Feast or Famine
Those boys are p-i-g-s pigs!
Good morning and welcome back to the blindside attack. Last week's ride, while starry eyed, was rudely denied by a late week slide. The jobs report should have offered support but--despite all the hype--it came up short. Was the good news baked in (much to Hoofy's chagrin) or is the year end rally now set to begin? This morning, while at Ollie's diner, the critters gathered for a few one-liners. Here's what they had to say:
Boo: (sizing up the stack of pancakes, three cheese omelette and basket of muffins in front of him) Back off, fellas, it's been a long time since I've chowed down and I'm starving! You know what they say...a hungry bear is a dangerous bear!
Hoofy: (yawning and looking at his watch) If that's the case, you'd better enjoy breakfast because when the market opens, I'm gonna eat your lunch! Dude, that payroll report removed the last crutch of rationalization from the bear camp. Besides, despite your best efforts, the breadth in the S&P was positive. You really think you've got a shot?
Sammy: Hold on a second, Hoofy. Everyone agrees that the payroll data was a positive input but you gotta respect the downside reversal--particularly as it was paced by the rate sensitive sectors. Interest rates may still be historically low and, yes, there is certainly a camp that believes that higher rates may trigger a rotation back into equities. With that said, the market is a discounting mechanism and if perception shifts to a hawkish landscape, it'll crimp the equity nirvana that's existed in investor's minds.
Snapper: I don't know, Sammy, it seems to me that the laws of inertia still apply. The tape has been trending higher since the spring and these last few weeks have simply served to consolidate the gains. As long as the series of higher highs and higher lows remain in place, I don't think fund managers are gonna raise an eyebrow. Besides, with year end approaching, performance anxiety is sure to kick in.
Boo: (wiping cream cheese off his chin) I agree, performance anxiety is definitely gonna kick in--but not in the traditional sense. The fat gains to date will cushion the pushin' but as soon as these managers see those returns slipping away, they'll look to lock in their years. Besides, let's not forget that this entire lift gift was predicated on liquidity and a lot of that juice is already in the juicer. Just as I was pointing to the negatives and wondering how we could rally (in March), the bulls are gonna be mumbling "7.2%" and "126,000" to themselves as the shvitz hits the fan.
Hoofy: What if Saturday's lunar eclipse eclipsed the technical lunar eclipse? As long as S&P 1044 (NDX 1410, BKX 944) holds, in my view, this is just another bear scare. The news, thus far, is overwhelmingly in support of the rally. I know that you think that the deficit, geopolitical backdrop, dollar, insider selling, complacency (VIX) and sentiment (crowded bull camp) are problematic but, yeesh, you've been saying that since Intel (INTC:NASD) was a teenager!
Boo: You just keep telling yourself that we're in a new bull market. Keep listening to the teletubbies wearing their Dow 10,000 hats and promising that this is a "traditional" economic recovery. Do you really think that the biggest bubble in the history of the world will lead to a standard fare cycle? Those phantom promises are gonna be the ghosts of profits past!
Sammy: We're not gonna have to wait long to find out, will we? The early morning picture paints a (slightly) weaker Europe, another Jinxy haircut (1%), higher crude (Saudi concerns), a couple of pushes in the semiconductor space (shocker!) and marginally green futes. It's fairly quiet on the catalyst front so today's price action will be left to the devices of the trading set. Watch the rate sensitive issues for signs (either way) and understand that a higher opening may be bearish while a lower opening is potentially bullish.
The critters were so engrossed in their spirited debate that they almost didn't notice Daisy standing beside the table tapping her hoof. "Alright boys," she began, "are you gonna just sit there and stuff yourselves or is one of you gonna offer this lady a seat?" Boo scanned the empty plates in front of him and slowly shifted his ample belly up and out of his chair. "Here ya go, silk milk, take my place," he offered as he struggled to his feet, "I've got plenty of work to do anyway." The bear turned and began to say something else to Hoofy but stopped himself, turned and made his way towards the door. He knew that, at this point, his words were empty and only downside action would give him satisfaction.
Good luck today.
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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