Welcome Back Minyans!
Good morning and welcome to the final four. With the shutters nailed down at the beach house and the linen placed under the bed, traders turn their attention to a new seasonal dimension. It was a hummer of a summer, for the most part, as the bulls and bears played a game of chicken. Now, with Autumn calling and the leaves soon falling, the minxy plot is about to thicken. Can Hoofy secure the brass (nose) ring or will Boo reclaim his place as king? Settle in for the ride and take it in stride 'cause both sides of the fence are about to collide!
When we last spoke, Hoofy and Boo were staring each other down and pleading their respective cases. The bovine opined that the industrial traction, minty breadth, electoral agendas, performance anxiety and positive confirmation set the table for further upside. The ursine uglies argued that a combination of mass complacency, insider sales, bubble trouble (debt, derivatives & housing) and geopolitical "unease" was the perfect backdrop for a downside disconnect. While all of these potential influences are valid, the near-term action will dictate which matter most and which are a ghost.
During last week's vacation rotation , the bulls found their footing after a grizzly bear scare. On the heels of the Intel (INTC:NASD) fade, the following five sessions could have been a messy test for our resident bovine. Hoofy held his ground, however, and while Boo will argue that the whisper thin conditions aided his effort, that illiquidity works both ways. When it became apparent that the bears would remain in hibernation, the pressy guessers covered up and the major indices closed higher for the week.
While the upside momentum warrants respect, it's worth noting that the NDX and SOX have now fill the gaps (created by the previous Friday's opening). That may be cause for paws but, at the same time, the S&P continues to pick away at upside resistance. S&P 1015 has been THE level of contention for three months and, as we know each test of resistance (support) removes a layer of supply (demand), we're starting to see some cracks in the ceiling. Watch the financials for signs of sponsorship as they remain the most critical sector for the market. BKX 850 is ripcord support while BKX 880 (50-day moving average) is initial resistance.
After a sideways summer, the near-term nuance has the edge of a marble. That statement, in and of itself, may prove telling as bear market tops are typically accompanied by widespread rationalization. Throughout the last few years, each rally has sucked in fresh capital and newfound belief. The current phase is distinct in that it has lasted longer (and converted more players) than previous head-fakes although, if my big picture view plays out, this will prove to be the most bitter pill yet. I've been giving thought to what the catalyst might be and while there are potential contenders (Middle East oil shock, inflation (via lower dollar), rate choke, confidence crisis), none of them will matter until they do.
In the meantime, our task at hand is to assimilate the metrics, juxtapose our time horizon and risk profile and craft a strategy that acts as an extension of our thought process. I enter today's session with a few core put positions (financials & select semis) and some tertiary gold & drilling longs. With Europe higher and the landscape drier, the Minx seemingly wants to try the upside out of the gate. I'll likely give her a half hour to settle in before feeling her pulse and taking her temperature anew.
In Minyanville news, the critters are busily preparing for next week's Critters Choice Awards Auction! The winner be featured in animated caricature form in the new Minyanville trailer that will premiere in New York City on November 12th. In addition to sharing the big screen with your favorite critters, you'll also receive two VIP tickets to join them at the event! With the proceeds benefitting the Ruby Peck Foundation for Children's Education and a host of special guests scheduled to attend, it promises to be a really big show!
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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