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Growth Spurts

By

Diamonds are a cow's best friend!

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It was a gorgeous afternoon at Camden Yards and, as the Birds prepared to bat in the bottom of the seventh, the critters were thoroughly enjoying the lazy day. Stretched across a row of seats on the third base line, they sipped their cool brews in the sunlight as they watched the opposing pitcher casually warm up. All was well in the world, they decided, and it really didn't get better than this.

Hoofy: Man, life is good. It's a beautiful day, I've made some decent coin lately and, most importantly, I'm spending quality time with my friends. For years, I wasted so much energy worrying about what I didn't have. I almost forget how special the simple stuff can be!

Snapper: (in a Maryland Terrapin jersey) Yeah, dude, it's good to see you with a smile on your punim and realizing that happiness doesn't need to be tied to the tape. Some people live their whole lives measuring success by the size of their bank accounts and, ironically, they miss the best trade of all.

Boo: (wearing a beat up Cubs hat) Not to be a bitter critter, but it's easy to preach perspective when you've got some jingle in your jeans. I'm sure I'd be witty and giddy if I were in your shoes too!

Daisy: You're missing the point, Boo. These are two entirely separate conversations. You can bum out and dwell or you can do something about it. I think you'll find that if you find balance in one regard, you'll find benefit in the other.

Boo: I hear ya, cowgirl, but I feel snake bit. I haven't had a good handle on the Minx in over a month and my confidence is shaken. I thought (at the time) that I had a lucid view of the world. The internal readings of the market, be it valuations or sentiment, were entirely different than the last go 'round in Iraq. Further, with everyone expecting the war rally, I felt certain that a high caliber zag was the way to play. Here we are six weeks later and the bulls still have the baton. It's very frustrating!

Sammy: Did you get stubborn? You know that emotion is the enemy when trading and it sounds as if you were holding on a little tight, Mav. Nobody can blame you for being wrong -- it happens to the best of us -- but while it's alright to trip at times, the goal is not to fall. What you need to figure out, my friend, is where we go from here.

Hoofy: Yeah, Boo, the writing has been on the wall but you haven't shown me the r-e-s-p-e-c-t. In technical land, we've seen breakouts all the way up the wall of worry (most recently at BKX 800). On the fundamental front, last quarter's earnings weren't nearly as bad as feared . When you factor in the performance anxiety and the potential for further structural shifts (into equities), the recent rip isn't such a shock, is it?

Boo: That's bull! Hindsight is always 20/20 and when the dust settles after this rally, it'll prove to be another in a long line of upside upchucks. If we would have failed, there would have been plenty of reasons to assign for to that as well. The market is NOT cheap, the widespread optimism is ominous and, even now, I maintain that my error was one of timing, not judgment. You'll see Hoofy -- I don't wish bad on anyone, you know that, but don't say I didn't warn you!

Daisy: Time will tell, fellas, but I'd focus on the journey one step at a time if I were you. JP Morgan kicks off their tech conference Monday and traders will have their ear to the ground trying to pick up signs of a pick up. In addition, there's gonna be a spattering of economic releases and a few chunky earnings reports. Pay particular attention to Cisco (CSCO:Nasdaq) on Tuesday as Sir Chambo is gonna take center stage. You know how he loves the spotlight!

Snapper: The bulls certainly have the mojo heading into the new week. The Minx sucked up the supply after last Thursday's punk numbers and rallied Friday when the downside confirmation didn't arrive. That's constructive action and, as we tickle the intermediate term resistance lines, it warrants respect.

Sammy: Yes, Snapper, you're right. But caveats surely remain and I would remind you that respect is a two-sided beast. The market IS factoring in some lofty expectations heading into the back nine and that's been a recipe for disaster the last few years. How many times have we heard about the famed second half recovery? Too many to count! In addition, we know the Minx likes to travel the path of maximum and it would be just like her to suck everybody into the vacuum before reversing course. That doesn't mean that this rally can't continue but it's surely worth a mention.

Boo: Plus, if and when this rally fails, the everyone will point to the dollar as the "non-confirming" element. When you balance that against resistance in the S&P (between here and 950), twisty stochastics, a VIX that "doesn't matter" anymore and signs of economic lethargy, there is a bear case here. Personally, I like it when people look at me as if I'm a dope -- the more bulls there are, the more painful the selloff will be.

Daisy: You're entitled to your opinion and I wish you well. I'd just be careful if I would you, Boo. The DIA has JUST given a triple-top buy signal (86) and the NDX blew through the November highs on Friday. I know you're on the lookout for false breakouts but there IS a shot that your expected reversal occurs from higher levels. I'm not playing favorites (winks at Hoofy), just sharing the facts. If we're in the blow-off phase, it can "overshoot" to the upside. It's kinda like downside capitulation, only in reverse. Being early can be a painful proposition.

Sammy: Those are good points, sugarpants -- now can we please put it to rest for the day? We're at the ballpark and I'm pretty sure there's a law against talking too much business on a Sunday afternoon. Just take it one step at a time and remember to think positive. We'll get there, but the journey is as important as the destination.

As the sun dipped below the right field bleachers, the next batter dug into the box and prepared to take his cuts. The Menagerie quickly turned their attention to the field of dreams and left the shop talk for another day. It was the weekend, after all, and while it's alright to "go there," they surely didn't want to "stay there." Profitability in the stock market is why we all work so hard but profitability in life? That's why we're all on this earth.

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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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