So put me on a highway
And show me a sign
And take it to the limit
One more time
One of the first lessons I learned in trading is that the reaction to news--rather than the news itself--holds valuable clues to the underlying supply/demand equation. Whereas the Intel, Yahoo and IBM trifecta pummeled the post-market futures on Tuesday, similarly sour news from eBay and Apple failed to dent the demand last night. Something to keep in mind as we waffle above oft-mentioned support (S&P 1275 and NDX 1705) and toggle near outsized open interest (S&P 1275 and QQQQ 42) in front of tomorrow's expiration.
We carefully eyed the financials yesterday as we thought the piggies would help dictate whether Hoofy could orchestrate a rolling rotation rather than an outright (downside) migration. While certain symbols bent (JP Morgan), the ability of Citigroup to stick above $48 (and the XBD to "base" above 200) was an incremental positive in an otherwise drekky day. I'm made no bones about my big picture concerns in this sector but, as a trader, I respect (but don't defer to) the price action. They remain on my radar today as we ready for a fresh fray.
I field alotta phone calls asking me for my thoughts on gold. My first response--always--is "what's your time horizon?" I offered in Ojai that the metal and energy complexes would likely share the leadership baton for years to come and opined that a hand-off was likely as we dusted our (victorious) softball uniforms. The XAU has been on a tear since, adding 46% in the last five months and garnering attention in mainstream circles. Me love them long-term--still--but given the snazzy and jazzy sprint they've enjoyed, I recently lightened some exposure and widened my "scales" for future nibbles as they correct.
Over the last few years, compression has been a common discussion in the 'Ville as funds increased the size of the bets (and the use of leverage) to offset the lack of volatility. While we know that this dynamic isn't a causation of price action, we must remember that it has the potential to exacerbate it. As volatility rolls through the asset classes into equities (VXO +11% this week), please pay particular attention to your definition of risk. Not in the Webster's sense, mind you, in a "what's my maximum loss?" sorta way.
I've seen my fair share of euphoria over the last 15 years but perhaps the biggest bubble yet remains intangible. As the disconnect between perception and reality manifests--as a function of volatility levels vs.. geopolitical risk, optimism vs. the conditional elements for a decline or the innate expectation that profiting is a right rather than a privilege--society continues to operate with an imbedded sense of entitlement. I readily acknowledge that traditional sentiment measures remain below levels once seen but psychology, in my view, is an ever-expanding and ultimately problematic dynamic. As with any bubble, it's difficult to assertain where we are in the the elasticity phase and yes, one more "blow off" (in price and mindset) is certainly within the probability spectrum. I will offer humbly offer that managed expectations and preservation of capital will ultimate serve in our collective best interests.
I recently offered some perceived themes that could potentially emerge in 2006, which included consolidation in the energy and metal sectors, diversification away from dollar denominated assets and 'foreigner to foreigner' transactions. This morning, as I powered up my trusty turret, news that China National Petroleum and India's Oil & Natural Gas Corporation--the biggest oil companies in each nation--may be eyeing a $3 billion venture in Russian operated by BP Plc. It makes sense, of course, as the two countries combine to consume 11% of the world's global oil production. "The governments of China and India are more concerned about high oil demand in coming decades," said Hong Kong investor Tim Leung, according to Bloomberg, "They're also trying to cut reliance on areas under U.S influence (such as Saudi Arabia and Iraq).
We've been banging on the beta version of the new Minyan digs all week and plan to migrate the Minyanship to our new home tonight. As with any project, and as old school Minyans have come to expect, we've put our heart and soul into making this the best possible experience for ye faithful. As we clear this hurdle and set our sights on what's to come, you can expect that the same effort and attention will be focused on broadening our content, clearing the MiM2 bar, affecting positive change and building a community that we can all be proud of. It's funny, I've been building the 'Ville for five years and our collective sense at MVHQ is that we've just entered the starting gate. We've gotta lot to look forward to and, on behalf of everyone in our Circle of Trust, we look forward to sharing our journey with you.
Good luck today.
Daily Recap Newsletter