Anchor: Good afternoon Tony great to have you back at Wacko News Network (WNN).
Tony: I can't imagine a place I would rather be.
Anchor: Let's cut right to the chase: Is the market going to continue trading off every news item out of the war in Iraq?
Tony: As I wrote yesterday on that stellar education and infotainment web site, Minyanville.com, if people are coming on air here telling you that it is all about the war, they are taking the easy way out. Each major news event has had a diminishing impact on the overall market since the beginning of the week. How many times can a euphoric feeling repeat? Don't answer that!Only a few then it becomes normal -- and the market is having a normal vs. extreme emotional reaction to the news events as they unfold before our eyes.
Anchor: All very interesting, but can you tell me more about this Minyanville?
Tony: I would but it would be just another shameless plug on my part. I will tell you though that those fleeces are awesome and chicks do dig bald guys in Minyan fleeces.
Anchor: Does this look like an infomercial to you? Now that you stated the war no longer matters... (Tony interrupts)
Tony: Wait a second. You guys love doing that. I did not say the war didn't matter. I said that market participants are going to give news coming from the war a more normal reaction vs. an extremely emotional reaction. There is a key difference there because until there is a new government in Baghdad, there is going to be some level of event risk priced into the market. Besides, I am not so sure it matters, since you folks in the media already have the U.S. forces invading Syria next. I mean come on already!
Anchor: You have been a hairless talking head for too long ... you caught me trying to sneak one by you. If the war isn't the next major driver of the market, what then will be? SARS, the economy, corporate profits reports, technical influences or Daisy's belly ring?
Tony: I am glad to see you like the site. Clearly Daisy's belly ring is a driver, but I think it will be some combination of the other factors. My best guess is that right now too many traders are using intraday technical analysis on the ETFs. It makes sense because there really isn't a fundamental reason to be a buyer yet, so no one wants to carry a position overnight. On the other hand, it is too early to say consumers didn't step up spending after the war because it isn't really over yet. This is what I refer to as the "Twilight Zone trade."
Anchor: Perfect term for you since you are in outer space. Could you tell our viewers a little more about it?
Tony: You are pretty funny, but looks aren't everything. The twilight zone trade refers to an environment where on any given day the market feels like it could spike or tank any minute. It is the period that follows pure hope, where you cannot prove whether or not the hope will turn to reality. When the market moves higher, current fundamental reality takes center stage and when it moves lower, hope takes center stage.
Anchor: So where in the Twilight Zone trade are we right now?
Tony: Frankly, I think the market is right in the middle, which is why it has been doing very little. There has already been a size move higher on hopes that the fundamentals will show dramatic improvement. It will take time to prove that out, and some want to bet on it generating a limited level of demand underneath the market. The supply comes from those who don't want to take risk as we head into the heart of earnings season. Since negative fundamentals are not a new thing, supply should be about equal to demand for a bit going forward.
Anchor: Sounds like a frustrating tape for just about everyone.
Tony: Have I told you about the quality educational and infotainment content over at Minyanville? In all seriousness, it is a very frustrating environment and thank God I have a place to present the current environment so I don't go out of my mind!!! Then again this whole thing is imaginary so maybe I already have...
Anchor: Come back and visit us again soon Tony -- you truly are Wacko News material!
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