Here comes Beeks!
Ooh, ooh that smell
Can't you smell that smell?
Ooh, ooh that smell
The smell that surrounds you
Good morning and welcome back to the flavor savor. Yesterday's action was quieter than a mouse fart but that didn't quell the curious smell. The Minyans are sniffin' for any opinion on which way the wiggle will eventually giggle. Will Hoofy push his tush through the upside bush or can Boo screw a blue bovine crew? It's a summer Thursday in Minyanville (shh!) so wake up and let's get to work!
Trading is a constant assimilation of our metrics (technicals, fundamentals, psychological & structural) and each assumes a different weighting at any given juncture. With the dog days of summer in full swing and actionable news at a premium, the technicals have become the tour de force. In a thin tape where everyone is keying on the same levels, they also tend to become self-fulfilling.
Our task at hand is to find the proper balance between the tangible inputs (constructive charts, firming economic data, earnings) and the abstract elements (manic sentiment, widespread complacency, optimistic valuations). Naturally, we must also weigh those findings against the backdrop of fiscal/monetary policy, bubble trouble (housing, debt, derivatives) and an uncertain geopolitical environment.
Are we having fun yet?
One step at a time, Mon Frere, and today's stride may be quite a ride. With the Dow Jones holding 9400 (past resistance, current support), the thin Lizzies seemingly want everyone to join the acne-fest. For that to happen, the NDX must push through 1320 and the S&P hasta stair-step above S&P 1005, 1010 and 1020. As we edge into today's muck, the Minx has a tube of Clearasil in one hand and a big 'ol club in the other!
My risk profile has been a combination of long volatility ("V") as I've got financial puts and "breakout" calls. My net delta has been negative (read: short bias) but, as you know, positive gamma gets one longer in a rising tape and shorter in a falling one. For that right, I'm paying a premium (theta) that slowly decays 24 hours a day, seven days a week.
In addition to that methodology, I've been doing some day trading to augment my exposure. For the last few days, I've been fading (read: selling) as SPY approached 101 and covering up as it slips back into the low 100's. Why have I been using that particular level as a stop? That level is a point & figure buy signal and if (big if) it triggers, it'll remove my technical edge for that particular trade.
Please remember that it's uber-thin out there and, as such, we must have our volatility antennas up. A few gorillas with an agenda can bully the tape around and when we're floating around so many actionable inflection points, that has the ability to create a feeding frenzy. Stay on your toes and please map out a strategy before you step on the field. For, if nothing else, strategy is our strength and not disaster.
Good luck today.
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