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The Market Needs a Hug


Translated from trader speak: the market has problems...


My beer-swilling buddy who made the very wise "maximum pain trade" bullish call prior to the Fed-Led rally last month just pinged me to note that Merrill (MER) "sits in the middle of a huge part of the prop trading business globally (the credit downgrade by S&P) will lead to less risk taking... vols should be much higher."

Translated from trader speak: the market has problems, in the view of my buddy. He's getting short right here, right now, for what it's worth. Other thoughts...

  • Speaking of things spoken of before: the S&P cash set a low of 1489.56 this morning before bouncing. Sound familiar? Both resistance and support weaken with every touch. I wouldn't bet on 1490 holding up against too many more sharp attacks.

  • Which brings us to Prof. Cooper's 1475; a breach of which would bring us to... pretty much hideous grimness (or "buying opportunity" for the glass-half-full crowd).

  • Amazon (AMZN) is taking a lot of blame for catalyzing today's selling. Folks, it's just not its fault. We've seen good earnings from tech throughout this rollover. Amazon beat and guided higher. As for margin woes; Amazon is a retailer; if you're looking for 50% margins you're shopping in the wrong stock aisle. The problem with Amazon's stock here is the same problem facing all the momentum players; there are plenty of reasons to sell ("Lock in gains", "broken momentum", "expensive" etc.) and not a ton of reason to try a heroic long effort.

  • When the Fed cuts again on Halloween, will the market say "Boo"?

  • Merck (MRK) is trading like a champ today, for what it's worth. Don't confuse being long anything for being actually "safe" from a continued sell-off but, if you're predominantly long (as most are), I'd rather be boring.
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