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Random Thoughts: Making Sense of a Tape Intense


Bad news that's not horrid is positive in an oversold tape...


Editor's Note: Given the twisty turns and market burns, we share this stream of consciousness from this morning's Buzz & Banter. If you want it in real time, click here.

Morning Dew - 8:45 am

  • On Monday night--and again yesterday on the 'Ville--I offered that post-rate cut, we should watch the DNA of the second rally in terms of leadership, volume, levels and tenor (let's call it a modern day LVLT). That remains the case and should be put to the test soon.

  • S&P 1240-1250 and NDX 1700ish are levels to lean against, if and when, for a trade.

  • I scribed some optimistic vibe this morning. Not for the sake of being contrarian--and certainly not in blind ambition mode--but it's always good to see both sides of the trade.

  • While I view short interest with a scrunched nose (with so many off-board derivatives, it's difficult to tell how much is directional and how much is "paired.") With that said, we should note that NYSE short interest rose 8.7% from late December to mid-January, which is the largest increase ever in short selling.

  • As Mr. Practical would say, there is a difference between giving the economy drugs and letting the market take it's medicine. As an aside, assuming another 50 bip snip next week, we'll be half way through the easing cycle. Remember what we said about where the last bullet would be pointed. Ouch.

  • My initial reaction is to scoop some Apple (AAPL) down 13% ($137). It was, after all, a $200 stock a few weeks ago and remains one of the best brands in business. For purposes of perspective, however, it's worth noting that a year ago, it was trading in the low $80's. See both sides.

  • Minyan Peter touched on the fact that BofA (BAC) talked about commercial exposure yesterday, the first time a big bank breached that topic. Sorta spooky, considering how pervasive something as opaque as sub-prime has become.

  • Jeezums! S&P down 43 and Nazz down 70? Thank goodness for discipline. The trader in me wants to fade the opening. The skeptic in me fears that it's a tad too easy after yesterday conditioned the dip buyers as it did. Man, there's alotta me's in me these days. I'm schizophrenic... and so am I!

  • Good luck Minyans and remember to breathe!

Gate Sniffage! - 9:51 am

  • Whataya Say, Vuja De? Does anyone feel like we've seen this movie before?

  • I faded (read: bought) some upside into this first whoosh, including a dose of Schering Plough (SGP), a spate of Citigroup (C), a snivlet of Mother Morgan (MS), a can of Coca Cola (KO) calls and I small spate of Pulte Homes (PHM).

  • Now I wait, with a conscious nod to the Trading Gods. My cause for pause is that back-to-back Snapper attacks seem a bit easy and nothing is easy. A stern smack would likely shake out the weak knees. Trading in-between makes sense to these tired ol' eyes.

  • Why are the homies getting less homely? Beazer Homes' (BZH) cancellation rate declined from 68% last quarter to 46% this quarter. Toss in the short interest (I'm hearing upwards of 80%) and you have the makings of an off-sides.

  • Man, Heath Ledger. Sad sad sad. RIP Yo.

  • Sell hope, buy despair? Yep. If you haven't seen our Ten Trading Commandments, please check 'em out!

Look at me, I'm A.D.D. - 10:13 am

  • Flies in the try? Aunt Fannie (FNM) (-5%), breadth (2:1 negative), Apple (AAPL) (too crowded for my blood), energy (I almost wick dipped but bit my finger) and repetition (I can't help but wonder if "straight up" is too easy).

  • Bode Wellage? The financials (as go the piggies), homies (incrementally less bearish news is a positive in an oversold condition), Ambac (ABK) and MBIA (MBI) (if they get rescued, it'll alleviate a principal point of concern).

  • Out to lunch? Pharma and consumer non-durables continue their distribution and I would think that these names need to stabilize with the tape. In the interest of "sometimes right, sometimes wrong, always tired, it seems," please see DRG 320, which is now broke and broker.

  • My Schering Plough (SGP) exposure is in out-month 20 strike calls (defined) and I wanna give some time. Rationalization? Not sure. Honesty? Always.

  • I'm "trading around" some of my in-the-hole purchases this morning, sorta like wading to and fro in the midst of a perfect storm. Be Rose, not Jack, if you catch my drift.

  • Yo Homies--see 'em. Bad news that's not horrid is positive in an oversold tape just as good news that's not fantastic is negative in an overbought environment.

  • What's for lunch? Anything but Indian. I can still taste yesterday's feast...

  • As always, I hope this finds you well.

Answers I Really Wanna Know... - 10:25 am

  • Did JP Morgan (JPM) jump up and scream "BUY ME!" when it was flat in the face of this morning's fugly futures?

  • Does Mother Morgan (MS) have room to $55?

  • So why didn't I buy more? (Trading in between.)

  • And why am I feeding ducks (making some sales)? (Discipline.)

  • Fish or cut bait pharma?

  • Does this tape have more swings than a Hedonism vacation?

  • Do you see Smith International (SII) trying to turn the driller tide?

  • Are you rotating your risk?

  • Minyanville Maui Office, how can I help you?

  • Nurse McCall or Julie McCoy?

  • Was that the easy trade?

Psych 1, Psych 2, What Do You Know? - 11:01 am

My gawd--this is nucking futz! The world waits with baited breath--whatever that is--as the tape twists and turns and flips and burns. I mean, honestly, are you watching what I'm watching? This is heart of the United States of America capitalist system, not some penny stock on a third market.

Interesting and interestinger? Uhh, yeah, you can say that. Some updated vibes.

  • I made a slew of sales into the jig (sell when you can, not when you have to) and while I've got long side exposure on my sheets, I'm happy to make 'em to take 'em and book 'em with Dano.

  • Where from here? If I knew the way, I would take you home. Since I don't, I'm trading "in between" with plenty of powder in my pocket.

  • An outright fold (lower) would invariably shake the tree and perhaps allow for true capitulatory purging. I've yet to reconcile my crowded keppe as to whether that's in the cards but make no mistake, it's within the probability spectrum.

  • There's chatter out there that some sovereign funds are eyeing the homies. I can't say that would shock me--and I certainly can't confirm it--but mis ojos son tus ojos

  • How would I describe this market? In a word, reactive.

  • With the world as it is, why don't we all move to Minyanland and surround ourselves with folks we trust and critters we love? I mean, seriously, life would be a lot simpler. And I'd weigh less. And have more hair...


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Positions in MS, SGP, C, KO, PHM
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