Hey Toddo -- now we really DO have a Minyan!
Well, I'm standing next to a mountain
Chop it down with the edge of my hand
Well, I'm standing next to the mountain
Chop it down with the edge of my hand
Good morning and welcome to stick pin city. While I huddled with the witch doctor yesterday, it looked like Bayou Boo and his frantic, er, paw were choppin' as fast as he could. At the end of the session, the Dow dipped, the S's tripped and, led by the semis, the Nazz hung onto her blip. Will the much discussed S&P resistance zone continue to cap this trap or is this (yet) another pause that refreshes before the manic panic continues? It's Freaky Friday in Minyanville, Mr. Neville, so let's put some fiyo on that bayou and dance into the weekend.
With all the chatter of asset alligators (into equities), I wanted to quickly touch base on the structural trading metric. This recent ramp reminds me of another period when the tone of the tape was accumulative and the price action sucked fresh capital into the market. It was shortly after the tragic events of Sept. 11, and, as we collectively forged ahead with a brave face, the averages did the same. I remember that period like it was yesterday -- we were working out of a temporary office in Ryebrook -- and the Minx shook off every anthrax blurb and rode "despair" to a higher ground.
In hindsight, the underlying bid was obvious. The Fed injected massive amounts of liquidity into the system, "black box" (allocation) models triggered buy signals and, regardless of the news, the energizer Hoofy kept going and going and going (until he didn't). Towards the end of the rally, it was downright goofy to even think about shorting but, as is often the case, the toughest fade (read: sale) proved to be one of the better fades.
Why do I bring this up? Well, perspective is often helpful (and useful) when trading, and if we don't learn from our past, we're destined to repeat it. I'm not suggesting it's right here (right now) and while I (humbly) have a high conviction in my long-term bear thesis, our goal is to focus on the journey rather than the destination. My point, Del Griffith, is that there's a huge difference between respecting the price action and deferring to it. There ARE craws (alligators) in play and that often clouds the other metrics but it's always dangerous to trade with invisible catalysts.
On another topic, a few faithful Minyans have pinged me with angst over their recent performance and asked how I deal with the rough patches. I told them, as I'll tell you, that every trader worth his or her salt has taken a beating at a point. The first goal is to stem the bleeding -- take a step back, a few days off, paper trade for a while -- whatever it takes until you get your "eyes" back. I've been doing this for 13 years and I've always been "streaky" in my feel. I was on my heels last October, saw the seams November through March and have, for the most part, been too cautious during this rally. You know what? This too shall pass, Ruby, and the goal is to be a position to capitalize when it does.
Regarding the market (oh yeah), the tape tickled S&P 965 and NDX 1200 yesterday before succumbing to the forces of gravity. There's been an underlying bid which I believe is structural in nature and, as discussed above, the alleviation of that is difficult to "time." My concerns surely remain, and there's ample (and valid) reasons for a sell-off but they'll only become obvious with the benefit of hindsight. Watch our levels, monitor our tells and take it one step at a time.
The early morning chatter of a "surprise" rate cute continues as the Elmer evidently wants to stave off the deflation that he doesn't think exists. That'll likely get louder if Monsieur Beeks rains on today's parade so be prepared for rationalizing, post-rationalizing and post-post-rationalizing on the back of the economic reports. The biggies, so you know, are the Wolverine Confidence report (expected at 93) and the Sammy Sosa Purchasing Manager report (expected at 49).
In Minyanville news, I'm pleased and proud to announce a few additions to our family. Scott Reamer, Bill Fleckenstein, John Succo, Kevin Depew, Mike Cahill and Jason Goepfert will join the Gazette's News & Views section with their unique voices and honest takes. Keep an eye peeled during the days and weeks ahead for their commentary as well as another round of Minyan additions. The critters are VERY excited and look forward to furthering their educational endeavors -- and I hope you are too!
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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