Random Thoughts: Why Energy?
Crippled crude, indiscriminate selling setting up a counter-trend rally.
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 Investing in a Perfect Storm and Trading Low Vs. Market Bottom.
Gate Sniffage! - 10:02 am
- Man it's muggy in NYC today. I wonder if that's a sign of societal acrimony?
- Tension is gripping the Street and, as social mood and risk appetite shape markets, we must respect the meltage potential. That's why we write "only trade with what you can afford to lose" and preach discipline over conviction as we find our way.
- You know my approach in here and while I'm "long Ginger, short Mary Ann" (trading smaller), I continue to operate through the lens of buy dips to sell rips (with a focus on the energy space).
- Why energy? A few reasons. First, remember how bullish everyone was near crude $150? We're now seeing the mirror image of that scrimmage. Second, that's where the lion's share of the indiscriminate (hedge fund) selling is and while I hate trading invisible catalysts, there are babies in that bathwater. Finally, I continue to have concerns that "something" could happen in the Middle East prior to the election, which would put a bid to Texas Tea. I hope I'm wrong on that last point but hope (or a lack thereof) isn't a viable investment vehicle.
- Vehicles include Weatherford (WFT) and BHP Billiton (BHP) (which trades like pooh).
- I've also got some EEM and QLD calls, which I'm losing money on, thus far, but trading around (dips and blips)
- Udder Eyes? Breadth is 2:1 positive (don't blink), Gold is getting jack hammered (was that a double top?), General Electric (GE) trades laggy, Google (GOOG) (-5%), JP Morgan (JPM) and Wells Fargo (WFC) (pinkberries) and the "cuteness" of the fragile "higher lows" (again, don't blink) across the board.
- It sure feels like everyone is expecting a probe lower. Keep an eye on the financials as a tell in that regard.
- Keep in mind that expiration exacerbates volatility in the days preceding expiration (that would be today).
- Hindsight is 20/20 but a little foresight can be dangerous thing.
Dip Schtick! - 10:34 am
Mea Culpa on not sharing this earlier but for those that follow the Toddo Sleep-o-Meter, it should be noted that I didn't catch a wink last night. That typically means something big is coming down the pike.
I suppose that's better than sleeping like a baby, which is to say I wake up every few hours crying my eyes out.
Am I concerned about an outright patty melt? How can I not be? Given the cancer is bigger than the patient, serious slippage is well within the probability spectrum.
That makes my counter-trend style risky but if there wasn't risk, it would be called "winning" not "trading."
Yes, that dip was necessary if we're gonna rally and no, it does not guarantee that we will.
The most bearish thing on my screen? The higher dollar and the action in the banks (Citigroup (C), Wells Fargo (WFC) -6%).
The most bullish thing? Market internals are (thus far) holding (Nazz is 3:2 positive) during this Fletch-style probe. That, and the fact that we're only 8400 Dow points from ultimate support.
Carole King? Seriously? Please make it stop...
And... is it me or does Carole King look like Glenn Close in Fatal Attraction?
Mama Mia and Hank Moody - 11:09 am
With all due respect to Carole King, she's being booted from the Minyan mind-share this morning by ABBA. Mama Mia, here we go again, as the bears prowl and growl towards Friday's intra-day lows. Test and retest, rinse and repeat, game on in a big way. Are we having fun yet?
Some Vibage, American Style:
This is the Matador City chant today. (Thanks Pep)
- Ix-Nay the internal ray of light. As it stands, there are three red for each ahead with the first hour and a half behind us.
- Green beans in the Red Sea? Uh... hmm... Sandisk (SNDK), EMC Corp. (EMC), Dow Chemical (DOW), Dupont (DD), Schering Plough (SGP) and select semis such as Altera (ALTR), Xilinx (XLNX), Applied Materials (AMAT) and National Semiconductor (NSM).
- As hard as it is to do, try relaxing your grip on the handlebars as it'll make for a smoother ride down this bumpy road.
- Full Circle? If I would have told you a year ago that you could buy the FXI (i-shares China) at a 65% discount, what would you have said?
I'm not quite sure why I just thought of this but as I did, I will share. I was just overwhelmed with the remembrance of the September 2001 marketplace. It was very oversold into Nokia (NOK) earnings (this morning, by the way) and we were well overdue for a bounce.
Old school Minyans will remember that we were very bearish on the macro landscape (from the March 2000 highs) but flipped our switch for a Snapper into that fateful day.
Oversold became very oversold (and buying, while early, was ultimately rewarded). I don't wanna freak anyone out (other than myself) but as this is a stream of consciousness, consider that very uncomfortable feeling streamed.
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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