It's a rainy day in the City of Minyans and the critters, dressed in jeans and sweatshirts, gathered at the town hall for some bagels and schmear. The Menagerie was admittedly fried after an active week of trading, but they knew that there would be no excuses when the closing bell rang to end the session. As they settled in around the big table, coffee in hand, the discussion turned to the stock market.
Boo: (wearing a backwards baseball cap) One up day in the market and shocker! ---here come the bulls. Silly little critters...how many times do I need to learn you a lesson before you finally get it?
Hoofy: Keep talking fuzz...your complacency is exactly the reason that this market could continue to lift. Whenever the bears sit there and smugly proclaim "let them go higher, I'll just average up on my short," it usually means the rally has some legs.
Boo: Listen, my brudda from another utter, you're being too myopic. You're trying to play the cute squeezy move higher while the "stream" is clearly lower. This market takes one step forward and two steps back. By trading from the long side, you've clearly got the stack decked against you!
Sammy: (taking a sip of coffee) Now Boo, you must remember never to let your opinion get in the way of making money. You may very well be right, but if the money managers of the World think there's going to be a rally, they will put money to work and the tape will trade higher. Perception is reality on Wall Street...if enough people believe it to be, it will be.
Daisy: (Quick to chime in on behalf of her bull) Question for you, Boo. What happens if the rally continues into next week and then we get some confirmation from corporate America? The buyers will surely be higher and you'll wish you weren't such a stubborn little bear!
Boo: Daisy, if wishes were knishes, I'd be twenty pounds heavier. You can sit there all day and project the price action, but the reality of the world remains bleak. You're so quick to condemn my lifestyle, but I've got one thing to say to you: Don't hate the player, hate the game baby!
Snapper: Guys, there's no reason to get saucy...settle down. I will, however, remind you that we have expiration next week and that always exacerbates the price action. If we start to get some upside jig, all the negative gamma players are going to be forced to chase the tape.
Boo: (wiping some cream cheese off his lip) That works both ways, Snapper, that works both ways. Further, if the tape does start to reverse and trade lower, you now have a whole new slug of "long money" in the marketplace. The oversold condition has been alleviated and the "bungee" effect that rescued S&P 775 the first time around will likely not be there as a backstop. Trade 'em anyway you want, but be aware of the risks!
Sammy: You all make excellent points and, in some ways, you're all right. Assimilate the crosscurrents, monitor our daily tells and identify that elusive edge. With a little luck and a lot of discipline, things will work out just fine.
With that, the group got up, gathered their belongings and prepared themselves for the day ahead. There was one more session before their requisite two day respite and, despite the eager anticipation, they knew better than to let their guard down. It takes a lot of effort to accumulate profits and only a little carelessness to rack up losses. They approached the front door, wished each other luck and ran out into the rain. It was, after all, a new day in Minyanville and the critters were fresh with excitement.
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 firstname.lastname@example.org.
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