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Yet, Here We Are!


It isn't the news that matters, it's how markets react to it.

She cuts you once, she cuts you twice
But still you believe
The wound is so fresh you can taste the blood
But you don't have strength to leave

(Billy Joel)

Good morning and welcome back to the trading crack. Boom Boom arrived on the scene yesterday and excited the crowd with what he had to say. Conventional wisdom dictated that any hint of a rate hike halt--now sixteen strong and still going--would be a panacea for the light-at-the-end of-the tunnel crowd. We didn't get it--in fact, the only change to his much scrutinized vernacular was adding the word "yet" to his now familiar party line, "Further rate hikes may yet be needed to address inflation risks." The broader proxies vacillated in kind, with the exception of the tech sector which was heavy throughout the hump.

I've been trading for sixteen years and have come to understand that it isn't the news that matters, it's how markets react to it. Respecting the action and deferring to it are entirely different agendas and that distinction--that very fine line--is often the difference between profit and pain. I offer this thought as we edge towards an all-time high in the DJIA, accompanied by technical validation in a number of secondary sector proxies. Indeed, a pure look at equities seems to be giving Hoofy a big ol' wink. I see it, he sees it, everyone seems to see it and that in itself is somewhat worrisome.

I walked to work this morning and chewed through the headlines in the Wall Street Journal. As I read the front page headlines proclaiming that an "Old Fashioned Economic Boom" was behind this surging stock market, that "Goldilocks" was again hanging in the hood, that the Dow Jones will soon notch new all-time highs--before shooting higher--leading to alotta "woo woo's and throwing paper," I stopped in my tracks and pondered. I do that sometimes, this pondering thing. In fact, I'm doing it now as I scribe my opening vibe.

Minyans know--or should know--that the fuel in the tank of the equity ranks is stacked like a double-D. That, while excellent financial sources like the WSJ don't touch on the fact that debt and the dollar are the primary sources of these perceived gains, there is more to this market than headlines and bottom lines. We talk a lot about herd mentality, the status quo, about habits that are hard to break and lessons that should be learned. We talk about risk management and discipline, hidden risks and compression, misleading numbers and mainstream media spin, about self-proclaimed gurus who scream and jump and offer advice without knowing the profile of their audience.

We talk about these things as we once talked about the dot.coms and, in many circles, the reactions are much the same. "You're not getting it." "It doesn't matter." "You're going the wrong way!" Perhaps--I'm humble enough to know that I know very little and experienced enough to understand that this could continue for a while. But while we can play seven ways till Sunday--and we will--I implore you to understand why the tape is strong and respect what can--and will happen--when the dollar or debt or a collective fret arrives. Indeed, if and when we tick to a new milestone in the top-line averages, take some time and do a little math. I think you'll find that real returns aren't quite what they're cracked up to be.

I'll leave you with a quote from my good friend and savvy sage Jeff Saut at Raymond James, who offered a dose of perspective in this morning's Journal. "It's close enough that I have a hard time believing they, whoever they are, won't push this thing to a record soon. People will be excited, but I don't understand it, and I don't trust it." That makes two of us, my brother, and I'll ask Minyans to open their minds and see both sides. With the dollar rallying for the first time in recent memory--and a big picture perspective that it's been the contra-equity tell--I'll wish you well and I'll see you on the Buzz.

Good luck today.

No positions in stocks mentioned.

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

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