The Rogaine Stain
Cisco and the BKX are our tells du jour!
Please be advised that Toddo is still experiencing technical difficulties, but thanks to snail mail, we got his morning entry.... hope to see him online soon!!
Good morning and welcome back the hair scare. A balding Boo had little to do for the better part of this summer zoo. As the bulls played and Daisy got...paid, the ursine stayed in their underground cave. After a long hibernation of grumpy duration, the bears have emerged from Terrapin Station. Is this the beginning of Hoofy's demise or a simple burp in a much bigger rise? It's Hump Day in the city of critters, so saddle up Sally...we've got work to do.
We often talk about the juxtaposition of field position and psychology. Good news (not great) is typically sold in an extended tape while bad news (not horrible) will often unleash a coiled beast. After our spring fling and summer hummer, investors wanted to see tangible signs of better times. While there have certainly been hints of a pulse, those searching for a strong heart beat are still lookin' pa nub.
Sir Chambo did his Cisco disco last night and while the numbers were "there," it wasn't enough to appease investors. On the conference call, as I listened to his "cautious optimism" regarding the "inevitable recovery," I had the strangest sense of vuja de. It's as if we've heard this all before but it's never actually happened! It's only a matter of time, in my view, before investors in the "show me economy" start screaming "show me the money!"
While the big picture bear thesis has crystallized in my mind's eye, our job title dictates that we focus on the journey (rather than the destination). Along those technical lines, there have been some interesting developments in chartland. The NDX has clearly violated the trendline (that's held since March), the S&P has "broken" in point & figure work (S&P 965 is a HUGE level), the Dow is threatening to violate it's support (9000) and the banks need to hold BKX 850 (if they don't wanna revisit BKX 800).
What's all this mean? Just as we were on alert for a "false" breakout above S&P 1000, we must be equally alert for the mirror's image. Technical analysis is one ingredient in a much bigger mix and should never (in my opinion) be used in isolation. When properly assimilated with our other inputs, however, they offer a framework with which to trade. So, these breakdowns DO matter, but factor them into your thesis rather than defer to them.
We'll likely see a bounce attempt at these levels but my humble view remains the same (fade rallies). I "think" there's further downside (S&P 915?) before a potential retest of the highs. However, as I opined last week, my sense is that we've already seen the highs for the year. That's not advice--each Minyan is responsible for their own financial choices--but this is a forum for honest communication and right, wrong or indifferent, that's what you'll always get.
Watch the bonds closely today as stabilization will likely allay some equity fears. There was a fair amount of pressing by the bears late yesterday (once we broke our levels) and, if there's no immediate gratification, many of those trades will likely be unwound. Once again, I'll remind you of the importance of a game plan and urge you not to trade reactive. Liking 'em up and hating 'em down is, by definition, a recipe for whippage.
Good luck today.
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 firstname.lastname@example.org.
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