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Monday Morning Quarterback


One of the oldest adages is that the reaction to news is more important than the news itself and, indeed, there are plenty of examples of the underlying bid.


Run, run, run for the roses
The bigger it opens, the sooner it closes
Meddle, meddle, friend of mine
All good things in all good time

(Jerry Garcia)

Good morning and welcome back to the sweltering pack. The mercury's rising and it's getting hot as the critters are back and they're ready to trot.

On the heels of a fortnight full of volatility, one which saw five 100 point Dow swings over the last eight sessions, the bovine are staking their claim to market fame as they once again eye S&P 1540.

One of the oldest adages is that the reaction to news is more important than the news itself and, indeed, there are plenty of examples of the underlying bid.

Intel cost cuts to harm margins? The stock was up 11%.

General Motors seeking concessions from the UAW? 12%, thank you very much.

How about the proprietary trading dings at Bear and Goldman or the give back in Google? Thanks, but it worries as the broader market shrugged it off.

Heck, even the continued uptick in rates, contextually problematic in an ARM-twisting finance based economy, is being viewed as a pure "adjustment" for a stronger, global economy. The pundits assure us that we needn't worry until 5.5% or higher on the 10-year and, well, thus far they're right.

The bull case, from my perch, has been two-fold for some time. First, the transfer of wealth remains in play as a function of the weaker dollar and foreigners continue to buy everything from high-end real estate to ETF's.

The second, and something to watch into the Blackstone IPO, is the transfer of risk, from hedge funds and private equity into the public domain.

Both are powerful, both are big money and both are reasons to respect the Matador Crowd as they eye the path of least resistance into the upcoming earnings season.

I continue to view the 3-D downside risks (debt, dollar, derivatives) as cumulative and lurking. Until the tape validates their existence, however, they'll simply serve as words rather than news.

Quick Bits

  • As Friday was June expiration, please allow a few hours for traders to square and pare before getting a true read on the tape.

  • Stocks have rallied the last 13 Fridays in a row in anticipation of just another manic merger Monday.

  • The 10-year yield remains a "tell," along with market breadth (when 2:1 or better, either way), the financials (BKX 116 is underfoot, 118 resistance awaits), Beta (Google, Apple in particular) and emerging markets (EEM).

  • There are likely stops on the other side of S&P 1540ish, if and when. Rally, and we'll likely see a "vacuum" ( as we did at S&P 1527). Fail, and chatter of a "double top" will percolate.

Minyan Mailbag


You mentioned paring back long exposure, but I can't recall you ever putting any on? Unless you mean Weatherford International (WFT)? The only other two names I recall you trading are Golden Star (GSS), and Sun Microsystems (SUNW) - but I thought you typically sold on higher prices, bought on lower, which, given the current prices in these two, doesn't fit the bill.

That said, do you trade other names than those that are disclosed in the Buzz, have I missed a name/trade, or is there something else?


Hey hoss-

Good question and, come to think of it, I understand your confusion. Not ALL my trades are discussed in public as some names are 'thin' and we try to steer clear of talking about those (lest someone thinks that we're trying to manipulate, which is "so not us."). You are correct in SUNW and GSS and, well, I'm still there in both although they don't trade all that snazzy (active traders should see the $4.80 level in SUNW that we discussed earlier this week).

It should also be said that, while our obvious goal is to 'buy low and sell high,' that's clearly not always possible (case in point are the S&P puts I bought yesterday). Sometimes, we gotta bite the bullet and book a loss. It ain't fun but it's part of the game and par for the course. The definition of an investment should never be a trade gone awry.

In any event, sorry for being a bit vague. Old school Minyans (such as yourself) know that we pride ourselves on being honest and forthright in the 'Ville and talking about "selling longs" without indicating particulars can indeed be taken the wrong way. Mea culpa on that!


And finally, lest you left a bit early on Friday, the following vibes were scribed by Professor Jason Goepfert of Sentimentrader on the Buzz. A prism of thought is crafted by a multitude of perspectives and we hope this helps you shape your take:

The latest Commitments of Traders report shows that large commercial hedgers (aka the "smart money") in the major equity index futures were net long to the tune of $10 billion+ as of this past Tuesday.

This is extraordinary, not just since they tend to sell heavily into rallies instead of buy, but that the amount of the net long position hasn't been this large since 1999. In the history of the data, it has gone over $10 billion just a few other times, mostly during 1994/95 and mid 1999.

On average, the most that the S&P 500 lost during the three months following the prior instances was around -2.8%, compared to an average maximum gain of +5.4%. This data has been urging bullishness for many weeks now, and so far has proven helpful in that regard.


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Position in sunw, spx, gss
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