The View from Pit Row
You using the whole fist there Doc?
Good morning and welcome back to the Minyanville 500. The bulls wasted no time racing out of the pits yesterday and by the time they were done, the only pole position Boo was riding was an equity enema. When the checkered flag fell, it was a resounding victory for team Hoofs and the bears were left to stare at their vehicles wondering what went wrong. The dip buyers seemingly have the mojo as we fire up our engines but if we've learned anything, it's to keep our hands on the wheel and remain acutely aware of the surrounding traffic. It's a new day of thrills and chills so strap on your helmet, buckle that seatbelt and let's get rollin'!
One of the most difficult (yet necessary) aspects of trading is the ability to honestly critique your own efforts. We'd all clearly prefer to turn a profit each and every day but, ironically, the greatest lessons are often learned during the most difficult times. There's a tendency among traders to view hindsight with 20/20 vision and lament about not making more or not losing less. That's a flawed mindset, in my opinion, and it wastes valuable energy in our constant search for self improvement.
As I walk through the last four trading sessions, I can recall each juncture and the various decisions it required at the time. My initial instincts to cover up the short side last Wednesday proved to be more insightful than I could ever have imagined. The S&P was trading at 790 and the fear, while far from levels I'd consider zaggable, was relatively palpable. While the strength of the ensuing rally clearly surprised me, there were tea leaves that begged for attention. The "war trade" unwind that everybody is now discussing was first identified in this column and the action in crude, oil, gold and the dollar, coupled with the initial trendline violation (S&P 835) indicated that something was "up." In other words, I heard the rumblings but, looking at the rear view mirror, we should have listened a bit more.
With that said, a little perspective is necessary as we power up and prepare to tackle the tape. If I told you last Wednesday that the U.S and U.N would not find common ground and the market would spike towards major resistance (S&P 870) in a matter of days, you'd probably tell me to say goodbye to the glue and hello to Betty Ford. Further, you'd likely argue that it would offer a compelling risk/reward for the bear camp. Ironically, the push higher has achieved the opposite effect and bulls have come out of the woodwork to proclaim the dawn of a new era. I'm not smart enough to tell you if they're right, my friends, but I will offer my modest opinion that they're not.
Psychology is a powerful animal as it drives perception which, in turns, dictates reality. The "look through" trade, something that we haven't heard about in some time, has emerged on the street and is getting louder with each uptick. As the thinking goes, the malaise that's undermined the equity market will fade with Saddam's regime and the economic backdrop will improve dramatically. While that is spurring the current performance anxiety, we should note that the same logic was in play numerous times in the past. Each and every instance, reality stuffed the bulls and we were left to discuss the false hope and empty promises that litter a bear market. Thus, there are two ways to play this--we can play Minxy musical chairs until the music stops or we can strategically identify price points to make sales. As always, the answer to that question is a function of your individual needs.
As we find our way, I will continue to offer my honest take--right or wrong--but it's important that we (once again) make the distinction that Minyanville is an educational community and not an advice site. There are plenty of people out there vying for your "investible" attention and that's simply not our game. We built our humble little town on a foundation of trust, truth and learning and our goal is to offer insights that allow you to make better decisions for yourself. We'll always put it out there, mind you, but we'll never tell you what to do--that's a decision for you alone to make.
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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