Be wary of false breakouts!
Well, another round of softish economic numbers and the futures... anyone? Anyone?
That's right class, the futures lifted nicely on the back of Beek's release. The desire to "look through" is palpable and, as the story goes, the war is pretty much over and companies can get back to business. One small problem though... there wasn't any business going on before the war!
I don't mean to sound cynical but Iraq didn't start the bear market and Iraq likely won't end it. I just get frustrated when I listen to economists on television preaching the virtues of the easy upside -- a tale they've shared for the last couple of years! It's alright to have an opinion and we'll all be wrong at times, but it's important differentiate between opinion and "facts" when addressing millions of people.
Anyway, let's turn our attention to today's tape and get this party started right. Yesterday's rally attempt stalled near the triple 200-day resistance levels (S&P, BKX, DJIA) and the bulls will surely try to gun 'em through again today.
These are also interesting levels for another reason: Both the NDX and S&P have put in a series of "lower highs" since November's Razor Burn top and the technicians are watching this closely. If the Minx can power through to the upside, the complexion of the market will shift. Until then, we remain in a defined downtrend and, despite the recent jig, Boo must be given the benefit of the doubt.
The structural metric continues to dominate the flows as equities are being traded as an asset class vs. bonds, the dollar, crude and gold. As this rotation continues, performance anxiety is exacerbating the price action and sucking fresh capital into the market. I'd liken it to a game of Minxy musical chairs and traders are dancing while they can.
I've been cautious in my approach and I'm aware of the opportunity cost associated with that methodology. I won't beat myself up, though, as that strategy has kept me in the game through the empty promises and false rallies that have littered the landscape these past few years. Rationalization, you say? Perspective, I say. And while I surely want to catch every move, I understand (and accept) that it's not gonna happen.
I power up with a lone leg in my metaphorical bear costume (25% conviction on the short side) and that's representative of my current posture. I've got a chunk of May puts on, and if I feel it, I can always set up some intraday gamma. I don't trust 'em (I respect 'em) and I prefer to play the minxy musical chairs with one cheek on the seat.
Good luck Minyans. Let's end this week on a good note.
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.
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