Freaky Friday Potpourri: Earnings, Expiration and Economic Malaise
A rate cut today would have been consistent with how the Fed has operated to date.
Good morning and welcome back to the scorning. With a
One, cut a hole in the box. Two, put the Fed in a box. Three, cut some rates like a fox. And this is how they'll do it!
Yeah, so I put it out there that the Fed was gonna whip out their scissors this morning. It's not so much that I think it'll provide some sorta long-term fix, it's just consistent with how they've operated to date.
If the snip doesn't quip, I'll unwind my pure "cut" exposure and trade around my other positions. Why? Discipline, mostly, as I slapped some risk on for a perceived catalyst.
Better head back to Tennessee Jed
Note the VXO, which was up a quick 20% yesterday. It's a long way from previous pain fulcrums but it's a step in the right direction from a widespread panic standpoint. I'm not talking my book, I'm just reading it.
I guess that's why they call it the blues…
How did I wind down a whippy week last night? By taking in some James Cotton at BB King's in NYC. The legendary blues harmonica player, known for his long run with Muddy Waters, got his mojo working in a big way!
Pep and I were heading home last night when a woman in a fur coat got on to the elevator. I said hello-to the coat-and explained that I mistakenly thought it was my cat. She smiled and said "I love animals," to which I replied "that doesn't mean you have to dress up like one."
Settle down kid, you're all over the place!
- I looked all ova for some upside calls in the financials yesterday but vols are simply too fat.
- I personally guarantee that there won't be a Black Monday. Iron clad. 100%.
- Hot Dog (HD) and Lowe's (LOW) acted dry again yesterday.
- Homies too, homie.
- I've got some exposure in that hood, along with some tech and some tape.
- The tape stuff, once again, is win, lose or draw exposure.
- Besides, I'm off to see the Maven and will be leaving around lunch.
- Gimme a break, it's my grandma and in 20 years, I'll remember that experience more than I will the tape.
- I don't know about you but I think Tom Bosley makes a helluva good spokesman.
- Geez, the NYSE floor looks empty, eh? Sorta sad albeit inevitable in the information age.
- I'm somewhat surprised by how heavy pharma trades. Toss DRG 335 on ye radar, if and when, as defined risk.
- Is volatility being exacerbated by expiration? You betcha, Mister.
- Why is it that every time I write the word antennae I think of John Belushi?
- Monsanto (MON) and Potash (POT) were down huge and the DBA is up 3%. I know they're different but the perception of their impermeable status was very much the same.
- We spoke about the vacuum between DJIA 12,800 and DJIA 12,000. I'm sure some folks looked at that level while we were at 12,800 and said "yeah, I'll buy it there" but, now that we're getting there, many of them won't wanna step. Human psychology is funny that way.
- Ditto NDX 1840ish, which is coming up quick.
- N's over S's, which is to say that if you're gonna play with Hoofy, you should do so (with defined risk) in the four-letter names.
- How bad can it get? Much worse, in my view, but not in a straight line. I will simply ask you to remember that when the inevitable rally arrives. After all, we may be going to hell in a bucket, baby, but we should always enjoy the ride!
- Come on, smile. It could be much worse and for many folks, it already is.
- I'm hearing from ALL OVER that Ben Bernanke is this and Ben Bernanke is that. Let's be clear folks, he inherited this mess from Sir Alan Greenspan. He may crack under pressure (Henry Hill who?) but this mess is bigger than he is and was here before he was.
- If you get confused, take a step back. Or, perhaps, you can just listen to the music play. A little tunage goes a long way!
Google (GOOG) "Important Level"
You'll likely see THIS chart, which paints an important picture for the world's most important tech stock (with all due respect to Mr. Jobs).
Check out the 2 year S&P 500 chart. That is one ugly break of support. If we don't get a rate cut, down 300+ Dow points wouldn't surprise me at all, and wouldn't follow through Monday be a surprise? We've had four to five nasty Friday closes the past six months and never any follow through on Monday. One of these days...
Hope this finds you well,
Follow through on Monday would be a surprise, especially since the market is closed!
As I wrote earlier, I do believe that we get a surprise cut in front of expiration for maximum bang for the buck. I could be wrong but it seems to fit their M.O. The issue, of course, is that there are only so many bullets in the gun and as we've long said, the one will likely be pointed within.
I am, for what it's worth, a better buyer than seller into this. While I understand that the big money is made between the 20's in trading, I'm also a seller of hope (October) and a buyer of despair (getting there, if only for a trade).
As Pep has so often stated, this is gonna be a long battle but that's a good thing. It's a heckuva lot better than GAME OVER, right here, right now.
Some Vinal, I mean final, Vibes
The tension is palpable as we dance on the tip of a pin and edge towards the end of the week. Can you feel it? I sure as schvitz can--it's argumentative, acrimonious and altogether anxious out there from Capital Hill to Wall Street to Main Street. And to think, we've still got ten months before the election!
There's no putting lipstick on this pig---it is bad out there--but it would be wise to remember the difference between the economy and stock market. Yes, we live in a finance-based economy and the two are inextricably linked. The twist, however, is one of time rather than price.
We've long offered our view that it'll get bad out there and, well, it has. I will share, however, that with everyone and their sister now seeing that, the potential for a counter-trend rally increases in kind. I offer that with utmost humility and hat in hand as the potential for redemptions not only exists, it's highly likely.
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