Minyans on the Schvitz!
Watch for the economic numbers at 8:30 and 10 a.m.!
Good morning and welcome back to the frantic fray. With yesterday's grindy climb fresh in the critters' minds, we gathered last night for a quick steam at the local gym. While Daisy was conspicuous in her absence (much to our chagrin!), we made the most of our time as the stressed ing)" target=_blank>schvitzed from our ample pores. The conversation went a little something like this:
Hoofy: Jeez, Boo, I haven't seen you sweat like this since... well, today!
Boo: Hey, you're funnier than a clown on Prozac! Whenever your bravado gets giddy, as it is now, you're usually pretty close to a can of whoop ass. Keep yappin', dude, and talk to me when the dust settles.
Snapper (sans shell): Come on now, Furrio, how much writing has to be on the wall of worry before you finally get it? The IBM (IBM:NYSE) news, in and of itself, shoulda smoked an extended tape for a quick nickel. What happened? The Minx absorbed the supply, burped a few times, and closed near the highs. After the close DaimlerChrysler (DCX:NYSE) released somber news but does Europe tank? Nosiree Bob. As a student of the market, you should know how to read the street signs!
Sammy: (looking at Snapper) Man, talk about shrinkage, you're a shadow of your former self! (turning to look at Boo) Speaking of tiny bubbles, Boo, I notice you've been a bit less aggressive of late and I don't blame you -- the tape feels firmer than Daisy in a spin class. It's certainly due to roll over, we all know that, but let the trend be your friend and stop beating yourself to a pulp.
Boo: Isn't that how it's supposed to feel before an interim top is put in? The bears are scarce, the long side is crowded, complacency abounds, there's tranched resistance from S&P 980 (multiyear neckline) through S&P 1020 and the multiyear downtrend in the banks comes into play around BKX 870. Oh by the way, the stochastics are twisty again (negative), we're spiky extended, the economic data ain't exactly supporting (cough) a second-half recovery and, perhaps most importantly, I've become the laughing stock of our humble little town. If we're not there, we're getting close.
Sammy: It all comes down to your time frame, trading style, risk profile and overall view, Boo. Each and every Minyan has a unique situation and, as such, it's virtually impossible for there to be a blanket answer for everyone. CAN the blow-off, if that's what it is, extend through S&P 980? Sure -- the biotechs and brokers have surely exhibited late-stage characteristics but the broader indices may still be in the midst of that final phase. Moreover, if you look at the Nikkei between 1992 and 1997, you'll see a very similar pattern to our current juncture. The Jinx (Japanese Minx) rallied an additional 7% (and three months) before finally beginning her death spiral towards despair.
Hoofy: And, with the noticeable exception of our predilection for sushi, we're nothing like Japan!
Boo: You said the same thing in 1999 bro, and you're a lot thinner now than you used to be. I'll admit that I didn't give you enough respect -- the short side got too easy -- but just because I'm early, doesn't mean I'm wrong. Look at the most recent Investor's Intelligence Survey (due out tomorrow): Bulls 56.5 (vs. 53.8 last), Bears 20.7 (vs. 22 last), Correction 22.8 (vs. 24.2 last). That's spooky stuff -- and while it's clearly not a timing gauge, it's something to factor into the mix.
Snapper: Come on now, rolling rationalization may work on a diet but it doesn't hold any water in the financial decision-making process. There were a lotta smart bears who got left behind in 1999 because they allowed conviction to cloud their discipline. If you're gonna spit into the wind, you'd better define your parameters. Remember, the mechanics of the swing are more important than the results of the at-bat.
Sammy: You all make valid points -- that's why there are two sides to every trade. Boo, you need to take a deep breath and map out a game plan for any scenario (including a "surprise" rate cut). Hoofy, you've been the critter with the mojo but rather than beating your chest, maybe you should look to take some gains and treat Daisy to a night on the town. Snapper, you're a jazzy and spry guy but don't instigate the situation, tensions are high enough as they are.
Boo: Can I say one final thing please? (stands up and walks to the center of the room) I know that my timing has been lousy and you guys tune me out with each and every uptick. However, I implore you not to ignore the bear case just because the market is in a bullish phase. Ironically, that's when you should be exploring the furry possibilities the most. When the duct-tape despair was all the rage (S&P 800), a variant view was a fortuitous fortune. We've at the other side of the psychological spectrum now and while the tape warrants respect, that doesn't equate to deference. Peace out, Rabitt!
The steam machine began to scream and Boo slowly walked out of the room and towards the showers. The rest of the critters sat there and let the conversation soak in. Deep in the confines of their subconscious, they were painfully aware that the ugly ursines, however few, were lurking in the shadows. The path of maximum frustration is littered with false hope and empty promises -- and there's a lot of both floating around Wall Street these days.
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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