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Freaky Friday Potpourri: The Next Step


The battle lines are drawn.


"Clowns to the left of me, jokers to the right, here I am stuck in the middle with you." --Stealers Wheel

Yesterday, in The Moment of Truth, we eyed S&P 875 as an important support zone where the Matador Crowd likely lurks. In their eyes, the recent pullback is healthy progression following the spirited sprint off the March lows. Upon retest of the breakout level, the thinking goes, they'll have fresh legs to run amok.

With index expiration influences behind us (and individual stock options being buried on the close), that battle should be fought in the coming days as perception morphs into reality. If the bulls toe that line, you'll hear a collective exhalation throughout the street. Should they flunk flank, the unfortunate "W" scenario will become incrementally more plausible.

That battle is circled on most major trading desks. The war, however, is an entirely different juncture, that of S&P 950. That level could well define 2009 as it's a confluence of resistances, moving averages and trend lines that will take real buying power to overcome.

As Minyans know, I aggressively traded from the buy side in February and March, balanced my act in April and shifted my stylistic approach to "sell blips to buy dips" in May. I've done so with discipline as my overriding mantra is one of financial staying power.

There will be massive opportunities when the dust finally settles but allergies will abound until debt is destroyed. When that time finally arrives, there will be far fewer players on the field and paradoxically, that's precisely when the field will be most fertile.

Our goal, as Minyans, is to get there together and quite hopefully, enjoy some smiles along the way.

Some Random Thoughts:

  • Through the lens of risk definition, I'm using the other side of S&P 900 as my near-term stop. Those looking for a tighter profile may choose the near-term downtrend line in and around S&P 895.

  • The friction between opinions is where true education lies and we always wanna see both sides of every trade. For Hoofy, that means "game on" above S&P 875 and BKX 30ish. For Boo, it is a conscious fade of conventional wisdom following a 35% rally.

  • My peeps on the commercial real estate front tell me that over the next 12-24 months, there will be $200-$300 billion of refinancing needs versus $50 billion currently available on the capital front. Subject to change, naturally, but worth keeping on our radar.|

  • We fingered a similar offsides into September but that was entirely more time sensitive and, as such, actionable. Remember friends, that the synchronization of time horizon and risk profile is massively important.

Answers I Really Wanna Know...

Some Vibes on Derivative Legislation from Minyan Peter:

The media is making a big deal out of the migration of the over-the-counter derivatives business to an exchange as if this is fresh news. Minyans know this is old news and the next step in a process begun by Timothy Geithner when he was head of the NY Fed.

Even so, I would not disregard its significance. With 90%+ of all derivatives business originated among a handful of firms, the regulators are trying to de-web the linkages across the largest financial institutions. Regulators believe that a clearinghouse structure can quickly and safely accomplish that goal.

In that regard, I expect that we will soon see a full court press by the regulators to move not just new, but all existing, OTC contracts to an exchange as soon as possible. Once this is complete, I think it completely changes the landscape for who is or isn't too big to fail.

Finally, back by popular demand, a smattering of "non-market" Minyan vibes that capture the spirit of our community:

Have a fantastic weekend Minyans for you've most certainly earned it!


Position in S&P
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