The Curse of the Bambino
The FTSE 100 (London) has never been down 8 sessions in a row--and today is day 8!
Good morning and welcome back to Minyan Stadium. It's a brisk December day at the house that Toddo built and the crowd is filing in for today's match up between Hoofy's heroes and Boo's crew. The bulls tossed a meatball down the pipe yesterday and the bears jumped all over it and jacked it of the park. Will the ursine dynasty continue to burn through the bovine pitching staff or can the hometown favorites come from behind and take the pennant? It's a beautiful day in Critterville so lace up those cleats and let's play ball!
Here's today's starting line-up. We know that our critical support zones (NDX 1050 and S&P 900ish) have been broken, no argument there. Further, we discussed the 'crowded' long side last week and the notion that traders were waiting for one more lift to 'lighten up.' Problem is, the velocity of the sell-off didn't afford many players the opportunity to make sales...just as the upside rip from the October lows left many would-be longs in the dust. The zillion dollar question remains-and this will answer our great debate into year-end-how will the bulls react?
Nothing summarizes the recent action better than the dreaded Red SOX. The saucy semiconductor index rallied massively over an eight week span in the face of bad news. Then, as positives started to trickle out of the group, they dumped almost half their gains-in five sessions! We know that the market is a leading indicator and the price action will lead the fundies, but jeez-this is nuts! The lines of distinction between perception and reality have blurred into one existence and emotion is exacerbating the bipolar swings. Calling Dr. Melfi!
Traders are a curious bunch and they will always assign reason to the rhyme. When the market was in rally mode, the economy was "clearly" picking up and the "look through" thesis was all the rage. Now, as the tape slips, there are Iraqi concerns, bellwethers aren't "seeing it" and valuations remain lofty. Which perception is, in fact, reality?
The truth is that nobody knows for sure what is real and what is Memorex-and anybody who says otherwise is fibbing. Our game requires us to assign probabilities to potential outcomes and create a risk profile that adequately reflects that view. As you dig into the box and prepare to take your cuts, ask yourself questions like "what is my time horizon?" and "what are my investment/trading objectives?" When you figure that out, allow for a decent margin of error and wait for your pitch. Remember, there are no extra points for trading every day. When we look back at the standings, all that matters is that we win more than we lose.
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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