Numb and Number
May peace be with you!
I need some information first
Just the basic facts
Can you show me where it hurts?
Alright, baby, it's time to find out which of the three faces of Eve will emerge. During March's spirited sprint, the bulls successfully triggered a vicious squeeze during the last hour. A few weeks ago, the two camps fought to a virtual standstill. Last week, the bears took control into the closing bell and flexed their fur. Which critter will be the top sitter in today's tape? Heading into the final hour, it's Hoofy's game to lose but, as we know, we've come to expect the unexpected.
As discussed, there are legitimate concerns for the bears here. The 200-day moving averages (Dow, S&P) are weakening with each test (higher), the banks have (thus far) absorbed supply, the breadth hasn't blinked all day and, by and large, expectations are very low for technology stocks. Despite my posture and regardless of your view, those inputs must be respected and factored into our thesis.
Why, then, do I have two legs in my metaphorical fur? I learned a long time ago that it's possible to nail the direction or the timing, but gaming both is a lesson in futility. The combination of lower highs (technical), pervasive bullishness (psychology), low VIX (complacency) and the complete discounting of geopolitical risk is enough for me to "trade around" a short side thesis. I may be wrong -- it's surely happened before -- but I plan to sell hope and buy despair until it stops working.
IBM (IBM:NYSE) and Novellus (NVLS:Nasdaq) highlight tonight's earning's parade while Bank One (ONE:NYSE), Check Point Software (CHKP:Nasdaq), Emmis Communications (EMMS:Nasdaq), GM (GM:NYSE), Johnson & Johnson (JNJ:NYSE), Mellon Financial (MEL:NYSE), Parker Hannifin (PH:NYSE) and Wells Fargo (WFC:NYSE) (among others) will report before tomorrow's opening. For good measure, Beeks will swing by tomorrow with industrial production (expected at -.2%) and capacity utilization (expected at 75.3%). Lest we forget, Thursday is also April expiration and, as we know, that has a tendency to exacerbate the near-term volatility (see March).
I'm gonna juggle hats and focus my attention on my overnight positions. In my mind's eye, I'm factoring in everything from an IBM (IBM:NYSE) upside surprise to an out-and-out disaster. In other words, we need to prepare for any and all scenarios as we craft our risk profile. Expect the best, prepare for the worst and always allow for a margin of error.
Have a peaceful night.
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.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter