Here comes the numbers!
Good morning and welcome back to the world's biggest thermometer. After four days of sway in the minxy buffet, we arrive at our seats for a new day of fray. Despite Tuesday's fright and Thursday's sharp flight, the tallied results have been awfully slight. Will Friday's new session leave an impression or are we destined to ponder this equity question? It's the end of the line (in weekly Minx time), so saddle up troops, there's a mountain to climb!
The vicious ramp in equity levels has served multiple purposes this year. First and foremost, investors have made back some of the money that was lost during the massive post-bubble melt. After three years of pain, the herd on the street has come back with a vengeance and, armed with a newfound bravado, they've taken no prisoners. The bears, once a grizzly bunch that feasted on the imbalances, have been taken out back and shot. One by one. Discredited. Humbled. Alone.
What we've witnessed is a complete about face in investor psychology. A few years ago, a bullish teletubbie would have been stoned in public, flogged for daring to offer constructive input. Now, as evidenced by the massive media gigglefest, there's no shortage of ursine embarrassment. Indeed, Boo's dinner invitations are few and far between and his presence is usually greeted with pity . Will that change? The Minx is cyclical, my friends, so you can be sure that it'll shift. The zillion dollar question is when.
We enter today's session with the Minx knocking on breakouts anew. S&P 1060 (NDX 1450) has been tried repeatedly but, thus far, nobody's been home. We know that with each test of resistance (support), a layer of supply (demand) is absorbed. Thus, the natural question is begged: do we have to remove this resistance as the next order of business?
We spoke yesterday of the potential of a breakout before a breakdown and that remains a distinct possibility. I can't (and won't) say that it can't (or won't) happen, particularly during these days of easy money. I would venture to say, however, that the acnefest will be relatively short-lived. Why? The noticeable rotation into defensive issues (drugs and energy), the eye-popping strength of the metals, the technical backdrop and the conditional elements that (continue to) lurk in dark corners.
Does that mean a pop and drop? Not sure. Does that mean we shouldn't try to play the upside first? You can do anything you want, cookie, as long as you're disciplined. The musical chairs can surely continue and how you approach this jucture is subjective to your style. It's worth noting (if for no other reason than to be informed) that the last time gold rallied 40% while the S&P ripped and the dollar melted (against all major currencies) was from 1986 into October of 1987. Just so you know.
Watch the breadth, financials (been heavy), the semis (Intel (INTC:NASD) and semicaps (Applied Materials (AMAT:NASD), retail (Wal-Mart (WMT:NYSE) and the dollar (meltage anew). It's Friday, folks, and that means our requisite two-day respite is right around the corner. Let's end this week with some jingle in our jeans.
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 firstname.lastname@example.org.
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