The Party Mix
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.
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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