The Hump and Grind
By Todd Harrison Jun 11, 2003 8:37 am
Be on the lookout for the Beige Book at 2 p.m.!
Good morning and welcome back to the daily dance. There are days in history that will go down as major turning points, when the entire dynamic of the marketplace was forever altered and statisticians will reference the daily events. Yesterday was not one of those days. The drifty grind was a round trip to nowhere before a late day jam job lifted the averages to their highs. After the close, the critters invited me to join them for a walk. As we strolled in the afternoon sun and enjoyed some ice cream, a spirited conversation evolved. It went a little something like this:
Daisy: Hoofy, take it easy over there -- if you save your appetite, I'll give you some real food for thought later!
Boo: Do you have no shame, Daisy? This is a family oriented community and the last thing we need are more visuals. I know that Hoofy is a horny beast (literally) but enough already! Down girl... DOWN GIRL!
Hoofy: Pay him no mind, Daisy, misery loves company and the bears are a lonely bunch. Look at the Investors Intelligence poll. There are 58.7% bulls (vs. 56.5 last) and 16.3% bears (vs. 20.7 last). That's leper city, sweetie, and they're falling off fast!
Snapper: No ing)" target=_blank>schvitz? Well, they're lonely for a reason. The pullbacks are shallow, Hal, and people are reaching for exposure. You can't tell the market what to do, you've gotta listen to what she's saying. Breadth has been Listerine clean and the Minx pulls back begrudgingly before rallying with the easy breeze.
Hoofy: And look at how she digests bad news: Last week, Microsoft (MSFT:Nasdaq) and IBM (IBM:NYSE) had overt negatives and there was nary a burp. This week, Motorola (MOT:NYSE) served up sobering news and the most "conservative" of the government sponsored agencies tossed their cookies. Did it spill over to the rest of the market? Nosiree Bob. Now the bears are pointing to Texas Instruments' (TXN:NYSE) mess last night as a sign? Yeah, it's a sign -- I sign of furry denial!
Sammy: You both make excellent points and I encourage you to continue listening to what the market is telling you. I know that, after the recent rally, the bulls aren't gonna roll over without a fight -- not with quarter-end looming, not with Elmer pumping liquidity into the system and certainly not with the knowledge that there's a rather substantial electoral agenda in play.
Boo: THANK YOU for acknowledging the "Elmer call" -- I thought I was taking crazy pills! I understand that the administration has the best of intentions but they're only digging a deeper hole for future generations. I mean, honestly, we're borrowing from Peter to pay Paul, the consumer continues to lever themselves, the deficit keeps growing and the fragility of the system is staring us in the face. It's gonna be a bitter pill to swallow after the bubbly is gone!
Daisy: Hey Boo, lemme ask you an honest question. Why is it that you have a conspiracy theory every time the market rallies and chalk it up to reality every time it fails. What if we ARE in a new bull market?
Boo: Then I'm wrong. But it's my contention that bull markets don't begin from such inflated levels of valuation and, after the bubble we've seen, the excess capacity will take many years to chew through. And to be clear, I'm not implying that Elmer & Co. is buying futures in his personal account but, at the same time, I think it's myopic to believe that the government plays NO role. The Bank of Japan intervenes in their markets all the time which is fine because they tell you about it. If you don't communicate the process, however, it's borderline manipulation.
Hoofy: (laughing) You're out of your tree! That's the craziest thing I've ever heard! Take a Xanax and watch some Disney movies, my friend, cause you're entering John Nash territory now.
Sammy: Yeah, you've gotta be careful Boo, they're gonna toss ya in a rubber room soon. Rather than think abstractly, look at where we actually are. S&P 965 (NDX 1180) are first support while S&P 950 and NDX 1150 are BIG (uptrend) support. On the upside, there's really nothing in the way until Friday's highs. If (big if) the bulls can squeeze the tape through there, the alternate scenario (S&P 1040) has potential. But let's worry about that when the time comes -- there's a lot of trading to do between now and then.
Snapper: Whatcha thinkin' Toddo?
Toddo: Honestly? I'm just enjoying the banter and trying to see all sides. There are infinite interpretations of the stock market and the right "call" will only been seen with the benefit of hindsight. I've got one leg in my fur (25% conviction on the short side) and the only reason I'm not dressed further is that I respect the breadth, the uptrend, the momentum and the potential quarter end agendas. I still think that this thing ends messy but timing is everything, fellas, timing is everything.
Hoofy: (with a milk moustache) Have you EVER been bullish Toddo?
Toddo: Absolutely, although, during the past few years, the bull costume cameos have been attempts to game bear market bounces. This particular bungee has lasted longer (and gone farther) than I thought but when we look back at this period, I believe it'll prove to be just another opportunity to make sales. Of course, I could be wrong -- it wouldn't be the first time -- but either way, there's likely to be a meaty pullback that will afford the bovine cheaper prices if they want to get involved.
The critters and I walked in silence for a bit and enjoyed the seasonally warm weather. One of the greatest shames of our profession is that we're forced to sit in front of our screens while the beauty of the world wades by. The red drips and green blips need to be balanced by green trees and a warm breeze. And we weren't about to let the moment pass without breathing it in.
Good luck today.
position in spx
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