Morning Thoughts June 7

  • Volumes good yesterday (+17% DoD and 5% above 10d) – closed at absolute highs – SPX ripped thru 1,300 and 200d – VWAP never tested on downside  – no short-covering evident – BIG asset reallocation from UST to equities – RISK back on (BETA +3.8%) – Homebuilders on a tear (above 100d) – TRAN back above 200d
  • The S&P 500 is now up 50 points since Tuesday’s open (including the overnight move in the futures today).  This level here is not the level to get long at.  You either took the binary risk on Tuesday and got long or are not doing anything at all.
  • Trading is a game of probabilities and the past few weeks have not been a good time for bucket 2 trading and the last few days havent even been good for bucket 1.
  • I remain looking for quick hits intraday and remain in cash otherwise.
  • The euro libor – overnight lending rate spread in Europe has eased off since December when they introduced LTRO.   Liquidity is not the issue anymore, it is one of sovereign solvency and contagion risk.  See the chart here.

  • The Russell 2000 has acted beautifully technically and is back above the 200 sma (red line).  Note the long selloff candle on Friday followed by a hammer on Monday, an outside day (engulfing candle) on Tuesday, and the big rally yesterday.  All very textbook stuff from a technical point of view.
  • Today is Bernanke day and we are in major headline risk territory.  I am keeping my timeframes super tight and size small until I see better risk/reward opportunities.
  • Also, note LULU is to open much lower today, near the $60 mark and the 200 sma.  It may be a stock to watch for quick trades.




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