (walking over and sitting in Tony's lap) What do you think Snoops?
Tony: (blushing but saying nothing)
Toddo: Can I take that one Tone? Seems the cat, er, cow has your tongue! I've known you guys for a while and my sense is that you're both relatively constructive on the intermediate term. I see what you're looking at--and I ALWAYS want to see both sides of every trade. I'm not sure of the timing of a deeper drought--it may come after a hard pullback, retest (higher) and fail--but in my (most humble) opinion, it's inevitable.
Hoofy: So you haven't converted to Hoofyism yet. Damn!
Toddo: I'm respectful of Hoofyism, bro, but no, I haven't converted. I rented some relative longs (industrials on a breakout) against my absolute shorts but I'm staying very tight with my risk parameters (both ways). There is surely gonna be a contingent pointing to another "higher low" in the NDX and, as of now, they're right. I will remind you, however, that until S&P 1015 is taken out, a short term top is in place.
Boo: Dude, if you were a bush, you'd be a hedge!
The room let out a collective laugh and I knew, at that point, it was time to end our lunch. Brian and Tony gave each critter a hug, took a moment to stare at Fokker and then made their way out the door. The menagerie, meanwhile, pulled up a bench and sat beside my trading desk as I tickled the flicks. It was, after all, a team effort and we knew that above all else, that we were in this together.
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 email@example.com.
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