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Randoms: Of Smoke and Fire

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AIG screams for attention while General Electric continues to whisper

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In yesterday's 3:00 Buzz, we warned "contra-hour" was not too impressive but given the proximity of the MOAL (Mother Of All Levels), be on the lookout for invisible hands."

While that vibe would have once triggered a slew of "grassy knoll tin foil hat" emails, our time together has proven the only difference between manipulation and intervention is communication.

To be sure, the late day surge may have been au natural-the widespread exposure of the head & shoulder patterns, from MarketWatch to Bloomberg TV, coupled with the ripcord at S&P 875, may have simply triggered nervous shorts to cover exposure into the bell (and in front of earnings).

To be honest, I wish my experience didn't cause me to question the notion of a "free market" but alas, these are the cards we've been dealt and it's the hand we must play.

Some top-line vibes on this sleepy summer Thursday
:

  • Have we learned nothing?

  • As past supports is future resistance, S&P 881 (200-day) and S&P 9-11 (50-day) will serve as initial resistance while S&P 875 (now tested a dozen times) remains massive support.

  • S&P 9-11? Remember back to September 22, 2008 when the S&P was at 1254 and when we drew the analog to the Pakistan Karachi after we banned short sales?

  • We mused at the time that if we tracked, the S&P would lift 11-12% (check) followed by a 28% decline, leading to…S&P 9-11. Everyone thought we were nuttier than Austin Power's coffee at the time.

  • The wicked part of that discussion is that we've required a 37% rally to get back to that level since the March lows. No wonder my desk top is chock full of hair follicles!

  • You know what's funnier than that rope in gym class? The dollar is down a meaningful 80 bips yet Crude (OIL) has given back it's morning nub and Gold (GLD) is struggling at the flat-line.

  • I don't mean funny like a clown, it's just that you can learn a lot just by watching and the commodity smeltage is a headwind for Hoofy that warrants attention.

  • You know what's not funny? How quickly American International Group (AIG) (-20%) is destroying whatever shareholder value was left. I suppose I understand why they reverse split this pit 20-1, but I think we can all agree that it wasn't the snazziest of ideas.

  • Call me old fashioned-or seasoned as the case may be--but where there's smoke, there's fire and when there's fire, people get burned. The action in American International Group (-22% today and -64% since the reverse split seven days ago) feels like a four alarm blaze so keep your eyes peeled for collateral damage.

  • I had dinner with a group that's a lot smarter than I am on Tuesday night when the topic of the market came up. As they all turned to me for my take, I offered what Minyans already know to be my current stance: We're likely traversing the other side of the "W" pattern and S&P 956 may well be the high water market of 2009. I've been wrong before and there are variable elements (the dollar), but we're always honest in the 'Ville and I share that for the newbie Minyans in our midst.

  • A different breed of Senate confirmation hearings?

  • Consistent with our banter on the Buzz yesterday, I paired the lion's share of my Research in Motion (RIMM) puts into the 9% day-over-day dip. I've still got a token amount and will trade it from the short side (sell blips to buy dips) as a function of time and price.

  • On this bounce, RIMM is retesting the right shoulder of the dandruff (where isn't there dandruff these days, other than here?). Boo added incremental exposure up a buck and change (as did I, gingerly) as he eyes $72-$73 as the upside fish or cut bait level (although it's not as defined as, say, Amazon (AMZN) $85 was).

  • Lest there were any questions about the government attempting to absorb job capacity, the CIA is canvassing financial analysts and projects it'll receive 180,000 applications.

  • I'm tempted buy the fruit of another to play the financials into earnings but the vols are Orca fat and I'm content to exercise my right to be proactively patient and trade with a scalpel rather than a sword. Hit it, quit it and sit it.

  • Remember in 2005 when we flagged "financials in drag" in Ojai? General Motors (GMGMQ.PK), Ford (F)...General Electric (GE). It's that last one that continues to bite my ankle in an attempt to gain mind share. It's down 70% since that mountain sojourn so I have a hard time shorting it but caveat emptor on the buy side (and yes, I bought a slug in March when it was trading with a six-handle, but that was a pure trade).

  • The FAZ and FAS reverse split, which will no doubt lure a slew of new money into these financial-on-crack vehicles. They're "fine" as a trading vehicle (one or two days) but please don't slap 'em on as long term positions or hedges. They'll shoot you in the arse and that's "so not OK" for Minyans.

  • Tick tock, Minyan, only one more day till our requisite respite!


R.P.

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Position in RIMM

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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