By Todd Harrison Oct 15, 2002 3:56 pm
Well, that was fun! I consider myself a man in every regard---but stick me in a dentist chair and watch me regress! Man, I sure am glad my traders weren't there to see me squirm...I was pitiful! Alas, phase one is out of the way and, while the quadruple wisdom yank looms next Friday, I'm taking my journey one tooth at a time. Hey Martin, come over here and wipe my chin!
Sitting in that chair watching the smoke lift from my mouth, I had a couple of thoughts I wanted to share with the good readers of Minyanville. Last Thursday morning when Boo was prancing and Hoofy was hiding, traders were pressing the short side trying to break the S&P through 775. At that point, we saw the first signs of panic via "bid wanted" situations in the corporate bond market. It's my experience that when it gets "that" negative and we're sitting on seminal support, the level typically holds and the shorts get squeezed. As we've seen, these moves last longer and go further than what seemed conceivable at the time.
Fast forward one week. Not only did that level hold, but the fear of losing has completely morphed into the fear of missing. This condition can certainly sustain itself and draw fresh capital into the market, but we must recognize that the tape is entirely more vulnerable as a function of this latest rally. The pure ursine will argue that, from 40,000 feet, the most vicious of rallies occur in a bear market and this latest lift is "textbook." He would also ask "what has changed?" other than higher prices and better entry points?
The bulls are pointing to a potential "trifecta" of the trading metrics. Technically, the market held where it had to. Fundamentally, the earnings (thus far) have been better than conventional wisdom would have dictated and, clearly, we've witnessed a psychological sea change. Further, if the tape can maintain its jig, the gorillas (read: institutions) are going to pile on in an effort to "save" their year. Indeed, the chatter of allocations (into equities) is getting increasingly "louder."
Where do I stand? Right here with a sore mouth! As far as the tape is concerned, if you put a water pistol to my head, I don't "think" we've seen the low for the year. This, of course, is only one traders (humble) opinion and I'm quite aware that it's quickly falling into the minority. I'm also very conscious that my "sense" of a stiff rally "may" have started. However, in my seat, we don't need to make that decision right now as we take our journey one step at a time. Each of you must make your own choices that reflect your individual risk profile and time horizon...I can only offer food for thought.
We're jamming with midday mind melds in front of tonight's releases, so I've gotta toss the other hat back on and play trader. Thank you all for bearing with me today as I "chew" through the crosscurrents, and I sincerely hope you're having a profitable session.
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