Mary Mary, why ya buggin'?
Will the wind ever remember
The names it has blown in the past
And with this crutch its old age and its wisdom
It whispers no this will be the last
Good morning and welcome back to the scorning. Yesterday's rip was a giddy-up skip that flipped the bear ship with the crack of a whip. When the flickering ticks were finally weighed, a rather smug bull could be found in the shade. "I tried to warn Boo he was trading 'em scared," said Hoofs to his friends though few of them cared, "but he didn't heed the advice that I shared, and wasn't set up or even prepared!" Was the strong Monday lift a dynamic bull shift, or should they say "thanks" for that sparkling gift? It's Tuesday my friends so let's shake those jitters and ready anew for a romp with the critters!
It wasn't too long ago that we were serenading Carrie and nervously eyeing the bucket of blood. We also know that her daddy (Elmer) is very aware of the minxy scare and will stop at nothing to protect his darling daughter. Has the recent (and sharp) increase in the money supply helped paint the picture of a pretty princess? I'll be the first to tell you that others in the 'Ville better understand the mechanics of a liquidity flush, but the timing is serendipitous. When the minx sputters and the printing press simultaneously starts hummin', it raises an eyebrow on yours truly. Money may not buy happiness, after all, but it can certainly buy plenty of time.
That, to me, is the crux of our task at hand and quite possibly holds the answer to our financial future. Despite Elmer's best efforts and intentions, we've painted ourselves into a helluva dark financial corner. Our country is in debt up to our eyeballs (on every level), our collective fortunes are tied to stocks and homes (both record percentage participation) and we assume that the printing press is a panacea. Ironically, the basic laws of supply and demand dictate that we're borrowing the most precious commodity of all: time.
The frustrating aspect is that we've already seen this movie and should know better than to believe that things are rosy simply because prices are rising. Most people will tell you that a 'good' trade is one that makes money. I would argue that a good trade is one that identifies the best potential reward per incremental unit of risk. That will inevitably lead to leaving some money on the table but at the end of the day, the goal is to prosper if you're right but survive if you're wrong. I'm not asking you to subscribe to my view--we don't do that here--I'm simply stating that when there are too many cooks in the kitchen, some of them are bound to get burned.
From a pure trading standpoint, challenging the legitimacy of yesterday's rally is a dangerous proposition with the exception of two very noticeable caveats. First, volume was absent from the equation, and that's been the qualifier that most technicians are looking for. To be fair to the critters sans hair, this has been a missing link on both sides of the Minyanville fence. It was quiet during the sell-off and it's equally muted during the romp. That lends credence to the seasonality factor and limits this input as a directional indicator (until, of course, it reappears). We must also note that despite the fright--and don't blink--the lightish lift rallied our five favorite indices--S&P, Dow Jones, Nazz (comp), semi (SOX) and piggies (BKX)--back to (or near) resistance in an arguably overbought environment.
We power up this minxy pup to find the Asian equation firm, Europe slacking and the metal/dollar duopoly doin' a whole lotta nothing. The trading radar remains relatively muted into (yet another) three day weekend and it appears as if the technicals and psychology will once again rule the roost. Please watch the breadth, Citigroup (C:NYSE), Russell 2000, semis, cyclicals and M.I.A. Meehan as we dangle our way through the daily dance. And think positive, Minyans, it could be a lot worse.
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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