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Thursday with Stories


I've found that taking steps back and deep breaths helps in situations like this and it pays not to project your opinion to the tape.


Some folks look for answers others look for fights,
Some folks up in treetops just a looking for their kites.
Whoa, I can tell your future just look what's in your hand,
But I can't stop for nothin' I'm just playing in the band.

(Grateful Dead)

I know you are but what am I?

The FOMC minutes hit the tape yesterday and, lest there was any doubt, the Federal Reserve is as confused as we are! While I've never been accused of being a picture of focus, our buddies on the Beltway are equally scattered as they assess the mess that Elmer left. Heck, this is the center ring of monetary policy, our governing circle of trust, the dog that wags the tail of financial markets around the world. Yet, one guy wanted 50 bips, another guy wanted to pause and Big Ben was in the middle saying "Whataya want from me?" Clarity, I suppose, but we can't point a finger if there isn't clarity to be found.

A few trusted traders I know, professionals who are tops in the field, reached out to me yesterday to opine that they're spun around. "It's not your fault," I told them, "there's a ton of noise in the near-term nuances." Indeed, the tape feels particularly crowded with agendas galore and the anticipated monthly inflows, coupled with the skeletal ranks during this holiday shortened week, only serve to exacerbate the confusion. I've found that taking steps back and deep breaths helps in situations like this and it pays not to project your opinion to the tape. In other words, trade--don't fight--and listen to what the market is telling you. If you can't hear the message, don't scream louder. It won't do you or your P&L any good.

As it stands, the S&P is range bound between 1246 and 1280. While we know the structural metric currently trumps technicals, chartists were wise to follow their discipline in May. Once the S&P broke 1280 support (the April low), that level immediately morphed into resistance. Following the bunk breadth and laggy leadership lower, the Minx cascaded to 1246 (double bottom from November/December). Then, with the stochastics twisting oversold and volatility spiking (VXO +70%), the tape bounced directly back to 1280 on Friday, before failing anew right where it "had" to. We power up this Thursday pup to find critters playing in the band and the benefit of the doubt resting with Boo (as we churn under resistance).

It's all Relative!

Pepe and I had a conversation late yesterday on the heels of his afternoon Buzz. His vibes, echoed often by many professors in the 'Ville, touched on the potential for deflation in the energy space. In particular, he offered that the recent bounce in the drillers was "mean reverting" and, quite possibly, fleeting. "The patterns for Crude and the OIH and OSX are virtually identical to the pattern for equities." He said as we edged down the back of the Hump, "Long-term sell signals on monthly and weekly charts in DeMark terms are aligned with the negative PnF indicators suggesting near-term moves higher will be brief in duration and magnitude, subsumed by the longer-term time preferences that are now in control of the market." Subsumed? Geez, I've never heard that word before. And I've known Pepe long enough to have mad respect for his skillz (not to mention his vocabulary).

I sat up and took notice of that Buzz as the long side of my pad is weighted to energy and metals. But before my fingers did the walking, I read the final portion of his missive. "I understand the case for the secular bull market in energy and metals, but I also am a believer in the case for a structural unwinding of debt. If that occurs, then outperformance by energy and metals may simply be relative in nature, i.e. they will lose less." Alas, while we've been dancing from a different angle, it appears that our big picture vibes are uniquely aligned. I've long believed that energy will assume top weighting in the S&P but I've yet to discern whether that'll be a function of slippage in the financials, traction in energy or a combination of both. I learned a long time ago that you can't spend relative performance but, with a little luck and alotta discipline, I'm hopeful that I can navigate these tricky twists.

Along those lines and to follow-up another blurb on yesterday's Buzz, crude and the metals both came for sale when chatter hit the tape that the US was working on an Iran accord with China and Russia. While I don't trust Mo as far as I can throw him (and I promise to try and throw him far), the news highlighted the "peace risk" we've bantered about in that space. Sky News reported this morning that Iran responded to the political overture by saying "Thanks, but not so much on the uranium enrichment thought." So, hopes for peace, as slim as they are, perhaps slimmed a bit more overnight. That dynamic, coupled with the upcoming Peruvian election (do you, Peru?), will add a splash of two-sided spice to both these spaces. See it all, even if you decide to trade it a little.

And, what would a Thursday be without some morning Randoms...

  • S&P 1246-1257, MDY 136, XOI 1043, DRG 323, RUSSELL 700, XBD 201 and BKX 108 all remain levels of lore for traders galore.

  • SunMicro painted the tape last night with job cuts and cost cutting initiatives. I swapped my common for a spate of January upsides last week and, from where I sit, I'm comfortable with that upside leverage.

  • We power up the morning pup to find a grabby greenback (+65 bips) and sloppy metals (gold -$15, silver -4%). The XAU acted fabu yesterday in the face of the afternoon smeltage and they'll be put to the test again today. Perhaps they'll shoulder supply through the weekend (Peru) but I continue to trade around a spate of long-side exposure in the space.

  • We got a slew of new Mountaineers slinking in before the early bird deadline last night but despair not. There are still some rooms left for the Mountain Mingle and if you wanna break bread with the finest collection of human capital on the Street---and noodle a slew of actionable ideas---you can still lock your spot for the mountain trot. It's gonna be a Festivus of the highest order!

  • You think we sleep 'round here? The new and improved Buzz & Banter is in the final stages of Greek testing and we're anticipating a roll out in the next few weeks. This puppy sizzles--trust me on this--and Minyan jaws will drop in synch when you see this snazzy tool. We know there have been a few gnats in the system but those bugs are gonna wish they stayed in the Roach Motel. It's exciting--I'm excited--can you tell?

  • Finally, a non-market related thought to end this morning missive. It's tough out there--acrimony is way up, returns (in many cases) are down and we're leveraged to a finance-dependent economy that is pushing the bar tab to our children. It's easy to get discouraged--to bicker over petty differences or lose your cool at a moment's notice. Breathe, Minyans, and remember that in 100 years, none of this will really matter. Your family, your buddies, those you love and the friends you get---that is the grist of life. And that is where our focus should be when the walls feel like they're crumbling down.

  • Good luck today.


position in energy, metals, financials, sunw

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

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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