A Maine Stay
Watch for the 10 a.m. economic releases to set the early tone
Good morning and welcome back to the lobster shack. A few days away from the fray is always a welcome play and I sincerely hope you enjoyed the down time. We edge ourselves into the summer season with humble lessons learned and many questions remaining. Have we turned the proverbial corner and will this time really be different? Can the economy catch up with equity levels and offer Hoofy some positive reinforcement? When will the massive divergence between the bulls and bears be resolved and, more importantly, how? Shake the sand from your pants and settle into your seats, Minyans, for a new week of giggles and wiggles is set to begin!
While the springtime sprint remains a favorite topic of conversation, these next few months should offer clues as to the durability of the recent rally. During the past two years, the month of May has been rather unkind to the Minx and the "lower highs" they offered haven't been touched since. While past performance is certainly no guarantee of future results, this factoid is interesting when juxtaposed against the manic sentiment and widespread complacency. That's not to say we can't rally from here, but if we do trip and dip, there will surely be writing on the rear view wall.
How do we know that this isn't a simple pause that refreshes? We don't. But there are some patterns that bear watching as we find our way. First things first: the steadfast series of "higher lows" and "higher highs" that was in place for a few months was rudely broken with last Monday's drubbage. While the rest of the pre-holiday week was relatively constructive, we must monitor the Minx to see if the next leg confirms this trend change. Also, please see the potential head and shoulder formation that is forming on the S&P (one month chart). A close "through" S&P 920 will offer dandruff confirmation while a rally through S&P 940 negates the pattern. So you know... and if you hair!
The stock market is a leading indicator and, as such, it stands to reason that an economic uptick should soon emerge. Thus far, however, we've seen few signs indicative of greener pastures. Even our ol' pal Elmer can't offer an upbeat assessment of the state of the nation. Earnings were "better than anticipated," he opined last week, but his outlook was noncommittal at best. Further, he spent considerable time assuring us that deflation isn't an issue before quickly offering that we've got plenty of weapons to fight it. Heh?
Perhaps that's a discussion for another time as we've got plenty on our trading plate. These next few sessions should be "telling" for the short-term players among you, so stay sharp and on your toes. While I continue to duke it out with Mr. Flu (thanks Casey!), the critters will attempt to carry the load as we find our way through a new day. Keep your right hand up, think positive, trade to win and let's start this party with a little jingle in our jeans.
Good luck today.
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.
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