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Random Thoughts: The Bull Costume

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Time to turn positive?

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So, how in the world are you? Sniffing around the financial marketplace, that's a loaded question these days!

HSBC (HBC) Chairman Stephen Green described financial markets as "the most difficult for several decades" after the banking giant reports a 28% fall in profits.

The Royal Bank of Scotland (RBS) is expected to post the biggest loss in British banking history.

It's widely accepted that the housing market is in its worst shape since The Great Depression.

Japan is close to declaring a recession.

China is technically broken-and forming a bear flag under resistance-in front of the Olympics.

Iran is snubbing its nose at the Western deadline on its nuclear program.

Yeah, it's rough out there. Real rough.

So, why can't I shake the thought that the rally we got in front of on July 16th-the one that was tested and put in a higher low at S&P 1235 and BKX 60-could continue, flummoxing the bears and sucking fresh money into the election?

That thesis is crystallizing in my crowded keppe and as I've been trading from the long side (hitting it and quitting it before flattening overnight), I wanted to share the fare for those that care (my sense is that, barring a conflict with (far from a given), it'll be accompanied by $100 crude).

Markets can stay irrational longer than most folks can stay solvent. This we know and this I've learned.

While I'll again reiterate that I foresee a few years of socioeconomic malaise, the destination pales in comparison with the path that we take to get there.

Just as everyone was bullish last spring and summer, the crowd-quite cautious by now- is rarely rewarded as a whole.

A breach of either of the aforementioned levels would violate the pattern and it's necessary to note that real risk remains (particularly with the VXO at 24).

That, as much as anything else, is why the mechanics of the swing (stylistic approach) remain as important as the results of the at-bat.

I'm not betting the farm-my risk leash is tight-but a run into the election, followed by the continuation of something more depressing than a recession, makes alotta sense to moi.

Sometimes right, sometimes wrong, always honest.

Random Thoughts

  • Minyanville is proud, thrilled and completely jazzed to welcome Professor Neale Godfrey to our mission of financial literacy. Her passion and energy to empower kids and their family will fit with the 'Ville like peas and carrots!

  • Why couldn't I shake Susudio from my crowded keppe as I watched Christian Bale as the caped crusader?

  • The upside of flattening out (into Friday's close) was that I patiently layered into exposure rather than lament about the crimson tide.

  • My upside vehicles today include the QLD (with a stop below $70), Mother Morgan (MS) (continues to act dry), Wachovia (WB) (reinitiated a position with the stock off 8%) and Citigroup (C) (conscious that it may have 'further news' to spew).

  • Again-and this is important-I'm in "hit it to quit it" mode rather than "close my eyes and buy 'em." I take nothing for granted these days other than discipline over conviction.


The Following Buzz was posted this morning at 11:30 AM when the S&P was trading at 1248 and the DJIA was trading at 11,240...

  • S&P 1235--the higher low we've been watching with both eyes--is a scant 13 handles away. That's nice and tight defined risk for those inclined to hang with Hoofy.

  • The financials, meanwhile, are in the process of making a higher low relative to the S&P. That would be technically significant IF (monster if) that S&P level of lore holds.

  • While I sense Citi (C) will have another pity party (if they mark-to-Merrill's market), I'm using that as a long side vehicle via some call options.

  • I should prolly put two legs in my metaphorical bull costume with a stop below our S&P level. Aw Jeez, why not--let's do it, with a conscious nod that we'll stop it out if it breaks.

  • What happened to those York Peppermint Patty commercials? Those were best in breed fo sho!

  • Morgan Stanley (MS) continues to trade dry.

  • Keep an eye on pharma as it continues to outperform. Ditto consumer non-durables. Both "make sense" in a slowing economy.

  • How bout dem Yanks, eh? There's a new X-Man in town!


R.P.

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Positions in MS, WB, QLD, C
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