Random Thoughts: Midday Market Update
The revenge of the bulls.
What a difference a weekend makes, eh? When I last posted to our real-time Buzz & Banter, I was surrounded by stacked boxes in our old haunt. This morning, 70 S&P handles and 600 DJIA points higher than Friday’s lows, we’re settled into the fifth edition of MVHQ as the bulls settle into a groove.
I won’t say it was a relaxing weekend but it was most certainly time well spent. With the exception of an excellent Mother's Day brunch, I've been in-house and on call since Friday's close. Interested Minyans can sniff out our digs on the MV Facebook page, where we're making a concerted effort to facilitate a more interactive community experience.
Some quick snaps to the entire team -- Super Sarah in particular -- for executing this Herculean task, during Mercury Retrograde no less! It's important to enjoy the moments, for that is the first step towards understanding "the purpose of the journey is the journey itself." For just like that, the moment's gone and now, my friends, the real work begins.
I was up the better part of the night -- a combination of scribing vibe and not being able to sleep; take that for what it's worth -- and pulled together some thoughts on last week's market crash and Shock & Awe: Part Deux. If you missed it -- I know, we’re all busy -- take a peek at Will the EU Emergency Fund Work? It’s worthy of a read as we embark on this five-session set.
Some Random Thoughts:
- Our best thoughts are shared in real-time on the Buzz & Banter. I could explain the opening (15-handle) fade, the retreat to intuitive support (at S&P 1150), the attendant bounce and other relevant dynamics, but it’s a much better read before the moves actually happen.
- I’ve had my eyes on Grandma Goldman (GS) since the opening bell. I didn’t like the way it traded then (up ‘only’ a finski) and I don’t like the way it’s trading now (up a deuce and change). Keep an eye on this stock. If it flips the crimson switch today, it could splash some cold water on an other wise hot tape.
- Please note the VXO is off 40% which, according to the fine folks at Bloomberg, is the largest single day drop in history.
- Shock & Awe Indeed! Overnight sovereign spreads were crushed -- 30-40% in some cases, although many are still elevated from where they were in April -- as government mortar shells bombed speculators. German and US CDS spreads, it should be noted, remain near recent highs.
- Remember back to September 19th, 2008 when Martial Law was declared for the markets? The S&P rallied 73 points that Friday -- and an additional 42 handles the following Monday -- before losing 500 handles the next two months. It's also worth noting that TARP passed on October 3, 2008, preceding that 500-handle drop.
- Remember again and please, there are two issues of note. One is the EU eye-popper and the other is faith and confidence in the system following last week's 1000-Point Plunge.
- I'll simply say this: in terms of faith and confidence -- and perhaps, safety -- today’s rally, at some level, better hold today. For my part, I nibbled back on some S&P puts (vs. Friday’s late day sales) with the index in and around 1160. Sometimes right, sometimes wrong, always honest.
- The most interesting thing on my screen? That's a loaded questio,n but I would draw your attention to the greenback, which was only off 60 bips this morning. That’s not a lot following the pretty powerful rally we’ve seen. Sorta makes you wonder if caught carry-traders are trying to unwind their risk.
- SPAIN IS UP 14%... all the way to the downtrend?
Click to enlarge
- Red Beans in the Green Sea include Walmart (WMT) and Transocean (RIG).
- Tricks of the Trade: Reduce the size of your positions when volatility upticks, and don't slap too much exposure on at any one price (allow yourself a margin for error).
- The question remains: If the sovereign lifeguards saved corporate America, who will be left to save the lifeguards?
- Good luck Minyans and remember to leave emotions for weddings and funerals.
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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