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Love Thy Neighbor

By

I could use a good waxing!

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One man caught on a barbed wire fence
One man he resist
One man washed on an empty beach
One man betrayed with a kiss


(U2)


The grifty drift continues it's minxy lift and all eyes are now glued to our technical levels. When it's this slow and thin, legitimate topics of conversation trade at a premium and our much discussed zone is no exception. Heck, after 11 weeks of option leaks, you can't blame traders for having a little range rage!

So is this...it? Do the SOX and Dow Jones breakouts portend an end of summer stampede? Today's signals are clearly more bullish than bearish--there's no denying that--BUT there are a few elements of concern. The volume is anemic and, as we know, that's the qualifier on any technical pattern. Whenever you "confirm" a signal, you always wanna see a surge in amount of shares traded.

It's also worth noting the absolute meltage in the volatility indices. The VIX has broken 20 (new low for the year) while the VXN (NASDAQ VIX) is getting waxed like a Brazilian bikini (down 10%). Low vols (complacency) historically paint an ominous picture for the broader averages. They can certainly drip lower, but it's a fairly important observation nonetheless.

Finally, the financials aren't confirming today's rally (yet) and while Hoofy would argue that it's a simple rotation, I can't overstate the importance of this group. They don't have to lead the market, per se, but they'll certainly act as a lead weight if they stumble and fall. Please pay particular attention to this complex regardless of what you're trading.

A curious Minyan emailed me to ask if I was suffering from selective eyesight. That's a common condition in the trading community as we sometimes have a tendency to focus on elements that support our individual view. I don't believe that to be the case but, as always, I'm open-minded to constructive feedback. As it stands, there's only been one winner this summer and his name is Sammy.

As discussed earlier, I am respectful of the market forces and have augmented my put positions (both near- and long-term) with a smattering of (cheapie) calls. As a function of the vol drippage, I opted to hedge myself this way and keep my downside exposure. The long side of my ledger is skewed to the semiconductor and industrial space (fresh breakouts) and my shorts are centered in the financials (for the most part). I'm willing to play the game but I wanna be there when the music stops. It is, in my opinion, a matter of "when" rather than "if."

That's about all I have to say about that, Forrest. I hope you're all having a fine day.
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No positions in stocks mentioned.

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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views 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 individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles 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. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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