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Randoms: Looking for Shoots and Ladders


Fundamental validation must follow technical affirmation.


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 Is a Down Day in the Cards?

Gate Sniffage - 9:58 am

  • As vibed late yesterday on the Buzz, I added short side exposure on the bell. Vehicles included SRS (real estate), FAZ (financials) and EEV (emerging markets) in front of Turnaround Tuesday (and, in the interest of full disclosure, added further FAZ this morning).

  • Why am I injecting trading crack into my portfolio veins? Simple, they're very short-term vehicles and NOT investments. I wouldn't own ultra-ETFs for anything more than a pure trade as the tracking risk is the definition of horrible.

  • The biggest risk to the bears today? That, as the market has tetherballed the last eleven sessions, a reversal lower on Turnaround Tuesday (with negative housing data) almost feels too easy and nothing is easy in a bear market.

  • That's why we trade with discipline and why I make some token sales in the SRS (vs. my late day adds) up 90 cents. Let your first sale be your worst sale, right?

  • And yeah, we're in a bear market, textbook 20% definitions aside. The latest lift is a cyclical bull nestled within a secular bear, as we vibed there would be when we started this year. I could, of course, be wrong and there's a huge part of me that hopes I am.

  • Does it really make sense that a debt bubble representing a decade of cumulative societal excess will stop on a borrowed dime? Jimmy Cliff would beg to differ.

  • In terms of tea leaves, we're currently more balanced than Nadia Comaneci in her prime. Breadth is balanced, beta is mixed (Apple (AAPL) and Amazon (AMZN) hang tough) and, while Wells Fargo (WFC), Goldman Sachs (GS) and JPMorgan (JPM) are pretty in pink, supertell Bank America (BAC) (and his little brother Citigroup (C)) are currently mating with the Matador Crowd.

  • Good luck today Minyans and remember, hit for average not for power. 500 foot homers make for great highlights but four out of ten winning trades is a ticket to Cooperstown.

Waiting to Exhale - 10:53 am

  • Emerson Electric (EMR), one of the better run companies out there, has offered that order trends worsened in April (which is a downtick vs. its last earnings call). Keep an eye on the reaction to news (it's currently off 3%) as those green shoots may well be the bull's breakfast.

  • A few folks have inquired about my muse this morning regarding the potential for single digit multiples as the "other side" of excess brings excess. This is something Snoop Tony Dwyer and I bantered about in Ojai and Vail. While it's yet to happen, I'll simply remind Minyans that value traps are the fatal flaw of fundamental analysis.

  • Blaming the media for the market malaise is sorta like blaming Raider fans for the dismal performance of the silver and black. Indeed, if regulators and policymakers read Minyanville in the years leading up to 2007, perhaps they would have been more proactive in administering medicine that addressed the disease rather than injecting after-the-fact drugs to mask the symptoms.

  • That wasn't meant to be salty or surly (that's not how we roll in the 'Ville). It's just that I sometimes get frustrated listening to self-proclaimed pundits who never saw the perfect storm brewing offering forward-looking solutions that make little if any sense. It's not an ego thing--there are people out there who assume that someone must know that they're talking about simply because they're on television. If I didn't care, I wouldn't share and you can take that to the bank.

  • Meanwhile, back at the ranch, the bulls are trying to put on a brave face and stare Turnaround Tuesday down. While I plan to flatten out my exposure by Thursday afternoon, I will share what I said to one of my good friends (who happens to be one of the smarter hedge fund managers I know) earlier on instant message. "S&P 950 is THE level and I would short with fury into that but be very careful should we break on through to the other side."

  • And yeah, I'm letting out some of the short-side exposure I covered into the earlier downdraft. Just tradin', Tex.

  • Tuesday's are fun days at Minyanville so lemme hop and juggle the struggle. I sincerely hope this finds you well and if not, that you snap out of it! Life's too short to have your mood dictated by flickering, bickering ticks (and yeah, I'm talking to myself!). Breathe and remember that profitability begins within.

  • With that in mind and through the lens of "a little levity goes a long way," I'll share this, which was what our Emmy Award winning Hoofy and Boo offered up when partners asked us to push the envelope.

More Answers I Really Wanna Know... - 12:22 pm


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Positions in SRS, FAZ, EEV
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