Investment Capitalist

Magazineline.com

Today’s housing numbers were a game changer for me. Sometimes, one’s brain learns to tune certain things out while sitting on the trading desk. At times, this filter becomes too good and blocks out important facts. Generally, the a.d.d. prevalent amongst all of us on the trading floor (as if it’s a prerequisite) keeps us in check and able to process multiple streams of data throughout the trading day. There is no way to describe the blitzkrieg of information that comes at us. Spice this up with an over-sized position in Goldman or Google, which is temporarily moving against you. Now, add to this your boss, the firms Head Equity Trader, and a partner, seen walking towards you, instantly breaking your concentration, but in a positive, productive way. A few slaps in the face, a smack on the head, a tightening of the face muscles as he’s restraining from unloading his wrath, and I find myself snapped back to reality. An instant flushing of the deck by folding all of my cards. A little stretch of the neck, crack of the knuckles, and what rings in my head?  “I want you to get back to your methodical way of doing things. Trying to scalp is not your thing, and you suck at it.”  No kidding. I’m getting scalped.

I recall the hours and hours of research, and the reams of charts I’ve looked at in the past few days, weeks, months. Realizing none of my trades for the day had anything at all to do with this research: All of it purely reactive trading designed for market making. When taking purely scalp trades, triggered from reactions to the tape, one has to also be making a market in that stock, otherwise it’s a losing proposition. Realizing there are only 45 minutes left in the trading day, I load up on the four most potent trades I had recognized the prior day. In those 45 minutes, I put “paid” to the notion of scalping. Making markets is good for those times when trading conditions are terrible. Unlike now, when there are too many opportunities to keep track of.

As I was saying, today’s housing numbers were a game changer. All bets are off for the bears being able to hold the line here. Because up until now, the rally has been purely within the boundaries of a technical correction. Today, during the firms live Macro Trading show, I laid the case that underlying conditions, as I have been saying since mid February, have become favorable for stocks. Now, March 8th is in the rear view mirror, and although it was a hell of a ride and a powerful one, I think it was just the first salvo of many to come from bulls with enormous amounts of dry powder to use and abuse the overly short retail traders that keep stepping in and getting run over.

Now that we are challenging the technical boundaries of a correction, and in some sectors where you can see signs of early leadership, I do not think the bears will be able to hold the line. Their only defensive responsibilities are right here at these key technical levels. Last week, I mentioned several long time short only hedge fund managers had converted to the other side. Kynikos, Greenlight, Grant, and a few others have accepted the inevitable. This massive wave of liquidity, like a river flowing in only one possible direction, will find the path of least resistance to get into the system.

The yield curve has steepened to a level that right now, the most profitable business to be in is banking.

This is a game changer. And if you think I’m just a raving lunatic that writes for himself, you’re right. But I also know how to read my instruments. I relate this to a fighter pilot becoming disoriented during pitch black conditions, and losing his sense of up or down. At that moment, if that pilot goes with his instincts, he’s dead. If he reads his instruments, he’ll live. So regardless of my frantic screaming and jumping up and down on my desk as a raving bull, put down the Post and read the instruments. And if you don’t know how, you can spend the next several years learning, or you can tune in to T3Live.com where I discuss it in-depth every week, and when I’m not saying anything of importance, you can put me on mute and listen to any of the other 4 unconditionally committed pure blood traders on the radio. www.T3Live.com Free trials all around, I’m buying.