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The Party Mix

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The drift continues and it's so quiet you can almost hear a bonus drop. You should see the motley crew on my desk right now. Juniors sitting to my left in a stained white tee shirt and flossing his teeth...and for some reason, he's really reminding me of Hank on King of the Hill right now. To my right, the paunchy Buckster is staring at the only screen that I can't see from my seat...and I almost don't want to know what he's pulled up from the internet this time. I could tell you stories about some Green Berets...but that's for another time. To my far right, Brandon Walsh (aka JJ) is mumbling about something but we never understand what he says anyway. Whenever he talks, we're conditioned to just smile and nod our heads in unison. Wow...it's almost like I have the entire cast of Deuce Bigalow: Male Gigolo sitting around me!

I don't want you to interpret my lack of aggressiveness today as being passive. This is an important juncture for the tape and I don't see the edge in pressing. Our risk profile adequately reflects our thesis and we have plenty of room to operate if we're wrong/early. Remember, the goal is to be in a position to proactively view prices as an opportunity rather than a hindrance.

The market has been trading in a relatively defined band and we've been methodically trading around our core positions. I'm certainly monitoring the SOX/NDX but my sense is that any breakout will be a head fake and should be faded (read:sold). I just don't see significant upside from these levels with the stochastics "pretzel twisting" as much as they are. For those that aren't familiar with that term, suffice to say that the more they twist, the more vicious the counter-trend move will be...and they're getting pretty salty.

I just said to the critters that it feels like the mirror image of early October when I had bullish pangs but was wary of one more melt. I have similar thoughts on the downside now but have that same concern on the final leg. As painful as it would be, I almost want this breakout to occur so the weak shorts get out of the way. I am very conscious of my cardinal rule that discipline trumps conviction but my instincts have always served me in good stead. There have been times in my career when I've zagged hard in the face of discipline. The mark of a good trader is knowing when those zags are appropriate versus simply getting out of the way.

If you're struggling with the same question and don't know the answer, trade a little "in between." We have a saying around here that "in betweens keep us out of trouble" and it's quite true. That blends nicely with our style of scaling in and out of positions. In other words, if we bought 250,000 Wasabi.com and it rallies some, we'll let out 50 or so. If it comes back in, we'll buy it back as a function of price and leave room to add lower.

We've surely refined the process over the years as we fiddled with what works and what doesn't. The most important thing is to remain adaptive and open minded as you dance with the Minx. While in between cusps, we like to find ideas and trade less market. When we sense a cusp approaching, we'll often start building market exposure to augment our risk profile. That style surely isn't appropriate for everyone, but we've found it to be a relatively successful approach for us.

Next week will bring a plethora of catalysts and we'll walk through those together in a bit. In the meantime, cast your vote and be counted as our poll closes promptly at 4pm. Thanks for bearing with me on a day that I'm admittedly dragging my feet. I don't go out very often and when I get a chance to see Lappy, Shrubs and Lionel, I think it's important to balance. Remember that we work to live, we don't live to work, so an occasional audible is allowed. Friends, above all else, are good for the soul.

Good luck into contra hour.
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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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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