Spinnin' wheel got to go 'round
Talkin' bout your troubles it's a cryin' sin
Ride a painted Hoofy let the spinnin' wheel spin
(Blood Sweat & Tears)
The lunch munch has come and gone and the Minx is holding her gains. I continue to hear of the "long squeeze" in the market which is sucking in fresh cash as a function of price. In other words, as the market continues to rally, portfolio managers are becoming increasingly anxious and committing fresh capital exposure. It's the very definition of performance anxiety and it's unfolding before our very eyes. The potential problem for Boo is-it could last a while.
My mentor and good friend Slaino just called to remind me that the only thing that matters is supply and demand-and they clearly want to own them right now. I (humbly) offered to him that the direction isn't as much a concern to me as the timing. This is textbook towel tossing action and it typically (eventually?) exhausts itself. The gazillion dollar question is: from what level does that occur? Indeed, if the psychology becomes self-fulfilling and investors just wanna get em in, they'll likely go higher before they go lower.
From a pure "eyes" standpoint, there really isn't much to stand in their way. The internals are fabu, our leadership sectors are jumpin' and we've broken out in both the S&P and the NDX. Regardless of posture, those are the facts and should be incorporated into any thesis. I told Hoofy (who's freakin') that if he thought there was going to be an end of day ramp, he could buy the S&P and use the breakout level (925) as a "stop." We discussed that strategy this morning (NDX), but it's playable in the S's as well. Remember, Hoofs, you can try anything as long as you're disciplined and/or defined.
On my side of the fence, I'm augmenting my day trading with a steady scale into defined risk downsides. This way, I'm using the prices to my advantage while trading around the thesis. It's not necessarily fun, but the best trades usually feel wrong before they reward you. In the meantime, it just continues to continue and the band is marches on. I've never been one to rationalize, but I will say that if you're having a tough day, think of those poor schoolchildren on that bus-and keep it in perspective. It could be worse.
I'll be back.
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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