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Random Thoughts: The Rally Before Reality?


Define risk as this upside can't be trusted.


Editor's Note: The following content was posted in real-time on our premium Buzz & Banter and is being shared here for the benefit of the Minyanville community.

Morning Dew! - 9:11 am

  • First, Phew! While Hurricane Gustav was a bruiser, white light and good vibes to those on the Gulf Coast for it being A storm rather than THE storm of the century. Now, let's hope that Hanna, Ike and Ten--the three other systems forming in the Atlantic--follow its anticlimactic lead.

  • Are you ready for some football? I am and, for possibly the only time this year, I can boast that my Raiders are tied for first! I bring this up as I eye the flag pattern we spoke of last week.

  • That pennant formation broke to the upside on Thursday and closed (retested) the precise breakout point on Friday. Pre-market futures are pointed higher, which would keep the "rally into the election" (S&P 1330-150) thesis alive.

  • Do I plan to play it that way? Yes and no--yes, in that I have no problem making defined risk bets should an advantageous set-up present itself but NO in that my sense is that a Category 5 storm might be brewing on the horizon in the form of a credit comeuppance. I plan on delving deeper into this discussion tomorrow.

  • Nick & Toni (aka Toddo & Doug Kass) tied a bow on the summer with the third installment of our mind meld. It's front and center on the 'Ville should ye faithful wanna peruse it.

  • Names on my radar include Baidu (BIDU) (interesting that it remains below double secret support, er, resistance despite the recent market movements), Simon Property (SPG) ($92 is a big level) and General Electric (GE) ($28 is the right shoulder of fresh dandruff).

  • Remember those bubble comparison charts we trotted out while crude was pushing $150 as we humbly offered that Texas Tea would somehow find its way to par in front of the election? As Mark Twain once said, history doesn't always repeat but it often rhymes.

    Click to enlarge

  • While I'm fresh and ready for a strong year-end push, keep in mind that alotta folks are using this week as their respite from reality. In that vein, keep your risk tight and size smaller than it might otherwise be as a function of still thin ranks in the marketplace.

  • Good luck Minyans--let's end this week with a smile on our puss and some jingle in our jeans!

Trading Like Ruben Carter - 9:50 am

Bennet makes an insanely excellent point regarding the downticking Chinese economy possibly having more influence over the price of crude than the not-as-bad-as-expected Hurricane.

However, following up on Professor Shartsis' Buzz--and with an eye cast towards three more storms on the horizon--I've dipped into some USO calls (despite my continued belief that crude will trade par into the election and perhaps lower thereafter as a function of slowing global growth.

Just a trade, Minyans, and a schnitzel at that.

Bob Dylan would be proud.

Gate Sniffage! - 10:36 am

  • Does Turnaround (Counter-Trend) Tuesday still apply following a three day weekend?

  • After scribing a bullish bent on July 16th, I opined on August 6th, in The Recovery and the Storm, that we could well see a run into the elections. I just reread that missive because I sometimes have a tendency to overthink things (ya think?).

  • As I just said to Minyan Doug Kass on the phone, the "best set-up" would be if the markets jack higher towards S&P 1330-1350, which would take us straight into the trendline of lower highs that have been in place since October.

  • Why? I continue to have serious concerns regarding the credit markets in general and the September issuance in particular. Financial institutions have $871 billion coming due into year-end and that won't magically resolve itself.

  • If risk appetites swallow that supply, we're off to the races. If they don't--and I don't believe they will--we could see a yelp lower that would crush the rush of late-to-the-party bulls.

  • How am I playing this? Smaller, for the time being, with some trading positions (long crude, short Baidu (BIDU) under $320), my small bet on Yahoo (YHOO) and a whole heckuva lotta dry powder so I can strike when the iron wrinkles out the sprinkles.

  • We're getting set up open the floodgates to Festivus 2008, which will be held on December 4th in NYC. Last year, almost 400 Minyans shared hugs and handshakes as we celebrated another year of life and raised money for the healers, dreamers, thinkers and visionaries of tomorrow. We sincerely hope that you'll find the time to join us for this year's soiree.

  • As always, I hope this finds you swell. Back in the saddle, swell.

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Position in USO, BIDU, YHOO, AXP, MS
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