Randoms: Banks a Lot!
There are two ways to view today's action in the financials.
We flagged JP Morgan (JPM) as an awkward redhead out of this morning's gate. As mused in real-time on the Buzz & Banter, when a stock opens pink in a sea of green, it typically portends looming supply.
Wells Fargo (WFC), Goldman Sachs (GS), and American Express (AXP) followed the downside switch flippage (say that ten times fast), with Citi (C) and Bank America (BAC) on their red, devilish tails as I pound this keyboard with great vengeance and furious anger.
There are two ways to view today's action in the financials. First, they massively out-performed yesterday-it's why we urged Minyans on the Buzz & Banter not to press the downside-and this could be some straight-laced ketchup (they rest while other sectors lift). That's the bull case and one Hoofy sincerely hopes will play out.
The other scenario is "As goes the piggies, so goes the poke-particularly as we again toggle in and around broader resistance in the S&P." Boo will quickly note that the financials have under-performed the last few months and that, my friends, can be viewed as a classic divergence.
The key, at least as far as this particular dynamic is concerned, is a matter of scope and a function of degree. If they waffle-sorta down, but not really-the broader tape should hold and could "go." If they get sacked like Tom Brady (yes, I'm still pissed about the Tuck Rule), all bets are off-literally.
Other tells are thus far trading swell; Breadth is 4:1 positive, the dollar is down (a necessary precursor but no guarantor of higher asset classes) and beta, by and large, is bid.
Keep the bank action in perspective but see it, for it's the single most important sector in the marketplace. A Royale with Cheese indeed.
- After watching the Saints last night, count me amongst the believers. They're exciting to watch, Brees is the real deal and it's impossible-yes, impossible-to root against the city of N'Awlins after what they experienced with Katrina.
- I was tooling around Facebook last night responding to some comments to my recent article and wrote "Dubai, in my view, won't turn the tide in and of itself-too much pride (and oil) in the region. If it's a straw on a much larger (sovereign) haystack, all bets are off. WATCH THE DOLLAR PLEASE."
- That was the domino theory we spoke of yesterday in the Random Thoughts video. Sub-prime didn't "matter" either; it wasn't even part of the mainstream lexicon until it sparked the infamous contagion. As someone who traded through Thai Bahts and Russian Rubbles, I can assure you that a butterfly on the other side of the world can indeed cause a stateside tsunami.
- Remember when we used the analogy of government fingers being invented to plug holes springing open in the financial dike? Fannie (FNM), Freddie (FRE), American International Group (AIG), Wachovia, Lehman...remember that jazz?
- The current construct is akin to governments around the world tossing sandbags against that same dike. The crisis of confidence, if and when it arrives, will be the realization that the bags are filled with smoke, mirrors and a whole lotta I.O.U.'s.
- With that said, we've been discussing the risk of sovereign debt defaults for some time, including the recent debt insurance spikes in Bahrain, Qatar, Turkey, Russia, Ireland and Greece. When I awoke to find that same story on the front page of the New York Times Business Section, I couldn't help think of a watched pot.
- IF (big if) the S&P can squirt through the multiyear downtrend to the upside, the next tangible resistance will come into play in and around S&P 1200. See both sides, Minyans, always see both sides.
- While I have you, keep an eye on Venezuela on the heels of Caracas shuttering four banks.
- T-Minus THREE days until Festivus and the critters are beside themselves with excitement. While we know many Minyans can't make it to Manhattan to support The Ruby Peck Foundation for Children's Education, please help as you can to effect positive change in the leaders and dreamers of tomorrow. It's what we do and a little love goes a long way...
- Good luck today; hit 'em hard!
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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