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Randoms: Shake, Rattle and Roll


Making sense of the bipolar stroller.


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 Friend of the Devil.

The Scratch and Sniff! - 9:02 am

  • You can learn a lot just by watching. As the red spreads in pre-market action, it's worth noting that Amazon (AMZN) and eBay (EBAY) are both indicated (marginally) higher.

  • We don't "do" acrimony in the 'Ville but please, Minyans, remember that nobody is a messiah in this market. If this financial crisis taught us anything, it's that we need to do our own work rather than blindly bet on others, particularly those who never saw this coming in the first place.

  • That, in a nutshell, is why our mission has always been to provoke, rather than shape, thought while surrounding ourselves with people we trust who have skill sets that complement our own. There are no blanket responses or easy answers but our chances of success are greatly enhanced if we stick together as a community.

  • Keep an eye on the greenback, which is up 1% this morning vs. a basket of currencies, and remember that a lower dollar is a necessary precursor (but no guarantor) of higher asset classes.

  • Remember that the first half hour is noisy and we generally get a better read (sector rotation, breadth, macro influences) once 10:00 AM EST rolls around.

  • My stylistic approach has been to operate with trailng stops in my trading account (both ways) while keeping an eye on S&P 600 through a long-term lens. As we edge closer to that level, my inclination is to build exposure in both buckets. We're still 11% away, mind you, but I wanted to put it out there, for better or for worse.

  • Deep breath, my friends--we've got a heckuva humdinga ahead.

Gate Sniffage! - 9:55 am

  • The "jump out and bite me" action out of the gate? Bank America (BAC), which popped 10% higher. Granted, it's thirty cents, but it still stood out.

  • The semis also flipped the upside switch rather quickly, as did select master betas (Amazon (AMZN), Apple (AAPL), Baidu (BIDU)). Again, the first half hour is noisy but it's worth noting as we together find our way.

  • Were you bummed you didn't own more when the market sprinted higher late Friday and sorry you owned too much when you saw the pre-market futures?

  • You can't have it both ways, friends, but remembering that opportunity cost is the "other side" discipline may help keep things in perspective.

  • See crude run (+4%). Run, crude, run? Perhaps, but we should collectively take a moment to ask why. If it's endemic of near-term reflation, that's good for stocks. If it's a proxy for geopolitical discord, that's another, more disturbing story.

  • So you know, so it's said and for what it's worth, I dangled some Wells Fargo (WFC) calls (into the 12%) pop, some SSO calls (vs. the in-the-hole Friday buy) a snivlet of General Electric (GE) calls (just trading) and got lifted above my limits. That usually means further demand looms, or at least it did in normalized times.

  • Gotta hop, my friends--I'll be back.

Engine Room, More Scream! - 10:29 am

I guess this is why we play the game, eh? What looked like a recipe for disaster has quickly morphed into an upside surprise, with the bulls stampeding through Matador City. I've mapped my plan for all to see (for better or for worse), used early strength to make some sales (discipline) and will operate with trailing stops on alotta leaves. The mechanics of the swing always trump the results of the at-bat.

Some top-line vibes:

  • Could this be the M2M rally ahead of Thursday's hearings?

  • Google (GOOG) "not participating" and see what you find.

  • NYSE internals have yet to confirm this lift (they're relatively balanced).

  • Minyanville is psyched to unveil OptionSmith by Professor Steve Smith.

  • Red beans in the green sea (other than Google)? Hewlett-Packard (HPQ), IBM (IBM), Amgen (AMGN), DuPont (DD) and EMC (EMC).

  • The entire world is reactive, with buyers higher and sellers lower. Taking the other side of that trade is dicey and dangerous but alas, that's where the profits are.

  • Speaking of which, gotta toss on the risk management hat. As always, I hope this finds you well.

What's the Opposite of a Pop Quiz? - 11:31 am

A stern test, which is what we could see taking shape now. "Straight up" was a little cute, even by my standards, so keep your eyes peeled as we edge through the bipoler stroller that is this manic-panic Monday. Some quick observations:

  • Goldman (GS) acted lazy on the lift (up $1-ish), which makes it a vulnerable on the sift.

  • That, and Google (GOOG)--our heretofore "super duopoly"--warrant a nose scrunch as we find our way.

  • With some of my vehicles (Wells Fargo (WFC), General Electric (GE), FAS) up 10-15% this morning, I pared risk as a function of discipline (as discussed in real-time). I've still got inventory (and wanna buy dips to sell blips) but I remain respectful of a sharper downside probe as I strive to see both sides.

  • Breadth--which failed to confirm the upside--is now 9:5 negative.

  • Thank you for this link regarding the upcoming Mark-to-Market hearings, Professor Markman. Wait a minute... mark, market, Markman... I'm having an Uncle Buck moment!


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Position in SPY, WFC, SSO
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