Define your risk and trade to win!
People tell me walkin' blues ain't bad
Worst old feeling I most ever had
People tell me the old walkin' blues ain't bad
Well it's the worst old feeling, Lord, I most ever had
Good morning and welcome back to the jittery track. I spent this past weekend laid up in bed with a handful of critters locked in my head. My keppe was crowded as they tossed about the path of the Minx which still is in doubt. "Stop fighting the tide and enjoy the ride," said Hoofy to Boo as he dried his brown eyes, "the stage is now set for a rally worldwide so you better step up or you best step aside!" Are the bulls gonna thrill as they chug the Nyquil or will they be force fed a most bitter pill? We'll know soon enough as we dust off our skills and ready anew for a romp through the 'Ville!
Last week's freak was notable on a few fronts as the bulls stepped forward to claim their prize. While they already had seasonal inflows at their back and an adrenalin shot from Microsoft (MSFT:NASD) in their pocket , the 14% crude puke (structural), a "better" Intel (INTC:NASD) (fundamentals) and fresh '04 highs (technicals) gave the bovine an obvious advantage in our quest for metric assimilation. And with the collective sentiment edging towards outright performance anxiety, the Red Dye contingent is noticeably nervous as we ready for the race to '05.
There has been an active discussion regarding what is and what should be. With the dollar falling apart and conflicting signals on the economy (jobs?), the great debate has merit. But just as there is a difference between a good company and a good stock, there is also a difference between a healthy environment and ample liquidity. I believe that ursine intellectuals will be proven correct but for purposes of the day to day fray, the Minx doesn't make a distinction between the two.
Therein lies the importance of identifying a suitable time horizon before initiating risk. If you believe that energy and metals are the tech and financials of yesteryear (I do), the pullback in crude should be viewed as an opportunity rather than as a hindrance. It should also serve as a reminder that sharp pullbacks are par for the course and the jitter bugs shouldn't be shocked if the precious metals follow the path of Texas tea. Markets, regardless of asset class, like to test the conviction of its participants and make certain that they believe in their thesis. They also tend to travel the path of maximum frustration, a tidbit that is often forgotten until after follicles have fallen.
We power up this Monday pup to find a mixed world with bated breath. As discussed above, the bulls have the benefit of the doubt and the path of least resistance remains to the upside. Macro caveats surely remain (watch crude for a reflex bounce off the 200-day) but as long as Hoofy can hold S&P 1188ish (very tight), he'll trade from the long side. Should that level break, S&P 1168 will emerge as the level to watch as we giggle towards baby new year.
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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