Hollers and Sense
By Todd Harrison May 19, 2003 8:54 am
Europe is gettin' spanked!
Good morning and welcome back to the twisty fix. With the grindy ride fresh in the critter's minds, I corralled the Menagerie for some much-needed face time with Queen Casey. Over a steady diet of room service lunches and honor bar munches, the lively conversation twisted and turned through a myriad of Minxy matters. Always thinking, I quietly placed a tape recorder in the middle of the action and caught the following conversation:
Boo: (ordering room service) ...and two bottles of your best champagne, the crab cakes, yeah... and the penne with mozzarella... yeah... and the chocolate fondue... uh huh, and... pizza -- three pizzas... right. And please make sure you bring up a bucket of ice and a couple of those robes... uh -- six. Right. And please put it on the Underhill's bill! (hangs up the phone).
Daisy: I hope you ordered my frissee salad, Boo -- you know I'm a vegetarian! You've been very selfish lately and, quite honestly, my patience is wearing thin. If you were a bit more open-minded, perhaps you wouldn't be taking such a bath in the market.
Snapper: Oh snap!
Boo: Watch it Bessie, I'm gettin' a little lactose intolerant over here! You can mock me, that's fine -- you have that luxury. You have the luxury of not knowing what I know: that this rally, while spirited, will probably cost investors a lot of money; that my existence, while grotesque and incomprehensible to you, will ultimately save lives. I know that deep down, in places you don't talk about at parties, you want me in the market -- you need me in the market. All the cheerleaders on television championing the upside won't shoulder the responsibility of individual investment choices. If you really want answers...
Hoofy: I think we're entitled, Boo.
Boo: You want answers?
Hoofy: I want the truth!
Boo: You can't handle the truth, Hoofy! The only time you listen to me is when the Minx is lower, and by that time, it's too late. This latest equity enema has every strategist and technician believing that the worst is behind us (no pun intended). Look at last week's economic numbers: Horrible. Look at the disparity between bulls and bears: Huge. Look at the complacency in the market: You won't even mention the VIX anymore -- that's how complacent you are!
Snapper: You've been saying the same thing for the last month, Boo, and it's getting a bit old. You can sit there and point to a complicated assimilation of metrics and toss all kinds of data in our faces. At the end of the day, however, it's a supply/demand game. If there are more buyers than sellers, the market will rally. Honestly, I don't care if it's a structural allocation, a short squeeze, a new-found confidence, a lunar eclipse or the result of an iguana convention. The tape acts great and the bears are in denial. Period.
Sammy: (slithering over to the window and taking in the view) I'm not sure I agree with that, Snapper. Hindsight has a habit of making us all feel dopey at times but the truth is, there's always a reason for the market to rally OR to sell off. The media will simply assign reasons for the latest rhyme and make it all seem obvious. If the tape slips going into Memorial Day, it'll be a function of the drippy dollar, tepid transports, tired tape, easing economy and tough technicals. If we rally, it'll be overt optimism, better business, strong internals and a broadening basing.
Daisy: But you can make the case that these last few weeks are a simple digestion of the recent rip, right? Can't a market "work off" an overbought condition by migrating sideways?
Sammy: Sure it can and that's what the bulls are hoping happens now. I'm simply saying that virtually everybody is aboard the Hoofy express and that's been a historical flag. I don't have a right hand... but if I did, I'd be keeping it up!
Casey: You know that you guys are absolutely out of your minds, right? I've been around some interesting characters in my day but, man, you guys take the cake! While I've got you all together, I wanted to tell you that Toddo and I are taking you for an extended Minyanville retreat next weekend. You'll be at your regular post through Wednesday and out of the office Thursday and Friday. A'ight?
The Menagerie: Cool!
Toddo: Before we do that, however, we've got three days to make some cake. You guys know that I've got one leg in the bear costume (25% conviction on the short side) and I'll be monitoring last week's highs as first resistance and S&P 935 (NDX 1140, BKX 800) as support. Also, please keep an eye on the pattern of higher lows and higher highs. If (when) we put in a lower high, that'll be heads up for a potential momentum shift. There's still "blow off" risk to the upside but, I'll say it again, there are plenty of reasons why the market should trade lower. As always, we've gotta balance the risk vs. the potential reward at each unique juncture and attempt to remain proactive in our approach.
The doorbell rang and I'm not sure I've ever seen Boo move so fast. As room service set up a table for seven, Casey and I caught each other's eyes and smiled. It had been more than a year since we first discussed the menagerie and, through the magic of imagination, we were now surrounded by a roomful of critters. So much had been done... and while there is so much left to do, we allowed ourselves to enjoy the moment. For we know that while the destination is far away, the joy is in the journey. One step at a time.
Good luck today.
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