Morning Audibles 4.12.10 - Wait, did I say Audible?

In football, an "audible" is where the quarterback comes to the line of scrimmage, surveys the defense, and may decide in that moment to "audible" to an alternative play selection if he feels either that the play that was called would not be a successful one (because it appears to be properly defensed, or, if a different play might expose some weakness. Basically, when you see Peyton Manning flapping his arms around like Morris Day doing "The Bird", you know an audible is coming.

It appears that nevermore in the history of the New York Stock Exchange will an audible be required. The playbook is simple. Cover all shorts on Friday. Sleep happy and long over the weekends, and you'll wake up Monday, and be "magically" richer by owning stocks. It's really that easy folks!

So I'm not going to offer any more insights here. I'm going to K-I-S-S. Buy stocks, they go up forever! They don't even decline by 1%. If they ever do go down by 1%. Beg, borrow, and steal (kind of the way our world governments do things).

Illustration?

Greece, over the weekend. (They're the "beg" & "borrowers" - or, should I say, "first in line to do such"). But read the fine print people. Here's what was actually said. "This decision today was no decision on aid for Greece," Finance Minstry spokesman Michael Offer told Dow Jones Newswires. "But it was only about technical preconditions for aid by further specifying the decision of the heads of state and governments. We expect, we hope that Greece is now in a situation where it can continue to refinance itself on the capital markets, as previously."

What CV reads is that there was NO DECISION (until certain criteria were met). Doesn't matter... It's a reason to buy Euros, sell Dollars, and pump the S&P (while everyone was distracted watching golf - congrats Phil!).

Andy T has again given us his "technical" view on the matter. The following is a reprint of his Sunday afternoon thread (which I will make a habit of featuring as the Monday morning thread). Andy's charts offer a "calmer" picture of potential levels (and possibly durations of data points that get processed through the meat grinder which are the capital markets). Good luck people!

Lastly, CV would REALLY like to express his congrats and best wishes for Phil & Amy Mickleson and family. It was a great moment in what has been a difficult period!

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By Andy T (April 11, 2010)

One of the very interesting developments the last several weeks has been the correlation between the Dollar and the stock market. Unlike most of last year when the DXY and the stocks/commodities were "inversely" correlated, that relationship has been broken. Basically, the "Peter Schiff/Jesse's Cafe Americain" crowd that was predicting both doom and gloom for the U.S. Dollar and the stocks have been wrong on both markets. While the Dollar strength was predictable and anticipated using technical analysis and sentiment, the associated rally in stocks and commodities has certainly been a surprise to me. It will be interesting to see how the stock market now reacts to any Dollar weakness....

This weekend's thoughts were dedicated to the DXY which has achieved all of the price and duration targets we had been expecting. It's probably time for longer term investors to take a few chips off the table. I would not advocate completely exiting long positions, but there is a decent chance of decline back to 78, giving us better levels to buy back in for the next phase of this bull market. The risk is that my count is incorrect and the market will just keep on chugging higher. For this reason, it would be prudent for longer term traders/investors to stay at least a little bit long (maybe 25-33% of a max long position?).

Traders who want to short this market should use 81.91 as a "stop loss." Alternatively, those who want to stay long this market should use 79.50 as "stop loss." That 79.50 has been good support for awhile now, hasn't it?

I don't have a report on the S&P because there's not much new here from last week. The market has not yet "peaked" and seems destined to print a 1200 handle. Short term support for the S&P futures is now 1183 and 1171. So, it won't make sense to bail on length or initiate shorts until 1171 is taken out on the futures.

Hope everyone had an enjoyable weekend. Good luck in the week ahead.

DXY Report 11 April 2010