It's lunchtime at the hallowed halls and as I was on my way to the kitchen for a second helping of Sushi, I overhead a heated exchange taking place in the conference room. It went something like this:
Snapper: Wasabi fellas, do you see this reversal? Semis, biotechs...even energy is participating! This is quite happening and it freaks me out!Boo: Oh relax, Beak, you just don't get it, do you? This strength is simply an alleviation of the oversold condition. I mean, it's not like World peace broke out all of a sudden! Get Real!
Hoofy: Well, you have to admit they act well, don't you Boo? Heck, even the breadth in the S&P just turned positive. The very fact that the tape can rally on bad news, particularly on the heels of yesterday's rippage, is constructive. Jeez...look at the SOX...its gorgeous! Daisy, you see that?!?
Boo: Man, you're more A.D.D than Toddo! Do you not remember where we came from? Last week's carnage? Last month's carnage? LAST QUARTERS CARNAGE? This does nothing to change the trend! And guys...it's not like the banks are participating...they just aren't melting anymore...yet. And look at CSCO, it's been trading heavy all day. What, you're gonna ignore that stock because it doesn't support your thesis? Stoo-pid!
Sammy: Now Boo, you know better than to get emotional. Almost any decision that's made in the throws of an emotional fit will prove to be a bad decision. You make some good points...CSCO does trade heavy and the banks are not participating. That being said, never let an opinion get in the way of making money. The collective psychology of the masses...they guys pulling the triggers and the big funds...they're the ones moving the tape. You need to get inside their head if you're gonna game the psychological metric of trading.
Snapper: Yeah, man...take a chill. The market, when it comes down to it, is little more than a supply/demand game. If enough people believe the market is going to rally, right or wrong, it can become a self fulfilling prophecy.
Boo: A'ight, guys, well good luck to you then. When push comes to shove, we're still in preannouncement season, there's still big geopolitical risk and all those people buying 'cause the tape acts well...they'll likely turn to sell if this rally doesn't hold. Plus, SOX resistance (270) is right around the corner. Caveat Emptor!
With that, the critter rose and began to file towards the door. It was, after all, only midday and there was a lot of trading...and a lot of risk...left in the day.
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 email@example.com.
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