...while we always wanna hear what's being said, please be independent in thought with regard to what you listen to.
Into the great wide open,
Under them skies of blue
Out in the great wide open,
A rebel without a clue
Good morning and welcome back to the turnaround shack. With September 11th in the rear-view, it's time to define some forthcoming clues. Yesterday was a mindful anniversary, a day to reflect on what was, what is and what will be. While I dug deep to share some thoughts that had heretofore remained untold, it was Billy Meehan's heartfelt missive that stopped us in our late day tracks. If you missed it, please take a gander as he aptly captured so many emotions and left us with hope in our hearts and tears in our eyes.
Turning our attention to the flickering ticks, we've seemingly entered a critical juncture for the tape. Minyans are well versed in the notion of asset class deflation vs. dollar devaluation and, as an extension of that, we've now experienced the "first domino" that is the collapse in commodities. When we noodled the five year trendline in the CRB a few weeks ago--and the potential implications for equities--the script had yet to be written. Now, with crude at its lowest level in five months and gold scolded to levels unseen since June (and sitting on its 200-day), we will indeed see if there is meat to this bone.
Over the last few weeks, I've tried to map out both sides of the ride. From Boo's perspective, he was looking for this very break in the CRB as a precursor of a nasty, watershed decline in equities. Now that he's got the first half of that equation---the CRB is down 11% in the last month--all eyes are on the equity brethren to see if they can decouple. Conventional wisdom and mainstream media still points to lower crude each and every time stocks rise (it's left unsaid when they trade in the same direction) so, while we always wanna hear what's being said, please be independent in thought with regard to what you listen to.
Hoofy, for his part, was looking for leadership in the homebuilders after their organic 2:1 splits this past year. They've acted well given the horrific news in the sector, but a quick glance at the charts finds that the HGX is sitting in the same spot as it was three months prior. He's also looking for jig in the internals, which has been sporadic at best, and stabilization (rally) in commodities, which we've yet to see. Finally, he's keeping a very close eye on the financials as the money center banks have been the definition of Cliff Branch.
So, which critter will have the final laugh? My gut--and I've got a big gut these days--says that the pain trade is to the downside and the commodity action is offering a sneak peak at coming weeks. I don't have a massive bet on (if I did, you would know), opting instead to keep my deltas neutral, trade my gamma and keep plenty of powder dry. I did add some select metals to the longer-term side of my pad yesterday (Golden Star (GSS) among them) but, truth be told, I'll coin more shekels to the downside as a function of my autumn options. We'll see soon enough, Minyans, and as always, we'll see together.
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 email@example.com.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter