There's no crying in baseball and there's no rationalization in trading...
I am yours, you are mine
You are what you are
And you make it hard
Good morning and welcome back to the flickering pack. There's a lot going on in the City these days as we dig in our heels and noodle the maze. With Dubya eyeballing Iranian President Mahmoud Ahmadinejad from afar--don't you love Haz-Mat sirens in the morning?--geopolitical tensions, coupled with posturing ahead of tomorrow's FOMC meeting, will be the order of the day. Toss in a slew of imminently anticipated acne--we're a stone's throw away from technical validation in the S&P and the DJIA--and you have all the makings of a stress sandwich.
As we're all up to our eyes in information, I thought we could cut to the Vinnie Chase and begin our spin with a Minyan Mailbag. This particular pup comes courtesy of Minyan Ken from Bahston, who shot me an inquisitive look in response to my late day Buzz. For those not Buzzin' (hey--get Buzzin'!), I offered that we may have seen a short-term bottom in the commodity space. "Whether it's a bounce (in a broader deflationary trend) or something to write home about remains to be seen. And yes, my sense is that a weaker dollar would accompany that move."
"Ok-- so now i am truly confused--on one hand you call for a potential short term bounce in CRB, and to get there you see a dollar decline, yet you offered a few weeks ago that equities could follow the commodity suit lower, resulting in a higher dollar. You can't have it both ways brother."
My response to him was quick and dirty: time horizon. As I told him, and as I'll tell you, I didn't get the break I thought we'd see in equities when the CRB broke. While that colors me wrong (in my September paper), I may simply be early. Indeed, I slapped on a fresh position last week with some long calls in the metal and energy space (January paper) and a slab of fresh puts in the financials (March paper). The thought, from where I sit, is three-fold. First, they're disconnected on a trading basis. Two, vols remain dirt cheap and three, this gives me some flexibility to "trade around" the position (with gamma).
Potentially, as I said to Ken, we could see a Snapper (back towards the trendline at CRB 330?) in the commodity space, coupled with marginal new highs in the indices (littered with non-confirmations, as per Jeff Saut) before the wheels fall off the wagon. There's no crying in baseball and there's no rationalization in trading--I'm simply trying to adapt my risk profile to the current state of the tape. If and when we get that move higher, I'll make sales on my long-side exposure to position myself for a subsequent downside move. If we don't get to see the Matador Crowd turn the screws to Boo, I'll be represented in the financials. So that's where I am--right or wrong, for better or for worse and 'til expiration do us part.
Before I shoot over to the Buzz, I'll offer that perception is reality when it comes to economic numbers. On the heels of this morning's weaker than expected PPI, the knee-jerk reaction is "ding dong the Fed is done" as futures jerk higher. Goldilocks may creep to the forefront of our collective mindset; but be careful, Minyans, we're a short shift away from slowdown concerns. I can't tell you when they'll arrive but when they do, the blonde ambition may fade faster than the Red Sox Nation.
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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