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Great Expectations

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A scared bear makes for a dangerous beast.

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Good morning and welcome back to the wild ride. Yesterday's yo-yo ended on a firmer note as investors digested Elmer and braced for the Cisco Soliloquy. While Sir Chambo reported marginally better results and his guidance was "there," the whispers on the street seemingly sought a more assuring wink. Will the expectations game matter as we edge into Wednesday or are the animal spirits too tough to snuff? Power up and settle down, Minyans, Hump Day is set to begin and it's bound to get nutty!

Taking a step back, the Cisco (CSCO:Nasdaq) situation is a Minxy microcosm for our great debate. Sure, things are better than they were peceived to be a month ago (uncertainty lifted) but does that necessarily mean we can put our right hand down? Listening to Chambo, I experienced an odd sense of deja vu as the "inevitable" economic upturn and "cautious optimism" were discussed. Haven't we seen this movie before and, moreover, isn't that the very definition of hope?

The collective mindset is clearly obsessed with missing the upside and, once again, that's been a hallmark of every bear market trading top. Elmer laid it out there yesterday but, as a function of psychology, the market chose to read the text with their oft used rose colored glasses. In my (most humbled) opinion, there was nothing in either of yesterday's catalysts to change the bear case. As a matter of fact, I'm growing more resolute in my belief that a major turn is close at hand.

If I were to critique myself (imagine that), it's clear that my big picture bent has influenced my daily dance a bit too much. Still, I'm staring at a market blind with optimism (bull/bear 55.8%!), complacency (VIX Jordanesque), fat valuations (too rich to start a bull market), extended indices (salty stochastics), non-confirmation from the dollar and latent risk (debt, derivative, geopolitical).

Yes, there is a bull case (obviously) -- if there wasn't, we wouldn't be at these levels to begin with. The key to our success, however, is predicated on our ability to capture the disconnect between perception and reality. Could THIS time be different? Sure -- if the metrics that historically launched a new bull cycle have entered a new paradigm, we may find ourselves in a whole new world. Sounds familiar, doesn't it? I'm not ignoring the technical breakouts on high volume -- they've been factored into my thesis. The Minx is pricing in the very best case, however, and I don't believe it to be warranted.

While I'm unsure if the dandelion needs to "blow off" a bit more before exhaustion (NDX 1200?), I'm approaching higher prices as a gift, of sorts. In my mind's eye, lower levels are a function of "when," not "if" and, at the very least, a meaty pullback is lining up. Could a downdraft prove to be more severe than a simple retrenchment? Let's worry about that when we get there, cookie, one step at a time.

Finally, in an effort to keep it in perspective, I had dinner last night with Scotty Sklar and Jordana Holovach of Jacobs Cure. I sat down at the table with visions of flickering ticks dancing in my head before listening to a mother anxiously map out a plan to save her ailing child's life. I'll tell ya, Minyans, if you're biggest stress is market-related, you've got a lot to be thankful for. Think about it.

Have a great day.
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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 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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