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Monday Morning Quarterback: Sell in May and Go Away?


Traders eye key technical levels.


Good morning and welcome back to the snickering pack. Following an action packed week that found the mainstay averages finally finish above important technical toggles, we power up this frisky pup for a fresh five-session set.

For the last two months, the trading fraternity has been religiously watching S&P 1405 and DJIA 12800-along with a litany of pertinent sub-indices-as clues to the upside fuse. They mounted that hump on Thursday and held tough despite Freaky Friday supply that emerged as we readied for our requisite two-day respite.

The question, quite naturally, is whether technical affirmation was warranted or if, as Professor Jeff Cooper likes to say, "fast moves come from failed moves." Both he and I have been warily watching S&P 1420 as a potential false breakout, a pop & drop that may pave the path of maximum frustration as a precursor to "sell in May and go away."

Two dynamics are jockeying for attention as we ready anew to turn the screw. The first is the S&P downgrade of Countrywide Financial (CFC) to junk, a move that warranted a nose scrunch after we openly asked "why" the Fed again took proactive steps Friday morning. We've learned through experience that it pays to ask these questions rather than blindly bet that they'll work.

The second newsworthy note this morning is the annulment of the Microsoft (MSFT)-Yahoo (YHOO) marriage after failing to agree on price. Yahoo claimed victory while Microsoft ceded defeat, a stance not yet supported by the respective stock swings. It remains my view that in the next-generation digital model, eyeballs equal audience and a premium will be paid for reach. It's indeed an interesting time to be in this space, both as an observer and a nascent participant.

Some other, random thoughts on this particularly pretty Cinco de Mayo:

  • I pared my exposure into the initial push above resistance (including a sale of Microsoft-always honest). I'm left with some situations (including Gannett (GCI) and McClatchey (MNI)) on the long side, a snivlet of piggy puts against it and plenty of dry powder for when I see the whites of their eyes.

  • As I'll be doing the Texas two-step tomorrow (in and out of Fort Worth), I plan to keep my risk tight and overnight exposure light. Any day trading efforts will be chronicled, as always, on the Buzz & Banter.

  • Minyan Peter is about as plugged into the financials as anyone I know. When he talks, it pays to listen.

  • I've gotten some great feedback from Seattle Minyans on a possible west coast fest on May 27th. If you haven't pinged interest and would like to share some hugs and handshakes, lemme know so we can get an accurate keppe count.

  • Opinions are like elbows, we know, but the weekend found three more muses on the state of affairs:

    • Warren Buffett offered that the worst of the credit crunch has passed although he would "enjoy seeing the stock market fall by 50% for the opportunities it would create."

    • Jamie Dimon of JP Morgan (JPM) does not expect the U.S. financial crisis to end soon and remains cautious.

    • Alan Greenspan, the man, the myth, the maestro, said we've slipped into an "awfully pale recession" that may continue to languish for the rest of the year.

  • Good luck Minyans. Let's hit 'em hard!
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Position in gci, mni
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