Who’s On First?

Abbott: Well Costello, I’m going
to New York with you. The Yankee’s manager gave me a job as coach for
as long as you’re on the team.

Costello: Look Abbott, if you’re
the coach, you must know all the players.

Abbott: I certainly do.

Costello: Well you know I’ve met
the guys. So you’ll have to tell me their names, and then I’ll know
who’s playing on the team.

Abbott: Oh, I’ll tell you their
names, but you know, it seems to me they give these ball players
now-a-days very peculiar names.

Costello: You mean funny names?

Abbott: Strange names, pet
names…like Dizzy Dean…

Costello: His brother Daffy

Abbott: Daffy Dean…

Costello: And their French cousin.

Abbott: French?

Costello: Goofe’

Abbott: Goofe’ Dean. Well, let’s
see, we have on the bags, Who’s on first, What’s on second, I Don’t
Know is on third.

Costello: That’s what I want to
find out.

Abbott: I say Who’s on first,
What’s on second, I Don’t Know’s on third.

Costello: Are you the manager?

Abbott: Yes.

Costello: You gonna be the coach
too?

Abbott: Yes.

Costello: And you don’t know the
fellows’ names.

Abbott: Well, I should.

Costello: Well then who’s on
first?

Abbott: Yes.

Costello: I mean the fellow’s
name.

Abbott: Who.

Costello: The guy on first.

Abbott: Who.

Costello: The first baseman.

Abbott: Who.

Costello: The guy playing.

Abbott: Who is on first!

Costello: I’m asking you who’s on
first.

Abbott: That’s the man’s name.

Costello: That’s who’s name?

Abbott: Yes.

Costello: Well, go ahead and tell
me.

Abbott: That’s it.

Costello: That’s who?

Abbott: Yes.

Pause…

Costello: Look, you got a first
baseman?

Abbott: Certainly.

Costello: Who’s playing first?

Abbott: That’s right.

Costello: When you pay off the
first baseman every month, who gets the money?

Abbott: Every dollar of it.

Costello: All I’m trying to find
out is the fellow’s name on first base.

Abbott: Who.

Costello: The guy that gets…

Abbott: That’s it.

Costello: Who gets the money…

Abbott: He does, every dollar of
it. Sometimes his wife comes down and collects it.

Costello: Who’s wife?

Abbott: Yes.

Pause…

Abbott: What’s wrong with that?

Costello:  What I wanna know
is when you sign up the first baseman, how does he sign his name?

Abbott: Who.

Costello: The guy.

Abbott: Who.

Costello: How does he sign?

Abbott: That’s how he signs it.

Costello: Who?

Abbott: Yes.

Pause…

Costello: All I’m trying to find
out is what’s the guys name on first base.

Abbott: No. What is on second
base.

Costello: I’m not asking you who’s
on second.

Abbott: Who’s on first.

Costello: One base at a time!

Abbott: Well, don’t change the
players around.

Costello: I’m not changing nobody!

Abbott: Take it easy, buddy.

Costello: I’m only asking you,
who’s the guy on first base?

Abbott: That’s right.

Costello: OK.

Abbott: Allright.

Pause…

Costello: What’s the guy’s name on
first base?

Abbott: No. What is on second.

Costello: I’m not asking you who’s
on second.

Abbott: Who’s on first.

Costello: I don’t know.

Abbott: He’s on third, we’re not
talking about him.

Costello: Now how did I get on
third base?

Abbott: Why, you mentioned his
name.

Costello: If I mentioned the third
baseman’s name, who did I say is playing third?

Abbott: No. Who’s playing first.

Costello: What’s on base?

Abbott: What’s on second.

Costello: I don’t know.

Abbott: He’s on third.

Costello: There I go, back on
third again!

Pause…

Costello: Would you just stay on
third base and don’t go off it.

Abbott: Alright, what do you want
to know?

Costello: Now who’s playing third
base?

Abbott: Why do you insist on
putting Who on third base?

Costello: What am I putting on
third.

Abbott: No. What is on second.

Costello: You don’t want who on
second?

Abbott: Who is on first.

Costello: I don’t know.

Together: Third base!

Pause….

Costello: Look, you got an
outfield?

Abbott: Sure.

Costello: The left fielder’s name?

Abbott: Why.

Costello: I just thought I’d ask
you.

Abbott: Well, I just thought I’d
tell ya.

Costello: Then tell me who’s
playing left field.

Abbott: Who’s playing first.

Costello: I’m not…stay out of
the infield!!! I want to know what’s the guy’s name in left field?

Abbott: No, What is on second.

Costello: I’m not asking you who’s
on second.

Abbott: Who’s on first!

Costello: I don’t know.

Together: Third base!

Pause…

Costello: The left fielder’s name?

Abbott: Why.

Costello: Because!

Abbott: Oh, he’s center field.

Abbott: Sure.

Costello: The pitcher’s name?

Abbott: Tomorrow.

Costello: You don’t want to tell
me today?

Abbott: I’m telling you now.

Costello: Then go ahead.

Abbott: Tomorrow!

Costello: What time?

Abbott: What time what?

Costello: What time tomorrow are
you gonna tell me who’s pitching?

Abbott: Now listen…Who is not
pitching.

Costello: I’ll break your arm if
you say who’s on first!!! I want to know what’s the pitcher’s name?

Abbott: What’s on second.

Costello: I don’t know.

Together: Third base!

Pause…

Costello: Got a catcher?

Abbott: Certainly.

Costello: The catcher’s name?

Abbott: Today.

Costello: Today, and tomorrow’s
pitching.

Abbott: Now you’ve got it.

Costello: All we got is a couple
of days on the team.

