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Random Thoughts: A Tale of Two Tapes?


The FOMC statement at 2:15 is today's toggle.


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 How Realistic is a North American Currency?

In my Buzz yesterday, I stated "Into the close? I think higher, as a function of the underlying bid in the banks, the 2:1 positive breadth and the pink dollar. The question will be whether they can mount S&P 855, which we circled this morning as a level of lore."

When you couple that with this post
, which discussed trading the financials from the long side, and the Monday Morning Quarterback "Can Banks Lead The Tape Higher for a Trade?", I enter today's center with a spate of Bank America (BAC) and a snivlet of S&P (via the SSO).

Nothing crazy, in terms of sizing, but directionally consistent with our theme this week. With that as a context, let's jump right in:

  • FOMC days are traditionally a tale of two tapes with 2:15 EST serving as a toggle. With Winky Wright in mind (jab jab!), I'll make some sales into the opening jig and watch the tenor of the tape (breadth, banks, beta) into any subsequent retest. I do believe this trade has room but discipline dictates taking our journey one step at a time.

  • Do you remember in Ojai '05 when we offered that "A complex maze of derivatives has tied together the balance sheets of the world's largest organizations. With the emergence of bearded financials such as General Motors (GM), General Electric (GE) and Ford (F)-all of which have considerable finance arms-it's quite probable that a ripple in Fannie Mae (FNM) or JP Morgan (JPM) will have an exponential impact across a wide array of sectors and industries?"

  • The one stock mentioned above that continues to cling to Bar Mitzvah status is General Electric, which was put on negative watch by Moody's last night. Minyans know that this stock has been on our witch, er, watch list for some time so keep it front and center. The reaction to news is always more important than the news itself.

  • That, coupled with the IMF prediction (at 9:00 AM) that it sees losses from toxic U.S. assets totaling $2.2 trillion, while lowering 2009 global growth estimates from 2.2% (prior) to 0.5%, is the does of reality splashed on Hoofy's happy morning mug.

  • How I reconcile my perceived window of opportunity (after January 20 and before the bloom fades on the Rose Garden in March or April) with more sobering assimilations such as the one Professor Bennet Sedacca scribed? With discipline and a tight risk leash that I'll tether out when I perceive an advantageous risk-reward.

  • Yes, my weekly syndicated missive pushes some sensitive buttons, as evidenced by the responses on the MarketWatch message boards. My response to their responses? Same as it ever was. Successful thought provocation requires keeping the carrot just far enough in front of our faces so we can smell it but not quite taste it.

  • On a housekeeping note, I've got a 10:30 meld this morning that should keep me away from the fray for about an hour. Lest you think I'm slacking, please know that all these meetings are designed to drastically improve the Minyanville experience. I'll be strapped back in by the time my lunch arrives but communication is the key to all successful relationships.

  • Happy Hump and hit 'em hard, Minyans, profitability begins within.


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Positions in BAC, SSO
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