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Randoms: The Splenda Rally

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The bulls enjoy some artificial sweetness.

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With the expiration hangover behind us and a heckuva hump ahead, these vibes are top-of-mind as we hike through Turnaround Tuesday.

This morning, before my 6:30 AM spin class (in preparation for mountain biking next week), the sequence of thoughts in my crowded keppe was: 1) China was down? 2) Futures are flat? 3) Can we learn a lot just by watching? Indeed, the first push higher today wasn't a shocker and if we continue upwards, I suppose the writing was on the wall.

So, what have I done? Added to my short-side tech bets with a 2% stop-loss. Minyans know I've leaned against this level numerous times and while the margin for error has thinned faster than my hair, it remains my preferred directional bias. Sometimes right, sometimes wrong but honest -- always honest.

The twists in the midst are two-fold. First, there's a real chance I'll get stopped out of my exposure before the next (perceived) wave crashes to the beach. Second, I really want to head to the hills sans exposure. I rarely take a true vacation and my preferred position would be "long S'mores and short stress" as I proudly represent the Raider Nation in Colorado.

Alas, there's a lot of trading before that comes to bear so here's what I'm focusing on here and now:

  • I "get" what the government is trying to do and-being fair-I agree that we needed to stabilize the patient before we attempted to resuscitate it. An unforeseen hazard, however, has likely been outsourced.

  • Two "oh-by-the-way" thoughts: First, bottoms are points and tops are processes. Second, news is always worst at the bottom and best at a top.

  • I had dinner with a fellow who runs four beans last night (yes, big beans) and he referenced this stretch as "the most disrespected rally of all time." I nodded slowly and soaked it in, understanding there are always two sides to every trade.

  • I like to look for stocks not participating in a big move, either way. When the tape is gapping higher, we note "Red Beans in the Green Sea." When the wave is lower, we'll eye "Green Beans in the Red Sea." You can learn a lot just by watching.

  • What are the Red Beans today? Citigroup (C), select semis (Broadcom (BRCM), Altera (ALTR), Xilinx (XLNX) and Applied Materials (AMAT)), the drillers (watch these please) and some consumer non-durables (Johnson & Johnson (JNJ), General Mills (GIS), Coca-Cola (KO)). Research in Motion (RIMM) and Amazon (AMZN) also trade slinky.

  • In terms of tea leaves, breadth is 2:1 positive, the dollar is (marginally) lower and the ranks are thinning. Please size your risk accordingly.

  • Eagle-eyed Minyan Mark Eckleberry notes that the morning rally failed right at Russell 2000 Index (^RUT) 50% bear market (588).

  • If you haven't chewed through Professor Coop DeVille's morning missive, I strongly suggest you do. Much like Pep's DeMark analysis, I learn a little more each time I read his sage suppositions.

  • The "Analogy of the Day" has to go to Minyan Peter, who continues to weigh in despite my continued insistence that he stay away, unplug and enjoy his family vacation! Selfishly, however, I truly enjoyed the following muse:

    "Yes, a liquidity crisis was averted, but the credit crisis continues and there is little Mr. Bernanke can do about that. As the towering spruce trees that surround me remind me, "Don't measure the world by minutes and hours, measure them by years and centuries. It all takes time."

  • There's no substitute for experience. I remember 1999 and 2000 like it was yesterday and I couldn't be more certain the wheels would fall off the technology wagon. Discipline and patience kept me in the game until such time I was in a position to profit and that's a lesson I feel compelled to channel to ye faithful.

  • I will also share my missteps from 2003 with hopes you have the foresight to avoid them altogether. There's no pride involved; simply the collective benefit. I lost, I learned and I'm a better trader for it. Everybody hurts, sometimes.

  • Do you think Minyanville has been a game-changer in financial media?

  • The Powershares (QQQQ) put additions this morning were, in fact, November paper.

  • Personally, I don't run with the crowd; I don't know where the cliff is.

  • Maybe we should call this the Splenda Rally given all the artificial sweeteners?

  • Thank you, for gratitude is latitude.


R.P.

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