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Monday Morning Quarterback

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...while everyone is looking past Labor Day for the next leg for the tape, the direction we establish this week will likely carry forward.

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Right outside this lazy summer home
You ain't got time to call your soul a critic, no

(Grateful Dead)



Good morning and welcome back to the summer slack. It's the last week of August and staffs are thin as players get their vacation days in. With alotta professionals slated for beach days and family stays, liquidity will likely wane as we wade towards Labor Day. While there aren't many folks expecting volatility during these lazy days, that very fact, coupled with skeletal ranks across the Street, makes movement entirely more likely. Which way will the wind blow with September a scant four sessions away? Only time will tell, my friends, and the action itself might be telling.

As Pepe prepared to leave on Friday, he popped into my office for some knuckles and a chuckle. We discussed weekend plans and briefly cast our tired eyes ahead. He said something that I thought was quite interesting, something I would like to share with ye faithful. He opined that while everyone is looking past Labor Day for the next leg for the tape, the direction we establish this week will likely carry forward. In other words, the tape rarely runs the way most believe it will when folks expect it to. So, in that vein, we'll both be on high alert as we ready for the long weekend.

As Minyans know, I slipped into my bear costume (two legs, or 50% conviction on the short side) on August 17th as the S&P tickled 1300 and the CRB was under attack. The thought process was largely predicated on the notion that asset classes have adopted a monolithic personality and, if commodities faltered, equities would be dragged down in kind. I initially slapped on a BKX 114 stop loss (all-time high for the piggies) but have since tightened that try to above my entry level. I enter this week with that in mind, carefully monitoring the CRB (which remains above the 5-year trendline but below its 200-day moving average).

There is, of course, the other side of that trade. As I opined last week, Hoofy is carefully watching the housing sector for clues to that fuse. With the HGX ensconced in a pennant formation--and many of these stocks down 50% into this latest spate of horrible news--the reaction to news (rather than news itself) could prove quite telling. Minyan Jamie Lissette aptly captured the current conundrum when he asked me, late Friday, whether this complex was similar to General Motors at $18 (when the wheels were seemingly falling off the station wagon). That's food for thought for those looking to pile on and pile in.

IF (and that's a big if) there's an upside trade in our midst, I would look for a few characteristics to unfold. The CRB must hold. the dollar would likely fold and the banks, which have exhibited sticky green tendencies, will continue to shrug off the mounting evidence of collateral damage. It's a sticky situation to say the least, but timing, as we know, is promised to no trader. That rings particularly true in a week that finds the first team at the beach and month-end in our midst. Discipline over conviction, Minyans, as we try to shake some shekels from this seasonal tree.

Good luck today.


R.P.

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Position in financials

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.

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