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Random Thoughts: Twisting Through Turnaround Tuesday


Will the financials again change the tape's tune?

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community. See also Commercial Paper Comes Home to Roost.

Gate Sniffage! - 10:05 am

Turnaround Tuesday is underway with the critters looking for some play. As discussed yesterday on the Buzz, I rode exposure in energy and financials higher with tight, trailing stops that were elected near the upper end of the daily range. After taking a stab in Apple (AAPL) puts (unwound as a push), I enter the center long powder and short chowder. Some top-line thoughts as we tap our cleats with the bat:

  • S&P 855ish is near-term resistance (past support) and a level to watch for those who like to watch such things.

  • I did, so you know, fade (sell) the opening for a quick trade (through the SDS) and a tight, trailing stop. Why? Just trading with Winky Wright. Jab jab jab...

  • Is that a complete reversal of opinion for me? Nope, not at all. With a short risk stick and dry powder, I'm simply try to get some porridge before the rest of the kids storm the kitchen.

  • A lower dollar is a necessary precursor--but no guarantor of--higher asset class prices. We can, of course, see a lower dollar and lower asset class prices, which is the worst of all possible worlds.

  • I am, so you know, in the process of transferring some coin from my oft-discussed (and at one time very controversial) 100% cash long-term account to a trading account.

  • Why? If, by chance, we swoon towards S&P 600, I wanna put a portion of that nest egg--perhaps 25%-- to work. Not saying it's near-term business, mind you, I just wanna have the the cannons loaded should we see the whites of their eyes.

  • Lemme hop, friends--have a heckuva great Tuesday!

Of Tapes and Tenor - 11:24 am

  • Tricks of the Trade: When you catch an early fade, such as my sale of the S&P on the opening, you're immediately operating "for a credit." In this particular instance, after the SDS rallied $2, I set my trailing stop at $1.50. Should we trade lower, the size of my squirreled nut will increase. If we rip higher, no harm and no foul. Either way, I share my process with hopes that it adds to yours.

  • I just put my order in for the Grateful Dead, April 25 at MSG. Sometimes, there's nothing left to do but smile, smile, smile.

  • A quick sniff of the critter compass finds market breadth working 9:5, the financials holding early gains (watch 'em, as their turn led the tape yesterday) and some legitimate jig in the semiconductor space (flagged last week as "dry").

  • Of course, I would be more enthused with that complex if the SOX wasn't tracing out textbook dandruff.

  • I again eyed Research in Motion (RIMM) yesterday as it pulled back towards fitty and again opted to watch rather than trade. That rounded bottom remains in play but it remains to be seen whether the price action will be Bold or a Storm.

  • Inquiring Minyans are asking if my transfer of some of my long-term nest egg to the front lines is in anticipation of imminent demise. The short answer is no--I just wanna have ammo ready should I need it.

  • Remember, this is my "other bucket," which is above and beyond the active trading fund I whip around like a Friday night Theal Squeal. Ya dig?

  • The talented Merrill Lynch economist David Rosenberg is out with a report called "Some Inconvenient Truths" that discuss, among other things, the likelihood that we're currently enduring a depression and that it'll likely last three to seven years.

  • Why does the term "financial staying power" continue to resonate in my crowded keppe?

  • And yes, I was stopped out of that SDS for a minimal gain. The lesson? The mechanics of the swing are entirely more important than the results of the at-bat.

  • As always, I hope this finds you well.

Well I'm learning to fly but I ain't got wings! - 12:56 pm

  • Pepe Depew put these four minutes on my radar and it offers a healthy dose of perspective regarding the size of the hole we're currently in.

  • Bank America (BAC) (+10%), Wells Fargo (WFC) (+7%) and American Express (AXP) (+6%) stand out in the financial complex. While everyone and their sister laments about the sorry state of the banking industry--and with good reason--we recently explored the other side of conventional wisdom. Remember, there are always two sides to every trade.

  • I have, so you know, been trading In-N-Out of select financials (on the long side for a pure trade) consistent with the vibes above. Again, my risk leash is tight but I'll always communicate to ye faithful what I'm doing and how I'm doing it.

  • Keep an eye on the potential pennant that is forming in the Dow Jones Industrial Average. While Hoofy has some upside wiggle room, these formations typically "break" in the direction of the prevailing trend.

  • I spent some time last night with a veteran market participant who has taken a sizable step back to explore other avenues in life. I asked if he was able to afford such a move and his response was "Given all the emotional toll this business has taken on me, I can't afford not to make such a move."

  • "We are suggesting nimble investors add money to the equity market with a near-term target of S&P 500 (SPX) 1050-1100, and the intention of again adopting our "out of the way" stance when the target approaches. If the SPX closes below 800, we would reverse this call with the anticipation of new lows." Snoop Tony Dwyer of FTN Midwest Securities.

  • There's nothing wrong with a little Petty on our time.

  • On a housekeeping note, you're gonna see some monster shifts in the 'Ville next week, which is the first of many steps designed to establish Minyanville as the phoenix that arises from the scorched earth of finance and media. The greatest opportunities are bred from the most profound obstacles and our intention is to be "part of the solution" for many years to come. Know we're working for you and we very much appreciate the continued support.

  • T-minus three hours, friends, let's make 'em count.

Chatta Box! - 1:27 pm

There is UNCONFIRMED chatter making the rounds that a bipartisan accord has been reached in Washington with regard to the stimulus package. I've got no edge but as my ears are your ears, I wanted to pass it along so you can factor it into your thought process.


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Position in SDS, BAC
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