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Game Face!

By

An "outside day" in the S&P is historically a bearish formation

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Good morning and welcome back to the field of play. Hoofy's Heroes were driving deep into positive territory and backed the bears to their own goal line when WHISTLE!--the Minx threw the flag and caught the bulls offsides. After the five yard penalty, the bovine have huddled up and will once again try to punch through the defensive line. Can they establish the run and jam the averages through resistance or will Boo's crew stuff the offense and take over on downs? It's playoff time in the city of critters and the crowd is on it's feet--just win baby!

The great debate in technical analysis is whether traders follow it because it works--or whether it works because people follow it? Case in point--everybody and their cat now knows that BKX 800 is an inflection point and, if you pull up a chart, you'll see the witchcraft at work. Test, fail, test fail...it reminds me of my college days when I was pledging Zeta Psi! With everyone playing the break out thesis and leaning long, the obvious question is: was it too obvious?

The problem with focusing purely on technicals is that it's only one of three primary trading metrics. Chart patterns offer a backdrop with which to trade but, ultimately, the fundies need to support the price action. As if there weren't enough X's and O's on our chalkboard, the wild card will always be a function of psychology. It's good...but what were expectations? It's bad...but how much is reflected at these depressed levels? It's a constant game of minxy juxtaposition and, at any particular time, one metric will matter more than the others.

We're 60% through earnings week and, thus far, it's been...there. The bulls and bears can both make valid arguments on the fundamental front--it all depends on whether they're choosing to "look through" the muck. Hope springs eternal and, eventually, there will be a sustainable rally when the upticks follow the market's lead. The problem is, and this is painfully familiar to most--if you jump offsides, you're gonna be penalized for illegal motion.

They say that a best offense is a good defense and that's a fine line when managing money. We can't just drop into the nickel package and run out the clock. We need to establish a back control offense, grind out three yards of dust and, when the safety cheats---go deep. It's a new game--far different than the one many of us have known--and we must adapt to the field conditions if we hope to win. Prepare yourself (mentaly and physically) for a long battle and, when it's all said and done, may the best team win.

Good luck today.

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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