Forks in the Road
By Todd Harrison Apr 06, 2004 8:52 am
The crowd is debating good news from great--I haven't heard many peeps talkin' about BAD news.
Good morning and welcome back to the monster Shaq. Yesterday's lift was a quiet green drift that delivered a gift to those who had sniffed. It was rather slow (as we already know) but the bulls came on strong and then stole the show. "I wouldn't wanna be in little Boo's shoes," said Hoofy as the confidence oozed, "as there's little in the way of news that'll stop this jiggy upside cruise!" Can the bovine keep the ship on course and whip the bears with vicious force? Or will they soon have buyers remorse once the news comes from the source? It's a brand new day in the Minyanville fray so let's sniff out that Minxy bouquet!
Three short weeks ago, with the Nazz tickling the 200-day and the Spooz on the south side of 1100, the bears started rubbing their eyes after a long winter hibernation. There were fresh pangs of terror, questions regarding the lofty earnings expectations and downright fugly price action in the semis and transports. It was, by all accounts, a gut check and for the first time in a long while, the fear of losing seeped into the collective mindset. It was a far cry from panic, mind you, but the bears had finally shown some moxie and it put traders on notice.
Fast forward NINE sessions. What started out as a technical bounce has migrated into a newfound confidence. Crude took a respite, jobs jumped on the scene and the technicals turned the corner and stepped atop the former ceiling. Now, as we edge ever-so-closer to earnings, the blink-and-ya-missed-it bears are scratching their heads as the mindset migrates to upside momentum. Was that all she wrote for the ursine uglies? Will corporate America deliver the eagerly anticipated upside validation? And perhaps more importantly, how will stocks react to the news?
I've been force fed respect from this foxy feline and I'm looking at the Minx in many frames. Ultimately, it's a matter of when the dirt will fill the hole and bury the believers like before. I truly believe that we're in a financial mess like none other in history and stimulus simply prolongs--not solves--the problems. The issue, as always, is one of timing--and at the end of the day, that'll dictate whether or not you were right (read: in a position to profit).
Professor Reynolds painted a picture a while back that bears repeating as we peer ahead. It was his belief that the ability of corporate America to "roll" their mountain of debt to 2006 bought the tape a lot of time. His contention was that the tight corporate bond spreads coupled with continued liquidity would spur the herd for a matter of years--not months--and irradicate the entire crew from Red Dye. And by the time the tab (debt) came due, it could potentially set up for a horror show to the downside (from Dow 12,500+).
Here and now, the juncture is a lot dicier for a number of reasons, not the least of which is that herd from Matador City. Monster levels--like the one that taunts us from above--become intrinsically weaker with each additional test. In other words, the more S&P 1160 gets probed, the less supply will quell the subsequent try. That has to be factored into any trading strategy--bull or bear--if and when we get back to that track. Today's business? Doubtful. But if there's a positive reaction to good news--two big 'ifs'--the bears could lose their nearest term crutch.
Bullish inferences? I prefer bullish alternatives. The backdrop--including but not limited to the massive psychology bubble, continued debt (personal, corporate and government), derivative foundation and geopolitical unknowns--serve as continually moving trap doors under the floors of Pamplona. They haven't mattered yet and it hasn't paid to fret. Still, and regardless of how you position yourself for the coming weeks, please remember that the greatest trade, er, trick the devil ever pulled was making the world believe he didn't exist.
We power up this morning to find a negative preannouncement from Nokia (NOK:NYSE) and that's turned the early morning tide crimson. Europe is lower by fitty bips across the board, gold has popped $4, the dollar has lost that lovin' feeling (-70 bps) and our futes have given back a fair amount of yesterday's giggle. Expect a day of posturing and manicuring in front of earnings and think positive cookie--it all starts within.
Good luck today.
No positions in stocks mentioned.
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