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Random Thoughts: See the Housing Double Bottom


The housing debacle will likely stay front and center for years, but the journey is entirely more important than the destination.


The following is a recap of Toddo's morning idea flow from the Buzz & Banter. It is being reposted here for the benefit of the borad Minyanville community.

Gate Sniffage! - 9:59 am

  • S&P 1405 to NDX 1990ish is the range until either side is broken. See both sides and please remember that technicals are but one of our four primary metrics.

  • There's no word yet whether Jeff Spicoli will be named to the Bear Stearns' (BSC) management committee despite what appears to be a close friendship with the former CEO.

  • May the Schultz be with you! Starbucks (SBUX) is caffeinating the late-to-the-party shorts that piled on the McDonald's (MCD) news after a 33% drop since November. Why do I bring this up? Two reasons: Field position and time horizon. When a trade appears to be too easy, either way, it likely is.

  • The most bullish thing on my screen? 3:1 positive internals.

  • The most bearish thing on my screen? The action in the semis.

  • If you could live in any time period, which would it be? The 60's would be cool, dude, just to see Jimi and Jerry jam at Woodstock. The wild west would also be cool, but only if I had a quick trigger finger.

  • Watch the homies here. If they don't go down on the KB Homes (KBH) disaster, the reaction to news may be more important than the news itself. Just remember to identify "trades vs. investments" in any of thise names. Particularly on a Turnaround Tuesday.

  • Lotsa great feedback on the Beta Launches of Minyanland and The Exchange. Both still have more Kinks than Ray Davies but alas, that's why they're in Beta. Please take the time to tool around and offer feedback where needed. We're a community for this very reason!

  • Hit 'em hard Minyans.

America's Worst Nightmare? - 10:10 am

No, not O-Dog, although he's pretty scary.

I'm talking about the housing debacle, which has been front and center for many months. And it will likely stay front and center for years (bubbles, and the attendant capacity, take time and price in the correction process). For purposes of trading, however, the journey is entirely more important than the destination.

For those looking to "just trade 'em, baby," please see the double bottom at HGX 126 (a trade below could be used as a sell-stop). We've got uber-defined risk (and a potential catalyst in prior pending home sales being revised considerably higher), so it's worth a look.

In the interest of full disclosure, I'm playing this small as I dip my toes back into the murky muck.

Now, who's got some snaps for my petrol?

There's a Little Black Spot on the Sun today.... - 11:13 am

The Minx slinks into hour deux as traders wonder what to do. As I ready for my 11:00 management meld---while, simultaneously trying to settle on my ten themes for 2008--I wanted to toss some top-line vibes out to ye faithful.

  • That stench you smell wasn't Phoebe "playing with Zoe,", it's the action in the homies following this morning's economic numbers. Thus far, KB Toys, er, Homes (KBH) (-4%) is weighing on the sector although, in all fairness to O-Dog, the HGX is up on the day. Defined risk removes emotion, we know, so...yeah.

  • Other flies in the try? The financials, from Bear Stearns (BSC) to Bank of America (BAC) to Citigroup (C) to Morgan Stanley (MS) are all dancing in Red Dye. While the banks and brokers offered conflicting messages yesterday, they're both pretty in pink today. Keep these on ye radar as psychology is too fragile to absorb pukage by this group.

  • On a positive note, NYSE internals remain stubbornly sticky at 2:1 positive.

  • Before I left for my (what seems like a dream) vacation, I was watching the potential (bearish) dandruff in the XAU (metal shares). I was cautious as a function of a potential dollar bounce, among other things. Professor Lance Lewis stepped up and pounded the table, which was spot on (see the chart here). I was wrong and, as there's no hiding in the 'Ville, I own it. Just goes to show you that technicals are but one of four primary metrics.

  • By the way, that's Cassidy. She's the Minyanland Den Mother and the object of Boo's affection.

  • Stepping into my management meld so 'scuse me while I whip this out. Heading into my 18th year in this business, I'm still uncomfy stepping away from the fray during the trading day. Crazy, eh? In any event, I hope this finds you swell. Pork chops and apple sauce, swell.

  • And, just to be a guy, I'll offer a free Minyanville tee to the first Minyan that can tell me which two pop culture references reside in the buzz bullet above!

Take a Meeting, Miss a Beating! - 12:55 pm

Alrightee then, I emerge from my major management mindmeld to find Zed Dead, the financials red and the housing names feeling dread. Some topline thoughts as I strap back in and anxiously await lunch. Arrrrrrrrrrrrrrrrr!

  • Countrywide (CFC) is regressing before our very eyes. When Bank America (BAC) injected billions, the stock was at voting age. On Halloween, she was a super sweet sixteen. Thanksgiving? Bat Mizvah central. Christmas? A hat size. Now, this pup can fit on a ring finger (with small hands at that). My point? Cheap can get "cheaper" and defining risk, rather than scaling in (read: stylistic approach) is tremendously important.

  • Speaking of which, the homies, which I nibbled on this morning, are going down faster than a flock of geese. The man in me wants to "layer in" to cheaper exposure but the disciplined trader in me is close to getting stopped out. The mechanics of the swing are always more important than the results of the at-bat.

  • One of my ten 2008 themes (coming soon) is the continuation of the transfer of wealth. I foresee this as a buffer rather than an outright solution but, for what it's worth, my sense is that the most beaten down sectors--which would include the homies--will be among the acquisition targets. That's not a reason to get long (invisible catalysts suck) but I figured I would toss it out there.

  • Consumer non-durables and pharma are also on that list, so you know, and both act better than Ed Norton today.

  • Snaps to Minyan Jordan Josey for being the first to name Blazing Saddles and The Brady Bunch as the answers to the quasi-trivia on my last Buzz. Pick a critter and wear it proud!

  • The VXO is down on the day? Jeezums! My better coverage guys are telling me that, while they've seen some put buying today, the overall vibe is that folks don't have enough protection on.

  • Finally, please note that, if Hoofy holds the fort, he'll point to A) the balanced breadth (now) in the face of pain and B) the fact that we just filled the opening gaps. Just seeing both sides, as we like to do, as we find our way through the Tuesday fray.

  • San Dimas High School Football Rocks!


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