Intraday Trading Observations

From Peter Tchir of TF Capital Markets

It finally feels safe to get long some stocks and high yield.  The move into noon was scary.  The move since then has been equally scary.  S&P moving around 30 points in half an hour seems wrong, but it does feel that weak longs got culled with these moves, once, if not twice.  IG seemed to get used as a hedge because people couldn't believe how far HY had dropped and didn't want to pay up, so for the first time, investors seem to have gotten themselves hedged and wedged.  That should help on any move upward.  I have to believe that some Eurpean investors shorted S&P into their close as the move so big and fast.  They are stuck now hedged and wedged and are likely to want to close out rather than keep.

The market has been showing up as heavily oversold, and finally feels like its oversold.  The NFP number wasn't bad today.  I was definitely surprised.  I am dubious about the accuracy of the number, but nonetheless, given how oversold we are, it should add some support.  I don't think the governments of the world, nor the central banks can do much to stem the crisis, other than print money in whatever form they prefer, but it seems like we will face a barage of these announcements.  The ECB and Italy seem to be firing the first salvo, but I would be shocked if we don't also get a good QE3 rumour later today.

I'm not sure how long I will want to stay long.  Nothing will have been solved, and I think Europe in particular cannot be solved because it will take the political will and money of a couple countries to solve the economic problems of other countries, but enough sweet things will be said, it will be easy for the market to rally.  And European credit actually traded fairly well today for the most part.  Some ugly moments for sure, and huge bid/offer, but it wasn't a disaster.  I don't think we can get a particularly big rally, because after these moves, investors have to run smaller positions.  I think SPX moved up 10 points and gave back 10 points in the time I wrote this