A Metaphorical Morning
By Todd Harrison Feb 26, 2003 5:48 am
The DAX is technically broken--and the rest of Europe is holding on by a thread!
It's early morning in Minyanville and the critters and I have already finished a two hour workout and settled into the diner for a stack of pancakes, eggs benedict and some frozen hot chocolate. Really? Hell no--I'm still battling Charlie the belly bug...but as long as we're talking metaphorical imagery--and as long as got up early--we might as well metaphorically exercise and have a really big metaphorical breakfast! The conversation went something like this:
Toddo: (pouring himself a bowl of Coco Puffs) I gotta tell you guys, this is one trippy tape! One minute they love 'em, the next minute they're getting spanked like a bad monkey. I'm dizzy with eternity!
Sammy: (his tail wrapped around a Pop Tart) You're right, brother, it's hard--but it's not impossible. As long as there's volatility in the market, there will be opportunities to make money. If we ever got to a level and flatlined, then you'd have reason to be concerned. There's good trades out there--you've just gotta be sharp.
Hoofy: Yeah, Toddo, speaking of which. You've been pretty tight with your discipline lately but yesterday you wavered a bit. What gives? It's not like you--especially when everybody starts filling in on the short side. You're too zaggalicious for that!
Boo: (doughnut crumbs everywhere) Hey! Leave the kid alone--he already walked through his reasoning! And, while I'll give you yesterday's battle Hoofs, the war is far from over. There remains traunched resistance in the S&P (850, 870), the SOX stochastics are hooking at the top (while bumping up against a trendline) and, according to our friends at Dorsey Wright, bellwethers such as Wal-Mart and Citigroup are a gnat's ass away from big resistance!
Snapper: You sound a little defensive there Boo--you need to chiiiiill. Remember, the ultimate zag here is a peaceful resolution to the Iraq situation and, clearly, nobody is set up for that. The fundies may be fugly, the technicals may be nasty and there may be 1001 reasons to be short--but if, somehow, this is resolved, none of that will matter in the near term. You'll get your melt...up!
Daisy: (sipping her tea) But if you're playing that, Snapper, isn't that textbook "fear of missing?" I mean, how can you possibly game something when it's outcome is the ultimate toss-up? Trust me, nobody wants a rally more than I do but at the same time (turning to Boo), it's important to remove hope from both sides of the equation. Yeah, I'm talking to you--it's possible to hope on the short side too, Boo!
Toddo: Listen, you're all making sense--that's why this is such a tricky game. I'm conscious and respectful of the upside, Hoofy, but with the technicals as they are, the uncertainty continuing to linger and nothing to hang your hat on fundamentally, I'm not buying it yet (so to speak). Granted, I'm not blindly putting 'em out either--too risky--but I don't mind some defined risk downsides at this stage in the game. Maybe I'm too bearish--but I think that, until proven otherwise, the burden of proof is on the bulls.
Snapper: What changes your mind?
Toddo: (eyeing the crispy bacon) A hard whoosh lower? Or, on the other hand, perhaps sustained strength through resistance (led by the financials and semis) that broadens out to the rest of the market. That would put in a much needed "higher low" and, if we can violate some upside trendlines, it would bode well for the bovine. There are some decent short-term (down) trendlines (in the Dow and S&P) that have been in play since the end of January. Those will be a good first test and they're not very far away. Do I think the market can jig higher with the Semi's in this field position? No. Am I humble enough to know I may be wrong? Sure am!
Sammy: Did you see real buyers yesterday? I know the rally was sharp--but was it quality?
Toddo: The word I'm getting from the street is that it was dominated by short covering. Hedgies pressed on the drekky Consumer Confidence number and the Russian roulette rumor (coupled with some potential allocation) was enough to ignite the fuse. With that said, we know how reactive money managers can be and the gorillas are more apt to buy an "up" market than a down tape. So, for purposes of qualifying the move, it's really a moot point.
The Menagerie slowly nodded their heads as they continued to plow through breakfast and I glanced at my watch. It was getting late and, while the critters continued to debate the fate of the tape, I quietly excused myself from the table. As I made my way through the crowded diner towards the door, I stopped to chat with my Joel and Ruby (as I do quite often). After all, these were my thoughts and it was my metaphorical morning--I could talk with whomever I like!
Good luck today.
position in s&p
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