Monkees and Minyanville
By Todd Harrison Jun 15, 2004 8:40 am
Offsides? The bond market just rallied a full point!
"I have called this principle, by which each slight variation, if useful, is preserved, by the term Natural Selection."
Good morning and welcome back to the ursine snack. After three full days in the seasonal haze, the critters returned to a crimson red phase. While one day does not a new trend begin, some damage was done to Hoofy's glass chin. "I've heard young Boo's rant and believe it's just noise," he said to his friends and maintained his poise, "but bears will be bears and boys will be boys, so please don't fall prey to the tricky fur ploys!" Was this just a pause in a broader bull cause or will we soon hear more Red Dye applause? It's a spankin' new day as we brush off our skills and ready anew for a romp through the 'Ville!
Any trader worth their salt will tell you that credibility is a function of return. It doesn't matter if you're trading a single position, a portfolio of stocks or a large diverse fund, the bottom line dictates your relative value in the eyes of your peers. It's the nature of the beast and it's been that way for as long as the ticks have flickered. Lotsa folks base their individual view on an assimilation of valued opinions and weed out, over time, those that fail to produce. It's human nature and time tested in its application.
If we apply these basic lessons to the minxy market, we can learn a lot about financial psychology. At the most basic level, we'll watch how a stock acts. Once comfortable, we'll broaden our view to incorporate its industry peers. Then, perhaps, we'll grow familiar with other sectors and note how they coexist. From there, once capable with equities in general, we learn that asset classes correlate in some fashion and extract information from their relative movements.
This forms perception which, when commingled with the structural forces, fundamental inputs and technical pressures, dictates future price action. It seems simple enough, right? Just figure out which metric matters most at any given time and formulate a strategy based on the strength of the legs under the table. There will be obstacles--emotion comes to mind as a primary headwind--but the firmer the foundation, the higher the probability of a profitable outcome.
Our current juncture is interesting--if not difficult--as the metric weighting may be morphing. We've discussed the structural influences (Carrie), overhead resistance (S&P 1140, NDX 2015, BKX 98, INDU 10-4)/support (COMP 1976) and we're readying for a dizzying array of corporate communication. The wildcard (and perhaps the single biggest variable) in the minxy mix remains the collective psychology. For if perception is truly reality, interpretation holds the key to the forward vault.
I've long maintained that the stock market is the world's largest thermometer and, as such, is the driver of most financial decisions. As long as the screens are green, purse strings are loose and the mood looser. But once the stimuli dries, wealth deflation kicks in and the inevitable music is faced, the entire dynamic will sadly shift. It is then that folks like Elmer and Franklin will be held to task and, for most, the first time that they'll be seeing the other side of the coin.
Our goal in Minyanville is to inform and educate, to plant the seeds that provoke thought and provide the tools that will enable you to make better and more informed decisions for yourself. That doesn't mean you're supposed to get "all beared up" and leverage yourself short, it simply implies that you must allow for all outcomes when mapping out a trade horizon and risk profile. One thing for certain, Minyans, alotta people are gonna get caught with their shorts down when the perfect storm hits. Our hope is that by reading the 'Ville, you'll have an umbrella handy.
Good luck today.
No positions in stocks mentioned.
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