Pause…

Costello: You know I’m a catcher
too.

Abbott: So they tell me.

Costello: I get behind the plate
to do some fancy catching, Tomorrow’s pitching on my team and a heavy
hitter gets up. Now the heavy hitter bunts the ball. When he bunts the
ball, me, being a good catcher, I’m gonna throw the guy out at first.
So I pick up the ball and throw it to who?

Abbott: Now that’s the first thing
you’ve said right.

Costello: I don’t even know what
I’m talking about!

Pause…

Abbott: That’s all you have to do.

Costello: Is to throw the ball to
first base.

Abbott: Yes!

Costello: Now who’s got it?

Abbott: Naturally.

Pause…

Costello: Look, if I throw the
ball to first base, somebody’s gotta get it. Now who has it?

Abbott: Naturally.

Costello: Naturally?

Abbott: Naturally.

Costello: So I pick up the ball
and I throw it to Naturally.

Abbott: No you don’t you throw the
ball to Who.

Costello: Naturally.

Abbott: That’s different.

Costello: That’s what I said.

Abbott: Your not saying it…

Costello: I throw the ball to
Naturally.

Abbott: You throw it to Who.

Costello: Naturally.

Abbott: That’s it.

Costello: That’s what I said!

Abbott: You ask me.

Costello: I throw the ball to who?

Abbott: Naturally.

Costello: Now you ask me.

Abbott: You throw the ball to Who?

Costello: Naturally.

Abbott: That’s it.

Costello: Same as you! Same as
YOU!!!  I throw the ball to who. Whoever it is drops the ball and
the guy runs to second. Who picks up the ball and throws it to What.
What throws it to I Don’t Know. I Don’t Know throws it back to
Tomorrow, Triple play. Another guy gets up and hits a long fly ball to
Because. Why? I don’t know! He’s on third and I don’t give a darn!

Abbott: What?

Costello: I said I don’t give a
darn!

Abbott: Oh, that’s our shortstop.

This week witnessed another resurgence of the
“who’s on first” market. Once again, indexes such
as the S&P 500 and the Nasdaq rallied nearly 5% in a single day
after a news release that was given a positive spin. It was spun
positive enough that our old friend Abby Normal Joseph Cohen (does
this make me a little man for teasing her?) was back on television
Thursday after the bell to once again proclaim a market bottom. Rest
assured, folks, I am journaling all of these events nicely for use in
my forthcoming book. 

With all of the hoopla this week about the bottom being in, etc.,
one’s mind can’t help but to wonder why we should be listening to the
same people who didn’t see or didn’t warn us of the top in the first
place. These are the same people who have been calling the bottom for
the past 7 months (since the Fed started cutting rates); these are the
same people who didn’t see the cliff coming that the global economy
fell off, who are now telling us that things have bottomed. But how
could they have bottomed when CEOs are making statements such as
“this is the worst slowdown we have ever witnessed” and have
absolutely no visibility or idea when it is going to get any
better?  How can they know we have bottomed and things can’t get
any worse when they don’t know where we are or where we are headed?
But darn, there I go again applying logical, factual analysis to an
otherwise fact-less and truth-less game. Yes, is all getting clear
now…delude yourself, keep buying, believe everything you hear and
you will do just fine. Naturally. Oh, I forgot, he’s the catcher.

Remember, if you are walking around a nude European beach in August
with a swimsuit on, YOU are the one getting the stares.

But, alas, with the ongoing proforma accounting olympics, we are
witnessing CEOs and CFOs continually spewing out nonsense that
“beats the street” but could feasibly be massaged into
anything +/- whatever needed. I honestly love earnings releases that
are recited as “XYZ company beats the street with the pro forma
earnings results. Their earnings reflect an 85% decline from the same
quarter last year but they beat the street by a penny!” Yes, it
is amazing and, yes, it is getting out of hand. Once again, it is our
job to see through the smokescreen and decipher the facts here; don’t
expect anyone to give you easy trades on a silver platter. 

The truth of this past week’s rally is not due to the perception that
Microsoft did anything worthy of praise. It is not that the unanimous
conclusion that the economy has seen the worst and is now racing back
up. This rally was simply due to the fact that market internals
reached short term oversold levels while reaching a key level of
fibonacci retracement at the same time the weighted put/call ratio
approached pessimistic levels only seen 8 times since 1998. Throw in
the fact that the VIX was exceedingly low, which created some very
cheap option prices, mix in a media and analyst celebration on
Thursday and Friday and, voila, you create a scenario whereby
institutions made untold money by playing cheap options on Tuesday and
Wednesday that tripled and quadrupled by the close of the week. Not
bad. Let’s all just realize and admit that the institutions are
“in the know” constantly and can position themselves however
necessary for market-moving events. Recognizing the reality of why
this rally took place will help us identify similar situations in the
future that we can capitalize on.

As such, I was away from trading action on Thursday and Friday but can
comfortably review the state of the indexes from a safe distance
today.

The chart of the NDX shows a “spinning top” formation on
Friday that indicates that the current move up is becoming
exhausted.  Of course, one single bar does not a signal make, but
it is an early warning that the bulls may have expended a lot of their
ammunition the last few sessions. Be on the lookout for a retracement
in the short term.

An examination of the Dow chart here reveals multiple levels of chart
resistance hovering overhead. Naturally (not the catcher) we will
consider entering short sales against failure at these resistance
levels. There is no question that the market is now locked in struggle
between pullbacks to support and rallies into resistance. It is too
soon in this formation to recognize which move will prevail in the
short term. As such, we are sitting in roughly 90% cash at the moment
as we closed out a great majority of our short positions early in this
past week.

Tune out the noise, trade the charts.

Have a great weekend.