Coast to Coast
Despite the early jig, staunch resistance rests a tad higher.
Good morning and welcome to the dawning . The critters are back from their west coast attack and they're looking to set a new trading tack. "The trip was a hit, a Minyan success," said Daisy still wearing her skimpy sun dress, "but it's time to focus, debate and assess the flickering ticks of the Minxy express." Will the bears soon take back their crimson red flag or will Matador City house critters that brag? Last night, while aboard Air Minyan, the menagerie talked tape and tinsletown. The convo went a bit like this:
Hoofy: (studying his manicure) It sure looks like my boys took care of business while we were gone. Did you see that smokin' rally? A thing of beauty, I tell ya, pure beauty. Get my peeps on the phone and tell 'em to dust off the tux!
Boo: (wearing a USC sweatshirt) Relax Hollywood, the major averages barely budged for the week and you're still looking at some serious humps ahead. S&P 1125 and Dow 10-4 are former support (current ceiling) and the Nazz is entrenched in a textbook channel of lower highs and lower lows (NDX 1440-1450 is the zone). Until any or all of these levels are breached, I'll ask that you bring your seat to its upright position, stow your tray table and drink a tall glass of 'shut the heck up!'
Daisy: Easy there shooter, I'm pretty certain that a measure of respect is warranted. If memory serves, it wasn't too long ago that you were gimped up in the basement.
Sammy: (clearing his throat) The bears make a valid point regarding the technical measures as they offer the shortest and most defined risk management approach. But Boo, to be fair, levels are simply guides with which to frame a strategy. The fatal flaw of technical analysis is that stocks are perceived to be better "up" and worse "down." Thus, by the time confirmation arrives, you're one step behind (or under) the bus.
Snapper: True dat, Sammy, true dat. Still, if I can spur the herd through those levels, it'll shift sentiment back to the bulls and scramble the bears in Red Dye Junction. There are surely "buy stops" set above those levels and triggering 'em is my mission in this week's rain.
Boo: And then what? A little squeezage won't alleviate the bubble trouble--you've still got fresh geopolitical concerns, consumers that are up to their eyeballs in debt and a universal consensus that we're in good shape until the election (and beyond). The powers that be are well aware of the high stakes and that's the only reason they keep feeding the beast with liquidity and constant posturing.
Hoofy: If you're so convinced that there's an electoral agenda, why are you fighting it tooth and nail?
Boo: Because the market is a discounting mechanism, my friend, and market cusps always occur when ducks are quacking the other way. That, in a nutshell, is why the first stage of any trading phase is denial (before migration and panic set in). At a point, a "positive" election is already priced into these levels. (pauses to think) Look cookie, as commodity prices surge (oil), it squeezes margins in corporate America. All I'm saying is not to judge a book by the color of its cover...especially with the rhetoric that often accompanies it. The unwind will be nasty and the harsh reality is that it can happen at any time.
Sammy: Be that as it may, I'll again remind Minyans of the importance of defining a time horizon before the initiation of risk. If we're to view the big picture as a series of little pictures, this week is all about jobs. There is a ripple of implications surrounding Friday's report--financial, political and psychological--and it'll get loud as Beeks draws near. The bears maintain that despite all efforts, employment remains the harbinger of economic health (and it's just not there). The bulls, having tired of the "lagging indicator" excuse, are now pointing to the new productivity paradigm. Something is gonna give and jittery critters are anxiously awaiting guidance.
The engines roared as Air Minyan circled for its final approach and the group readied themselves for landing. They were pretty psyched--their road trip was history and the road ahead was paved with promise. As they fastened their seatbelt and braced for landing, the collective enthusiasm was apparent. For they knew that regardless of which way the fray strayed, they would always have each other. And that, my friends, is the best trade of all.
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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