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Random Thoughts: A Sharp Wave Lower


Few are being spared in an ugly Hump Day session.


Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also The Other Side of the Trade: Bear Trap!, CDO Investors Take a Haircut and Punting My Puts.

Is This the Big One Elizabeth? - 2:01 pm

I'm not sure Fred but the action is, in a word, fugly. With the notable exception of the big beta space--Apple (AAPL), Google (GOOG), Research in Motion (RIMM), Baidu (BIDU) and Amazon (AMZN) are holding a bid--it's scary fare out there Mon Frere. The "all bets are off" dollar is higher, breadth is five red for each ahead (4:1 negative on the Nazz), commodities are getting smoked, Panama Red, and social mood continues to darken.

What to do? Toga? Orange Whip? Make the world's most annoying sound?

Nah, we can do all that later. With the market open and traders hopin', we figured cutting to the chase my offer the most utility. Just remember, Minyans, a little levity goes a long way and days like this we need it most. Some top-line vibage:

  • S&P 900 is important on an intraday basis. Why? Note the upward sloping "higher lows" that are in place. Fragile as they may be, they be in place.

  • The hit it to quit it approach ain't for everyone, I know, but disciplined risk managers are feasting on this emotional famine.

  • I did some radio last night (I got the face for it) and there sure is a lot of anger aimed at Wall Street. For good reason, in some cases, but the all inclusive blame brush simply isn't fare. The A.D.D. immediate gratification zero percent societal mindset must accept some culpability for the current state of hate.

  • I most certainly respect the consistent thread of sharp insight on Minyanville as it pertains to the potential for a "sharp wave lower." As discussed this morning, there are valid reasons it could (should?) occur but again, as I've been "tight and hoardy," I'm happy to pick spots and take shots at some babies in the bathwater.

  • And yes, that continues to include energy --picking spots not bottoms--as crude breaks to fresh cycle lows. My vehicles are equity as a function of fat premium and wide spreads in the option markets. Buying dips, selling rips and keeping the lion's share of my powder dry for the whites of their eyes.

  • Contra-Hour is set to begin so factor that into your process as we eyeball the other side of the Hump. Again, I'm out tomorrow (off-site management meeting) so a wild and wicked Thursday blur is pretty much guaranteed.

Which of you to game me tell will risk uncertain pains of hell? - 3:25 pm

  • While painful, the process of debt destruction is constructive on the margin. To get through this, we needed to go through this and we're going through it now.

  • Many in the mainstream media are asking why lower crude isn't equity positive. Minyans had the news they needed to know before they knew they needed it.

  • The specter of Argentina default is an anecdotal data point in the Dot.Gov implosion Minyan Peter talked about yesterday.

  • In bull markets, you buy dips to sell blips. In bear markets, you sell rips to buy dips. For counter-trend plays, you shadow box with a mirror and invert the process (either way) with risk management the governing tenet.

  • There are a LOT of technicians looking for a "Wave 5" violent leg lower. That analysis has been, to quote Mona Lisa Vito, "dead on balls accurate" but begs the question if the path of maximum frustration will reward, well, anyone. See all sides and allow for a healthy margin of error both ways.

  • It's never too busy for a little Terrapin, right?

  • The friction between opinions is where true education lies. That's the founding principle of the 'Ville--there is always a bull case and bear case but the residual grist is what you'll read about in tomorrow's newspaper.

  • Per my earlier missives, I'll be out of pocket tomorrow for a management off-site meeting. As such, two thoughts. First, my risk profile will be flattish (although I'm not opposed to small energy equity positions at these levels) and second, in the spirit of how nonsensical Turnaround Tuesday, Contra-hour and my Sleep-O-Meter index is, the tape tends to go NUTS when I'm not strapped in. Fair warning.

  • Gold getting to our aforementioned $700 level. If I were here tomorrow, I might nibble but as I'm not, I'll remind myself that opportunities are made up easier than losses.

  • Russia? Halted. Brazil? Halted. The U.S.?

  • Fare ye well into the bell--and tomorrow--my friends and remember to take the high road. It's less crowded and boasts a much better view.


Did you know the doors to Festivus 2008 are officially open? Have you yet locked your spot for the critter trot as last year's soiree sold out? (This is our annual event to commingle our professors, partners and Minyans while chowing down and listening to live music. The very best part? It's for the kids in the good name of my grandfather.)

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