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Tuning the Tape


Take the time to kiss someone you love tonight.


What would you think if I sang out of tune,
Would you stand up and walk out on me.
Lend me your ears and I'll sing you a song,
And I'll try not to sing out of key.


So--here we are. The internals can't seem to find their traction, the charts make Fokker look attractive and the sentiment is borderline hari kari. What to do? The most critical decision that you must make is one of time horizon. Are you playing for the day? Are you setting up for next week? Are you deploying capital for the intermediate term trade? Are you....experienced, Jimi?

Let's take a step back--and a deep breath--and take an objective look at what we've got. The two main issues on trader's plates right now are terror and war. It seems that everyone is talking up a weekend invasion and/or a cataclysmic event. What you need to do is assign a probability to each, juxtapose that against your time frame and, when in doubt, err on the side of caution.

I can't tell you what's gonna happen, cookie--I wish I could. I can tell you what I'm focusing on. The internal weakness and horrid technicals are the most tangible negatives on my screens. Those inputs, coupled with my utmost respect for the tape (and the potential for further disconnect) have quelled my urge to get bigger at one level. I've got two legs in my metaphorical bull costume (50% conviction on the long side), added some (defined) exposure (as a function of price) and now, I'll wait.

As per my style, I'm entirely more comfortable playing the long side when the masses are panicky. That doesn't mean it's right, my friends, but selling hope and buying despair has been the money trade for quite some time and it's served me in good stead. Barring an exogenous shock (not a given but not likely?), I'm fairly comfy that I'll have a chance to make higher sales. How comfy? About 50% conviction, cookie.

Sectors I'm looking at? The financials are the most coiled and while I'm a steadfast bear (longer term), the best shorts are typically the best longs in a counter-trend rally. I'm also looking at other beaten up big caps as they'll likely be the vehicle of choice when the chasers turn and reach. When is that gonna happen? A smart fella once said that you can pick the direction or you can pick the timing but you'll rarely nail both. That's why I continue to implore you to keep your wits about you.

Listen, if you're choking on exposure and you can't think straight, I've found that paring a bit and trading "in between" has helped me in the past. If you're focused on one position (or over-exposed), you'll miss the compelling opportunities when they arise--and that's the double whammy.

This is a very hard period--there's no shame in admitting that. Capital preservation continues to be an important component in any investment thesis. Think lucidly, act intelligently and, no matter what happens, don't look back. Our future lies ahead.

Good luck into the close.
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No positions in stocks mentioned.

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

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