Hold onto your hats, Minyans, this Thursday promises to be chock full of nuts!
We're busier than Bob Dole in a Pfizer (PFE) factory so rather than scribe vibe in our regular format, we're gonna dive right in and take a spin. Hold onto your hats, Minyans, this Thursday promises to be chock full of nuts!
Yesterday afternoon, while bowling averages were way up and mini-golf scores were way down, late-day rumors dismantled the market. I hadn't heard 'em at first but, while watching Goldman trade curiously heavy, dropping full points at a clip, I warned Minyans to keep their right hand up (while the tape was tickling her highs).
As you know by now, Hoofy fell into a trap door shortly thereafter as the (now denied) Goldman (GS) "preannouncement" story, along with (unconfirmed) banter that Fannie (FNM) and Freddie (FRE) debt ceilings were within sight. As I wrote on the Buzz, I wasn't jawing because I was short - I bought a fair amount of S&P puts between S&P 1488 and S&P 1499 - I was simply sharing my eyes and ears as that's what we do in the 'Ville.
While the short-side stance felt like an equity enema in the late afternoon, I was keeping loose grips on the handlebars as I eyed resistance (S&P 1490-1510 and, more importantly, the banks (BKX 111.50). Indeed, as far as that latter matter is concerned, the piggies' high poke yesterday afternoon was an uncanny print at BKX 111.60.
The market massively melted and, as I attempted to pare some puts as a function of discipline (no-I didn't get any off), the tape rocketed higher when it was reported that Goldman denied the rumors. I expected a relief rally but in the interest of honesty, I didn't see the full upside retracement coming. I've been watching tapes for over sixteen years and it felt like someone was unwinding . I was honestly surprised that one quelled rumor would spark such a sharp move.
I woke up this morning to find that BNP Paribas, France's largest bank, halted withdrawals from three funds because they couldn't "fairly" value holdings tied to the stateside sub-prime mess. IKB Deutsche Bundesbank also confirmed that they are holding a meeting today to discuss their "financial situation" following sub-prime losses. And the United Kingdom recently offered that their sub-prime crisis might be worse than it is in the U.S.
The U.K? Germany? And now Pepe Le Pew is holding his nose too? So much for containment.
So, what shot does the European Central Bank up and pull in response to these tidbits? They inject $130.2 bln dollars into the system in an "unprecedented response to a sudden demand for cash." Quite interesting, I would say, after the FOMC downplayed these very same concerns a few days earlier. We opined that Big Ben's hand was being forced by China and the more we hear, the more that makes sense.
I'm gonna make some put sales into the abyss (and the attendant volatility pop) and attempt to roll down my stops. This market is not for the meek, my friends, so if you're not involved, I would A) trade smaller, B) understand that it's VERY thin, C) remember that emotion is the enemy when trading and understand that the ability not to trade is sometimes as important as trading ability. Deep breaths and discipline.
- I've now heard seven people on mainstream financial media opine that either "we could close higher today" or "this is a buying opportunity." They might be right but that's not psychology that sparks a bottom in the vein of "denial-migration-panic."
- A little perspective, please. We've just given back yesterday's rally and remain 3% higher than Monday's lows.
- What did I do on the opening? I sold 25% of the S&P puts I added yesterday into S&P 1488-1495. Discipline over conviction, particularly since I wasn't taken on my offer into the faux Goldman melt late yesterday.
- My gut is that this initial bounce is Pavlovian and will fade lower but, as I have my bed, I'm gonna sleep in it. Even though, for some reason, I couldn't fall asleep last night.
- Seeds of green in the crimson steam? Some homies (watch these!), IBM (IBM), Yahoo (YHOO), Starbucks (SBUX), Proctor & Gamble (PG) and Amgen (AMGN).
- Shocker, Fokker! Rumors of a "surprise rate cate" are cascading around the street! We sorta figured this would happen after the ECB liquidity spigot but it's now loud.
- Watch the financials (they'll be the proxy of possibility) and remember, while we would likely get a sharp Snapper knee-jerk if Big Ben chimes, it would behoove Minyans to ask "why" rather than blindly bet. They just said risks remain to the upside--if they cut now, their credibility would be in serious jeopordy.
- OK--so here's a question I really wanna know. If you could have dinner with one person (across the spectrum of history), who would it be? My first thought was Leonardo DaVinci but that's not my final answer. Send 'em in and we'll tally 'em up later!
- Good luck, Minyans---and remember to breathe!
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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