I'm sitting here, stuck in the middle of a bunch of members of the ursus family, thinking about what the trout are taking on the South Platte this afternoon. Needless to say, I can't wait for the upcoming weekend on the river. Fly fishing, at least for me, is an escape to clarity, away from the madness that is currently the market.
But while I wait for the weekend to arrive, I'm bouncing a couple of scenarios off of my furry friends, who've been crowding around my trading terminal today. Bobby the Black Bear, also known as Ursus americanus, has been the most aggressive of the group today. He keeps telling me to lean on the Nasdaq right here and now. (Bobby wanted to make sure that I told all of you that the Nasdaq-100 (NDX.X) took out its relative low just recently!!)
Bobby's also been laughing, rather cynically, at the further deterioration on the fundamental front in tech. In fact, as I was typing this, he joked, "You think that Motorola (NYSE:MOT) news was bad? Huh...just you wait, things are about to get saucy." (I didn't find that funny, for what it's worth.)
Patty the Panda, sometimes referred to as Ailuropoda Melanoleuca, however, has been a little more level-headed about today's price action. She's my good buddy, mind you, and knows when not to press her luck. In fact, she's been covering some of her shorts into this mess today. Her reasoning, as she explained it, was quite logical: The Nasdaq is oversold by way of Stochastics, Bullish Percent, and/or the ARMS Index - take your pick. Although, she did remind me that oversold doesn't necessarily equate to a short-term bottom.
Even though Patty's be arguing a solid case for taking some bearish gains off the table into this weakness, Bobby's been insisting on pressing his bets.
"You know, Eric, I have a superior nose," Bobby just whispered into my ear, "and I can smell it, can't you?"
"The fear, the capitulation of those silly hoofed ones," he explained.
While I appreciate where Bobby is coming from with the capitulation argument, I just don't see it today. The "fear gauges" of the market are in parabolic mode, but not even near the levels they were back in April. And, heck, the Fed's been slashing rates like mad this year. Doesn't that mean the market HAS to rally? (I know more than a few money mangers still clinging to that premise.)
So I'm stuck here, at what seems to be a short-term, pivotal point for the Nasdaq. Do I press my bearish bets? Or, do I cover and get ready for an impending relief rally?
Gary the Grizzly, known as Ursus arctos, who's been around the game for awhile, growled, "You ever think about a straddle?"
Eric Utley Option Investor