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Clarity Chase

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Make the right decision for YOU.

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Good morning and welcome back to the front running pack. With one day to go in the race for control the bovine are ready to go on a roll. It started last week with a preemptive lift, a rally that started viciously swift. "The bears thought the tape was under the gun," said Hoofy the bull after the fun, "but they haven't seen the meat of the run as we're gonna rip when the voting is done!" Will clarity spur the herd higher still or will crimson soon spill throughout the 'Ville? The election is here so roll up those sleeves and let's take a read of the minxy tea leaves.

Public perception and conventional wisdom have cast their votes for tomorrow's tussle and "clarity" has won in a landslide. You know the drill--as long as somebody wins, no matter who it is, the market will light a fuse and land sometime in '05. That's the universally accepted opinion and the anxious masses are already endorsing our new leader (even if we don't know who it is yet). The technicals are lining up, the fundamentals are hanging tough, crude (-9% last week) has started to behave and corporate bonds are chill. And as the tape scrapes higher, the risk of underperformance is forcing the hands of the few money managers who don't believe the hype.

Last week, while the bears still held the benefit of the doubt, we spoke about Hoofy's perfect storm. He wanted to see a sharp rally into the election (a stretch then but 'obvious' now) coupled with a sharp spill in crude and a runaway win by the incumbants. We've seen the first two elements unfold and a consensus evolve that either candidate will suffice as long as it's a clean win. That puts investors in a fix, of sorts, as further upside is considered obvious but that, in and of itself, is a pretty scary assumption.

The question I must ask is that two of the three probable outcomes are bullish, how much of that trade has already occurred? Virtually every media outlet I watched, read or listened to over the weekend was calling for an electoral relief rally. I understand the thought process and can visualize self-fulfillment but how many times has the media successfully mapped out the market? It would be considered reckless to take the other side of that trade--particularly into year-end--but we must remind ourselves that the path of maximum frustration--by definition--confounds the masses.

I've struggled with proactive positioning as a function of these crosscurrents and will continue to err to the side of caution. While I'm aware that I've muted my returns by choking up on the bat, I plan on maintaining that posture into the election. That means that both sides of my pad are defined and smaller than usual. It's not as aggressive as I would like but it's consistent with my view and, as we're all responsible for our own decisions, I'll live with the ramifications of those choices.

In the interim, and until I identify a discernable edge, I plan on reading the tape and taking my trades. The short-term "tells" have worked exceptionally well and I'll continue to dance with the ducks as I find them. The brokers (XBD), semis (SOX), breadth, crude, cyclicals and small caps remain on my trading radar and I'll juxtapose my profile against the backdrop of technical analysis. Along those lines, watch S&P 1120 below and NDX 1500 (BKX 100) above. And above all else, Minyans, think positive--it all starts with you.

Good luck today.

R.P.
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 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.

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