Monday Morning Manager
Good morning and welcome back to the ball park. It's October, sports fans, and you know what that means. The stakes are higher, the ball is on fire and the pressure will build as we head to the wire. With this week's earnings line-up waiting patiently on deck, the crowd is frenzied with anxious anticipation. Will Hoofy's Heroes continue to rally or can the ursine uglies sweep the finale? The payoff pitch is on its way so watch those signals and let's get paid!
The fixed income types are taking a three day weekend (enjoy Brian!) and, as such, the equity festivities will be a function of posturing. We know that the week ahead will be chock full of earnings and one of three things is gonna happen. Either the bulls will manufacture a quiot riot (and squeeze Boo's screwballs), they'll lock in some gains "just in case" (after the nice playoff run) or maybe, just maybe, the Minx will frolic at frustration station and await word from corporate America.
With Friday's after-hours pop, Europe's overnight zest and this morning's green monster, it certainly feels like the bulls wanna serve up some cheeky chin music. The dollar is stronger, after all, and that's been a bearish beacon in the night for Boo. Still, I doubt that we'll be able to overcome the S&P 1050 resistance without some earnings oompha. This is a holiday session, however, and it's worth mentioning that whisper thin liquidity has the potential to exacerbate volatility.
Once we edge through today, the gamesmanship will begin in earnest. Everybody is already expecting earnings to be "better" but the collective reaction remains to be seen. Much of the relative zest in the corporate nest (on the back of massive stimulus) has been a function of cost cutting, government spending and easy "compares." The absence of end demand hasn't stopped the train (yet) but if it's going to continue to chug and hug, we'll need to see some tangible signs of the end user.
A few Minyans asked me if a push through S&P 1050 negates the Burned Razor thesis and I would respond that it doesn't necessarily negate it but it does reduce the odds. The congestion that we've witnessed (since the end of September slip) is intriguing on a few fronts. It's either forming the "broadening top" (that everyone now seems to be talking about) or it's storing energy for the final thrust higher. I'm sticking with the former but if the latter gets fatter, we'll need to assimilate that dynamic input into our hypothesis.
Our mainstay tells remain in place during this (relatively edgeless) session. The banks, brokers, retailers and cyclicals will provide big board tells while the semis (and semicaps), internets, biotechs, software and ponies will guide the four-letter freaks. And, as always, the breadth will continue to show us the way as an internal measure of health.
Finally, on a separate note, I want to weigh in on the Fenway fiasco. I do think Pedro threw at Karim Garcia but that, in and of itself, shouldn't have cleared the benches. The most egregious act of the entire melee, in my opinion, was the gesture that Pedro made towards the Yankee dugout (pointing at his head). That was bush league--particularly for a Hall of Fame pitcher--and Clemons exhibited both class and maturity in his response (or lack thereof). Just my two cents and I'm sure I'll hear from plenty of bean eaters.
Good luck today.
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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