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Monday Morning Quarterback: The Trading Staycation


The summer is drawing to a close.


A seasonal summer stretch that allows professional traders to escape the flickering ticks without fearing markets will structurally shift in a meaningful way. Last since in 2006.

Welcome to the last week of August-the "quiet period" on Wall Street when the frazzled and frayed attempt to sneak a peak at all they've missed while staring at those pesky screens.

It's the last chance to relax and recharge batteries before the home stretch of the calendar year kicks in, a time to balance and remember that the purpose of the journey is the journey itself.

That is, at least, how it's supposed to be.

The last two summers haven't followed the traditional script. Ever since the bloodied remains of American Home Mortgage washed ashore in the crimson tide the subprime storm, a day at the beach hasn't had the same appeal. I suppose the same can be said of tanning in general although Angelo Mozilo still hasn't received that memo.

The sad and simple truth is that there is no rest for the weary. When the market is open for business, the potential exists that we'll see mind and mood altering information.

That's the world we live in, one woven together with derivatives, dependent on credit and reliant on the velocity of money to functionally continue.

Be that as it may, this is a week when second stringers will be making decisions on many trading desks. The last thing they'll want to do is explain to an already agitated boss why they made a stand or took a loss.

Expect ranks to thin and volume to dissipate as we edge closer to our requisite three-day respite and stay alert, Minyans, as it won't take much to move the tape.

Some Random Thoughts:

  • We picked up chatter late Friday that a $3 billion commodity hedge fund shuttered its doors and halted redemptions. That, as much as anything else, may have exacerbated the downdraft in crude.

  • To that end, we've seen a 30% year over year increase in hedge fund failures. While we wouldn't wish harm upon anyone, it's a necessary evil in the weeding out process we've been discussing for years.

  • The irony? Just as volatility and leverage were responsible for many of these failures, those failures and the attendant deleveraging of their portfolios is now responsible for the volatility.

  • Minyan Michael Santoli of Barron's, in his always excellent weekend column, spoke about the "psychological recession." It's again worth noting that social mood and risk appetites shape financial markets, not the other way around.

  • The stock market crash didn't cause the Great Depression-the Great Depression caused the stock market crash and that prolonged period of socioeconomic malaise was an era, not an event.

  • Is it me or was that the most enjoyable Olympics ever?

  • Minyan Kirk shares the observations that the MACD dipped below 50 on three separate occasions and the RSI dropped under 30 four times between 2000 and 2002. Thus far this cycle? Nada and zilch, respectively.

  • Professor Jeff Cooper offers some interesting observations regarding the potential for a retest of S&P 1260. If you haven't taken a test drive of his service, that gratis trial is one piece of advice I don't mind offering.

  • Some Themes on my Radar heading into year-end?

    • The corporate credit crunch and banks' ability to roll their debt.

    • Societal acrimony, both stateside (into the election) and abroad (as geopolitical tensions mount).

    • Retail Therapy, or the need for retailers to seek therapy when the winter version of "Staycation" dampens holiday sales.

  • Have a great week and think positive Minyans-profitability begins within.


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