If you're not mandated to trade every day, take a deep breath and think about your edge. There's no shame in doing less!
It's a beautiful morning in Minyanville as the critters ready themselves for another session and, on the way to the coffee machine, I passed the large conference room where they have their morning meeting. I'm typically not (that) sneaky but I must admit that I found myself lingering by the door trying to pick up some nuggets of wisdom. This is what I got:
Boo: So let me get this straight, Hoofy -- you want to buy S&P 850-860 because you think everyone else is gonna buy that zone? Forgive my ignorance, but you're a bull -- not a monkey! Toddo always said never to play catalysts (of flow) you can't see. What happens if the buyers don't materialize? What happens if unfortunate news hits the tape? What then? You'll look like Bozo the Bovine!
Hoofy: Wow...what a difference a day makes! You got spanked so hard during this last rally that you couldn't sit down all weekend! The market pauses for one day and you suddenly find your attitude again? (turns to Sammy) Is it me? Or does anybody else this is a bit weird?
Sammy: The volume DID contract during the sell-off (vs. Friday's rally) and while much of that is likely expiration-related, it should be noted. The upside surge also shifted the mojo into the bull camp and the onus is on you, Boo, to take it back. A one day wonder ain't gonna do it kiddo -- nobody's scared.
Boo: (reading a stack of papers) Did you guys see today's research? Union Pacific (UNP:NYSE) preannounced last night, Merrill cut a handful of homebuilders, Goldman was cautious on Hewlett-Packard (HPQ:NYSE), Cowen punted Gucci-Gucci Goo, UBS downed Cummins (CUM:NYSE) and CS First Boston cut numbers in Cisco (CSCO:Nasdaq). It's all bad!
Snapper: (winking at Hoofy) Blame it on the war -- everyone else will! The market looks forward, Boo, remember that. The news is always the worst at a bottom.
Boo: You think the news is the worst? Are you smoking cabbage? Virtually NONE of the historical guides support your thesis and while you may manufacture a near term move higher, I'm telling you guys -- and mark me at my words -- we haven't seen the bottom!
Daisy: (confused and looking around) I'm sorry Boo, but for the life of me, I can't seem to find your crystal ball. Have you seen it Hoofs? You Sammy? Maybe it's invisible 'cause I can't seem to locate it anywhere! (pauses for effect) My point, young bear, is that the script has yet to be written and while it's entirely alright to have a big picture view, you must remain adaptive. A lot of smart cookies were spot on with their analysis but fatally wrong in their timing -- and they're no longer around.
Sammy: She's got a point, guys -- listen to what she's saying. It's alright to factor your beliefs into your process -- particularly if you're a longer-term investor -- but the traders among you should continue to assimilate the metrics and remain disciplined. There are surely times when you'll slip -- the goal is not to fall. I'll remind you that the equity markets are trading as a function of the macro environment and stocks are being driven by the dollar (lower today), crude (higher today) and, to a degree, the fixed income market (higher). Even if you JUST trade equities, you must monitor these outside influences.
Boo: That's fine. My only point to you, as my friends, is to be careful. The shorts -- or what's left of them -- were so happy to see a down tape that most of them covered by the close. If they start to get sloppy, I would pay close attention to our S&P levels. It's a fish-or-cut-bait zone for a lot of players. I will also ask for you to keep a close ear to the ground for developments in the war. If (big if) Russia or China start to take a more aggressive stance, all bets are off -- and I mean quickly.
There was a silence in the room as the Menagerie let it all sink in. As they arose and slowly made their way towards the door, Daisy stopped and looked at her friends. "No matter what happens, guys, I just want you to know that I love you all." The clan smiled and the mood in the room suddenly upticked. With all the horror in the world, the little things matter most. And sometimes, they just need to be said.
Good luck, my friends.
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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