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Random Thoughts: Swing and a Miss


Bulls take one on the chin.

Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Hungry Bulls Gobble Up Gains and The Thanksgiving Market Hangover.

Is Zed Dead, Baby? - 11:10 am

The Holiday hangover is in full effect as the Minx slinks near session lows. You wanna talk about a bipolar stroller? The ink barely dried on the second largest five-session gain in history as investors powered up for a fresh five-session span. I know, the sharpest rallies occur in the context of a bear market. That may be over... or perhaps that's just what they want us to think.

Some top-line vibes in no particular order:

  • As discussed, I faded (read: bought) this harsh spate of supply. Research in Motion (RIMM) and Amazon (AMZN) were pure eyes (both trade dry in the face of supply) while the SSO and QLD are "pure tries" with trailing downside stops. Should we take another leg down, discipline will trump conviction on the pure market plays.

  • Positions aside and hands over eyes, a pure sniff of our trading tells is begging caution (and may soon be begging period). NYSE internals are 8:1 negative, the brokers (XBD) are down a nifty 10%, retail is off almost 4% and the dollar is 60 bips higher. Keep it in context (following the recent run) but please keep it in mind.

  • Other double digit Debbie Downers? Bank America (BAC), Citigroup (C), Goldman (GS), Deutsche Bank (DB), Merrill (MER), Morgan (MS) (-17%), Schlumberger (SLB), Nabors (NBR), Smith International (SII), Weatherford (WFT), Deere (DE), News Corp (NWS), Advanced Micro (AMD), Micron (MU), Sandisk (SNDK), Baidu (BIDU), MBIA (MBI), Silver Standard Resources (SSRI), Apex Silver (SIL) and our ol' pal Dryships (DRYS).

  • Yeah, it's Nosty out there (with a capital N). Discipline over conviction and risk management over reward chasing as we continue to find our way. And remember, Minyans, if you choose to dabble, trade to win, never trade "not to lose." Nobody ever scored a goal skating backwards on their heels trying to defend an empty net.

  • As always, I hope this finds you well.

Ah you can talk about the pit, barbecue, the band was jumpin', the people too... - 2:06 pm

Talk about going the wrong way! Last week's historic gains notwithstanding, Boo isn't messing around today. Out of the gate and from the word "go" the bears have been large and in charge. The crimson tide started in Asia, spread to Europe and dutifully infected U.S. financial assets. From soup to nuts and head to toe, there's nowhere to run and few places to hide as we edge our way into a brand new month.

Some top-line vibes in no particular order:

  • Any trader worth his or her salt has battle scars. The key, as something we often say in Minyanville, is that good traders know how to make money but great traders know how to make a loss. The definition of an investment should never been a trade gone awry and we need to remember that if we hope to be among the chosen few in a position to prosper on the other side of this ride.

  • Consistent with that thought, and as a continuation of the real-time tries shared earlier on the Buzz, I'm operating with a trailing stop on the SSO and QLD (neither of which have been elected yet but both of which are getting close).

  • With regard to Research in Motion (RIMM) and Amazon (AMZN), I'm inclined to give them a bit more room but won't rationalize my risk if they breach their previous lows. Both are small enough to add lower but representative enough that I'll participate if the tide turns. Treat this subject with care but both names feel like they want to trade higher when the hemorrhaging abates.

  • Consistent with the Minyanville mission to identify potential fixes for this mess (beyond the arbiters of time and price), I wanna thank all ye faithful who shared their thoughts and encourage those who haven't to be a part of the solution. We're all in this together and now, more than ever, we need to remain unified.

  • You can't (shouldn't) trade invisible catalysts but we must always respect that they're "out there." As such, keep in mind that policy makers are desperate and we could see a meaningful move (such as the suspension of mark-to-market) at any given moment. You don't have to agree with it, mind you, you just have to see both sides.

  • How do I get long Advil in front of Friday morning?

Sometimes Right, Sometimes Wrong, Always Something! - 3:18 pm

Wowzers, if that's the contra-hour rally, I'm not sure I wanna see the next step (it could be a doozy!). How am I approaching it? Same as it ever was, sans emotion, with humility and defined risk. Some random thoughts as we ready to exhale:

  • In a perfect world, when I initiate intraday risk (as I did today with the SSO and QLD), I like to "catch cusps" and set my stop above my entry levels to ensure "trading for a credit."

  • That obviously doesn't always work--in a perfect world, I would have hair inflation and weight deflation rather than the other way around--so the onus is on us to adapt.

  • As such, on that last little blip higher, I tossed on a fitty-cent trailing stop on my slightly in the hole positions and will flatten that particular risk win/lose/draw into the close (particularly since I'll be out of pocket for the better part of tomorrow).

  • To be clear, and as you might have surmised by now, my inclination is that we could see some liftage from current levels (where I dipped a toe). If we've learned anything through the years, however, it's that discipline must always trump conviction and the mechanics of the swing trump the results of the at-bat.

  • Oh joy, Hank is confident. And there we were, worried that policy makers were asleep at the wheel. Wait--is that acrimony? Sorry, we don't "do" acrimony in the 'Ville but sometimes "things" are tough to stomach.

  • Lemme hop, please, as the Trading Gods just took my SSO and QLD and deposited them in the Bank of Humility. As always, I hope this finds you... finding your way in a way that finds you well.


Please be advised that the 2008 Holiday Festivus to benefit the Ruby Peck Foundation for Children's Education has officially SOLD OUT as we tagged our magical 300 Minyan mark. If you (or someone you know) would still like to attend, shoot us an e-mail and we'll see what we can do. We strive to take care of our own in these parts and as always, we'll do our best to circle ye faithful.

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Positions in RIMM, AMZM, DRYS, SSO, QLD
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