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Freaky Black Friday Potpourri: Watching Key Dow Levels


Given how thin it'll be today, there's no shame in slightly smaller positions.


When Black Friday comes, I'll stand down by the door
And catch the grey men when they dive from the fourteenth floor

(Steely Dan)

Good morning and welcome back to the top button pack. With pigskin and poultry now in the rear-view, the most die hard of traders will look what to do.

The late Wednesday action, after a respectable Snapper attempt late in the day, failed to find its footing and flailed into the close. Whether it was fund redemptions or pre-holiday risk aversion is academic at this point.

It was what is was and it is what it is. Now, with a thin and thinner shortened session upon us, we must figure it out anew.

Last night, while I was digesting turkey and the tape with "my brother," (who has the best pure trading feel that I've come across in my career), he opined that he was getting bulled up for an bovine run. "It's too negative out there," he said in his thick Bahstan accent, "I think we've got a decent upside trade coming."

I communicated to him that after trading from the short side for quite some time, I flipped my lid and began trading from the long side on Tuesday. "Pure trade and dancing between the elephants," I told him, "and I'm staying very tight defined with my risk." Why am I trading 'em that way versus averaging down and scaling in? Three reasons:

  • Structurally, there continues to be tremendous risk. We've been eyeing the wobbling wheels for a while and while you can trade seven ways till Sunday as long as you're disciplined, you can't rationalize risk.

  • As measured by the VXO, we're a ways away from the fear fulcrums that have accompanied previous panic lows.

  • The mainstay averages are still flat to higher for the year. That perspective is important as it feels like we're much lower than we really are.

Still, as traders, we're not as concerned with the destination as we are the path that we take to get there. Through that lens, we've been talking about three important levels in the DJIA. 13,000, 12,800 and, if that doesn't hold, a straight shot to DJIA 12,000. We happened to close directly on DJIA 12K so that, coupled with BKX 90ish, remain technical levels of lore.

For my part, I've got some manageable defined risk calls on (including Citigroup (C), which continues to trade dry on a relative basis) although, in the interest of forthright disclosure, I pared my position when the stuffing was on the Wednesday wall. I'm not complaining for each day is a world unto itself. Besides, given how thin it'll be today, there's no shame in slightly smaller positions.

Random Thoughts

  • I haven't heard anyone talk about Black Friday as a double entendre yet.

  • Some widely watched averages are down 10% from the highs, which has been a "close your eyes and buy 'em" level for the bulls in the past.

  • Keep in mind, however, that the financials are down twice that-some much more-so if "as goes the piggies, so goes the poke" plays out, we've got room to swoon (albeit not in a straight line).

  • How can you root against Brett Favre?

  • Minyans share 'cause Minyans care. One worthy old schooler passed along this safety check on money market funds.

  • Where can this rally run? S&P 1450 doesn't seem too far-fetched.

  • I'll be joining Hoofy and Boo on FOX Business Happy Hour today at 2:00 EST for those looking for a break from the malls.

  • Good luck today, Minyans, and make mindful decisions. The risk profile you go home with is the one you'll awake with on Monday.

  • Fare ye well.


Holiday Festivus is here! Come join us and support the Ruby Peck Foundation For Children's Education at an old-fashioned Southern-style hoe-down in the heart of New York City on December 7th. Click the image below to learn more!

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