The Picnic Nitpick
By Todd Harrison Jul 08, 2003 7:51 am
Steak your claim, baby!
Good morning and welcome back to the fluttery flicks. With yesterday's spirited sprint fresh in their minds, the critters gathered in Town Square last night for a summer picnic. While chowin' down and lounging 'round, the conversation slowly migrated towards the action in the stock market. A nearby squirrel recorded the following tidbits:
Hoofy: I'll tell ya, they really caught the dandruff crowd looking the wrong way last week. Did you guys catch that head fake at S&P 965? My boy Snapper showed up and showed those bears of will what will really is! (high fives Snapper)
Sammy: In a holiday shortened week, a few meaty gorillas with an agenda can do that. What's more impressive, in my eyes, is yesterday's broad based rally. Once the "higher lows" held in the major indices, the collective focus shifted to a potential "higher high." That, coupled with some fresh short squeezage (from Thursday's close) gave the bulls all the ammo they needed.
Boo: Ammo....or rope...you dope! Listen, I see what you guys are lookin' at....the Nazz is broken out, the breadth is Listerine fresh, the financials are firmer than farmer and sentiment is oh-be-joyful. My timing has...what's the word I'm looking for...SUCKED? But mark my words, my metaphorical friends, this pill will be bitter, it will be swift and it will be painful. And I don't wanna hear it when the schvitz hits the fan!
Daisy: Quick question: Are you a bear...or a groundhog? You've been spewing the same shpiel for months now and the Minx continues to motor higher. If I were as thin as your credibility, I'd be the centerfold for Playbull!
Boo: You're such a poseur, Daisy. Maybe if you stopped reading US magazine all day and paid attention to the substance over the style, you would learn something. I can't tell you when the pain will rain but with the entire world in the inevitable recovery camp, it could happen at any time. To borrow an analogy from a fellow bear, Elmer keeps digging and digging and digging hoping to find oil. By the time he realizes it's a dry hole, we'll be in way over our heads.
Snapper: It's a good thing you've got fur, Boo, because I don't know if I've ever seen a chillier critter. Let's assume for a moment that you're right and the market is going to hell in a hand basket (whatever that means). Every Minyan knows that a good trader isn't as concerned with the destination as (s)he is with the path that we take to get there. You've been post-rationalizing more than Bill Clinton ever did!
Sammy: Well, yes and no Snapper. The furry fiend has a point when he says "it" can happen at anytime. With the sentiment indicators, complacency, valuations and economic uncertainty as it is, Hoofy shouldn't be shocked if the give back starts to kick in. On the other hand, Boo, you've got to respect the technical patterns (higher lows), hydration situation (liquidity) and the potential for greed to trump fear for an extended period of time. You MAY be right--this may be crazy--but crazy may take the bus deep into the night.
Hoofy: I don't understand why the revenge of the herds is such a shocker to anyone. If you pull back and look at a five year chart of the market (particularly the Nazz), we've erased a ton of the excess that existed during the bubble. In the process, people got too used to shorting stocks as a money making stylistic approach and the Minx switched gears on 'em. Poetic justice if you ask me.
Boo: See, this is where you and I differ. I don't believe that the overcapacity has evaporated as a function of the pin prick. If excess breeds excess and a regression to the historical mean of return occurs, we're in for a long, hard road. I'm clearly in the minority here (and more so with each day) but what we're witnessing is par for the grizzly course. It's textbook action that the bears are getting hurt--in a bear market, nobody makes money. The ursine got weeded out during the first bubble gum run, the bovine took it on the chin the last three years, the newfound bears are once again diminishing and, you'll see, the brazen bulls will once again eat humble pie. It's a vicious death dance and by the time the music's over, there will be nobody left to turn out the lights.
Hoofy: You're so dramatic. Why can't you just admit you're wrong and join the fun? Don't you know how good it feels to make money on the long side? I've been enjoying steak dinners every night--and every morning for that matter!
Daisy: (shoots Hoofs a hard, cold stare) I'm gonna pretend you didn't say that--I don't care how much money your making, you'd better mind your manners!
Snapper: Enough--Minyans aren't reading this for the story line, they wanna know what's on the trading agenda looking forward. Moreover, they wanna know if the third times gonna be the charm (for the second half recovery).
Sammy: Well, we know that an assimilation of our trading metrics is somewhat convoluted and, while the path of least resistance is seemingly higher, the trading radar will soon shift it's focus to the fundamental metric. Yahoo! (YHOO:NASD) reports tomorrow, Juniper (JNPR:NASD) and Pepsi (PEP:NYSE) release earnings on Thursday and General Electric (GE:NYSE) takes center stage on Friday. With the second half already underway and nary an economic uptick in sight, the bulls will be searching for any signs of upside validation. They've got the structural metric (liquidity) on their side but, as Boo so eloquently pointed out, there ARE warning signs flashing in the night. Understand the two-sided risk and don't trade just to trade. Patience will typically bring price and, if it doesn't, opportunities are made up easier than losses. Now, enough tape talk--pass the mashed potatoes!
The critters turned their attention from the food for thought and thought of food. With earnings season approaching, they knew that the proof would be in the pudding and they needed their nourishment. Besides, they'd pay their daily price already and it was time to shut it off and find some balance. They had plenty of friends who had lost perspective--and a lot more--by totally immersing themselves in the flickering ticks and vowed never to become "that" critter. As the sun set over downtown Minyanville and a calm settled over the clan, all was well in the world--at least for moment.
Good luck today.
No positions in stocks mentioned.
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