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Monday Morning Quarterback


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


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.


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