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Random Thoughts

By

...does anyone else feel there are gonna be two sides to the summer volatility story?

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  • Keep your eyes peeled to market internals as they're now 2:1 negative.

  • That, coupled with the downside reversal in Goldman (GS) and the brokers, bodes well for the "paring" scenario (in front of the Turnaround Tuesday earnings parade).

  • "It is noted that the CBOE equity put/call ratio has recorded readings in the 0.50 region for seven straight sessions. It is therefore reflecting the most option trader optimism in several years." Jay Shartsis on today's Buzz.

  • My favorite part about the new & improved 'Ville? I cannot tell a lie…

  • Tort…

    A few Minyans have pinged asking whether we're in the midst of the "echo bubble" that we used to muse about way back when. My response was "to which bubble are you referring?"

    If we're talking stocks, I think it's situation specific---it's hard to make the case that the broader tape, at these levels, is a parabolic frolic. That is, of course, unless you pull back the camera and view the dew through a four year lens.

    1987 Present

    Click to enlarge Click to enlarge


    What I will offer is that we're seeing bubbles of a different breed, from debt to derivatives to hedge fund and private equity, that are fueling asset classes around the world. Yes, it can last longer than most folks believe but that should not sway you from a methodology that will allow you to stay in the game regardless of the

    Trailing stops. Defined Risk. Proactive patience. Discipline over conviction. It should never take a bad tape to invoke good mechanics.

  • And Retort, courtesy of Minyan Michael Santoli of Barron's…

    Hey Guys, the new face looks great-- congrats!

    Just a quick note on the now vs. '87 charts:
    Look at the percentage moves, or use a log scale. This time we're up less than 40% in the four years, while heading into the crash the Dow had well more than doubled. This time the S&P has doubled off the bottom, while it had tripled from the '82 low into the '87 high.

    I happen like the '87 analogy myself (more importantly, so does Professor Woody Dorsey), but the velocity of the move in recent years hasn't yet matched that period's. Which is why I'm partial to '97 as a touchstone (globalization was considered only a bullish thing, crowded emerging markets trades, runaway financial "innovation," deals that then seemed crazy - MS/DWD, T/TCOMA, etc.) though in '97 we had the benefit of a massive bond-market rally, which we now lack.

    We know '97 as a pretty good year, but there was a 12% S&P drawdown in 20 days that fall.

    Cheers-
    MJS


    Thanks Mike, and we now return to our regularly scheduled Random Thoughts…

  • Thank you sir, may I have another?! After the sharp Snapper of Friday, the homies are rolling back to earth as fundamentals play tug-o'-war with the Buffett/Hovnanian (HOV) speculation.

  • Energy is also taking a well-deserved breather as money continues to rotate into beta and cyclical issues.

  • Speaking of cyclical issues, does anyone else feel there are gonna be two sides to the summer volatility story?

  • The OSX, while 26% above its 200-day, continues to hold its very nice uptrend.

  • Chill, Phil, you've simply got a case of the Mondays and it promises to be a heckuva busy week.


R.P.

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