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.
Daily Recap Newsletter