From our family to yours, have a happy Thanksgiving!
The sneaky freak is winding down as we walk ourselves through this ghost town. With the ranks thinning with each passing tick, the potential for (cough) gamesmanship increases into the bell. To add insult to injury, the critters are on edge as they nervously eye Pierre and openly wonder if he'll find his way to the other side of Thanksgiving. Concerned, they just filed into my office and flopped down for a quick chat. It went a bit like this:
Boo: (seething) Durable goods were horrid but does anyone care? Of course not! I'm tellin' ya, this market has "problem child" written all over it and the last piece of the puzzle is to condition everyone to think that it doesn't matter. The dip shtick needs to be good and thick for the path of maximum frustration to be paved with Red Dye.
Hoofy: (smiling) What we have here is a failure to communicate. You're confusing what "is" with what you think should be. Lemme ask you a question--if Elmer is intent on inflating our way out of debt, the dollar will clearly devalue and absolute net worth will decrease in kind. But it won't offer the disaster scenario for stock prices that you're looking for in a definable time horizon.
Sammy: (slithering to the middle of the room) Can I say something? The fatal flaw in both of your analyses is that the market is non-linear. You're both watching the tape as a function of time and price but there are other variables that impact the financial markets. Scott Reamer has done some fantastic analysis on the causation (or lack thereof) among traditionally accepted investment principles. There isn't a set equation that will dictate where the market will trade--it's dependent on an infinite and often unquantifiable set of inputs.
Daisy: (winking at the snake) That's just Sammy's way of saying that he's a bit lost in here.
Snapper: Or maybe it's just his way of saying that the first step towards successful investing is to define an applicable horizon. Toddo often opines that big picture views have no place in active trading and daily noise shouldn't influence long-term investments. There's a truth to that, although anyone who sits in front of a screen all day will tell you that patience and discipline are the hardest methodologies to master.
Boo: (peering over the desk to look at the price action) Well, what do we think in here?
Sammy: The standout elements today have been the dollar (nine-year lows), crude (swinging like a Hedonism vacation), beta (nets over nuts), the financials (firm) and the breath (minty). That bodes well for Snapper although it's safe to say that the bears won't relinquish NDX 1580 ('04 high) without a strong fight.
Boo: True dat.
Hoofy: Don't trade in denial, Boo--when you asked me two weeks ago what I wanted for Christmas, I told you a sideways consolidation into Thanksgiving. While the market remains overbought and the big picture blues still sing loudly, the near-term is all about liquidity and greed. (Walking over to the bear and putting his arm around him.) Just do me a favor--enjoy the holiday and don't worry so much. Before you know it, the future will be here and the past will already be gone.
With that, the critters gathered their belongings and prepared for the final thrust before the down time. As they left the office, I made sure to let them each know how much they meant to me. I'm sure they already knew but this is a time to give thanks and express appreciation for the good things and kind people in our lives. And with that, I wish each of you a healthy, safe and prosperous holiday as well.
May peace be with you.
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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