Nightmare on Elmer Street
Did Tony just smile at Rhonda?!?
Good morning and welcome back to Wednesday the 13th. With twelve snips in his back pocket, Sir Elmer and his merry band of scissors will once again take center stage in the early afternoon. While the rate debate on today's slate remains unresolved, the Fed heads will surely snip bips in some capacity. Does this Minxy crew cut really matter or is this a simple act of desperation from those in the know? Settle in and settle down, Minyans, for the games are about to begin!
I remember with great clarity how excited the talking heads got when the Federal Open Market Committee first cut rates. As the screams of "Don't fight the Fed" echoed in the background, the bulls got pulled into a rather nasty slide. After a dozen more clips, rates are approaching ultimate support and the reflation migration has begun. We know the M.O., right? By dressing down the relative appeal of the fixed income market, equities become more attractive to the all-important fund flow. But is it really that simple?
While many will argue that our market is nothing like Japan -- and they made the same argument at Nasdaq 5000 -- there are undeniable similarities. I'm not gonna have that conversation right now (too involved) but I bring this up to make a simple point. If nothing else, we've learned that an economic and financial malaise can last a LOT longer than anybody expects. If our bubble was virtually twice as large as theirs, is it realistic to think we'll emerge from the muck after a short period of time?
It's my contention that the powers that be know exactly how bad this situation can potentially be and they're pulling out all the stops. This has led to a rather nifty bullish phase and a widespread belief that the worst is behind us. I'm not just talking about the recent sentiment surveys (Bulls: 59.4%, Bears: 16.2%) as they can shift with the latest market leg. Almost everywhere you turn, pundits seem intent on using the word "recovery" as if they're trying to will it into reality. Could it happen? Sure, I suppose anything is a possibility. While it's entirely alright to hope for the best, there's no harm in protecting yourself should the worst case unfold.
Turning our attention to the steps that make up the journey, our technical metric remains a focus. Trendline support from the March lows is being tickled across the board. When we look at the "lower highs" since last week, it's clear that something is gonna give and it's likely gonna give soon. I would caution against positioning yourself too aggressively in either direction before the FOMC decision. More likely than not, the entire landscape will be altered after Elmer shows his hand.
Tells today include the brokers (Goldman Sachs (GS:NYSE), the semis (heavy yesterday), the breadth (internal health), retailers (consumer proxy), the generals (General Motors (GM:NYSE) and General Electric (GE:NYSE)), the transports and big cap tech (for signs of accumulation or distribution). Also, our very own Snoop Tone is on CNNfn right now so tune him in and turn it up! And please remember to put limits on your orders (on/near the announcement) and wait for your pitch, cookie -- it's out there.
Good luck today.
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 firstname.lastname@example.org.
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