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The Answer Dancer


Watch the fixed income market for equity clues!


Fortune comes a crawlin, Calliope woman
Spinning that curious sense of your own
Can you answer? Yes I can,
But what would be the answer to the answer man?

(Grateful Dead)

Good morning and welcome back to the shivering shack. The green Monday muse was drifty light cruise that spared the scared bulls from another bad bruise. Despite the harsh fright from a chippy red plight, the Minx held together (much to Hoofy's delight). "It coulda been ugly," he said with a grin, "but my brethren got snugly despite our glass chin." Can the bovine bounce back with another fine ditty or is there cause for pity in Matador City? We've got Elmer and earnings and critters (oh my!) so let's dive in deep and give this beast a try!

The world's largest thermometer will focus on Elmer today as he states his case on the rate debate. While he'll likely chat up growth and productivity--and may lose his vaunted "patience"--there's a growing grumbling among market watchers that we're not gettin' the full scoop. I'm all for an optimistic assessment, mind you, but how can anyone look us straight in the kisser and offer that there's no inflation? Crude is at a thirteen year high, the prices paid component (of yesterday's manufacturing ISM) was at a 25 year high and, well, all you've gotta do is walk to the corner store to see that money just doesn't go as far as it used to.

I can't tell you when the focus will shift towards stagflation--where I think we're headed--just as there's no way of knowing when the psychology (or debt or derivative or housing) bubble will follow the four-letter example. But sentiment can shift at any time and that, in a nutshell, is the trap door that paves any trading path. You may have hoofs, claws, legs or paws--that's your prerogative--but please respect that a crowded Carrie with bubble trouble makes for a potentially toxic combination. And the only way we'll know when it matters, for sure, is after the asset class morass is in full swing.

Now, before you move to Gunsandbutterville, there ARE constructive trading elements nestled in the current muck. Tops--if that, in fact, is what we're wading through--are typically processes as new dynamics are introduced to the collective mindset. Hoofy will note that the rate hate is baked into the tape, for now, along with a sprinkling of China slowdown concerns for good measure. When he factors in the (tight) corporate spreads, snazzy stochastics (BKX/SOX) and the ability (thus far) of the NDX to hold the 200-day moving average (2nd time), he looks a bit like the bird that chowed the canary.

We power up today's pup to find the dollar index down 1% (failed at the 200-day), metals higher by a like amount, Europe mixed (FTSE outperforming) and the stateside futes green with envy. Elmer, for his part, is likely rolling out of bed (good morning Andrea!) and readying for his requisite 15 minutes. We know that once he paints the tape at 2:15, the action is bound to change drastically. Employ patience, discipline and risk definition, please, as we find our way through this minxy fray.

Good luck today.

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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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