Did somebody say cactus?
Good morning and welcome back to spin city. With yesterday's fugliness, the bears placed the burden of proof squarely on Hoofy's shoulders and dared him to stand tall. "It's obvious that expiration buoyed the market," said a smug Boo from his penthouse pad, "and now that the oversold condition is history, so are the bulls!" While that may be an oversimplification, it's not entirely out of the question either. The February protection expired, the ursine opened fire and the rest, as they say, is history in the making.
Before we turn ALL of our attention stateside, I'd like to point out that some of the overseas markets are precariously close to DEFCON status. We know that with each test, support (or resistance) becomes inherently weaker as it chews through demand (supply). As it stands, the Japanese Nikkei, German DAX and the French CAC are all threatening multiple bottoms and, much like the U.S lows we've been discussing, I'm not certain how many more assaults they can stand.
Hoofs certainly seem to have his back up against the wall but hope--for lack of a better word--isn't lost yet. Despite the meltage, the NASDAQ comp managed to hug the all-important support zone that we discussed yesterday. Further, the major indices are (thus far) higher than they were during that fateful Duct-Thursday and as long as that's the case, the bovine will point to "higher lows" (technically positive). Put another way, it may not look good for the bulls but they've still got a chance--they just have to step up and do it soon!
The sad truth is that (absent news) sustainable upside may be unrealistic without a washout to clean the slate. We know that there's four main frames with which to view a trading move--cycles, phases, trends and nuances--and historically, we don't get real jig without real despair. We can look back to September 2001 and July or October 2002 for the most recent example. In each of those cases, fear wasn't just something we discussed hypothetically, it was something we felt in our bones. When the (trading) bottom was put in, bulls were made to feel like the silliest critters in the world!
Is this conjecture actionable? With so many variables currently being juggled, it's hard to project a scenario too far in front of us. Think of it as riding a bicycle down a mountain trail. You'll surely look at the view once in a while but if you don't watch the terrain directly in front of you, you're liable to toss yourself on cactus! Take the market one turn at a time, don't hold onto the handlebars too tight and respect the difficulty of the course. With a little luck and a lot of patience, we might actually enjoy the ride.
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 firstname.lastname@example.org.
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