S&P 1015-1020 remains the first support zone!
Good morning and welcome back to the stacked deck. Yesterday's cards were full of aces, faces and a few failed chases. While Boo eyed a royal flush, Hoofy held his ground and called his bluff. When the tables folded and the critters bolted, the bulls were miffed but not insulted. They've seen this hand, they made a stand and absorbed the supply with their demand. Will the bovine win today's poker or will Hoofy look like quite the joker? It's a new day in the minxy soiree so grab some chips and let's go play!
It's been a twisty ride through the rising tide as the ursine try to salvage pride. Each time they've scratched the surface of a newfound purpose, however, Hoofy has opened a can of whoop ass on the beleaguered bears. This has produced obvious results--broad gains, renewed confidence and outright swagger in Matador City--and subtle undertones (widespread complacency and cries of uncle from Red Dye Junction). This has raised the stakes, and in some case aches, in our city of bulls, bears, cows and snakes.
At the end of the day, and regardless of your individual approach, the name of the game is much the same. We're all looking to maximize our reward (relative to the assumed risk) and find our way to a profitable day. For the active Minyans among you, that remains a function of identifying the actionable tells (brokers, semis, breadth, levels) and employing a strategy that acts as an extension of those inputs. The longer term types with an extended horizon need to identify the trends and extrapolate the potential shifts to the broader phase and/or cycle turns.
I bring this up as a confluence of inputs are simultaneously occurring. The brokers continue to report better than expected earnings (how much is baked into current levels remains to be seen), the dollar has been getting creamed, our technical levels have (thus far) held, quarter-end performance anxiety is heating up, insider sales continue to pour out of corporate America, an overt electoral agenda is in play, the bubble trouble continues to lurk and, I've got to say it, the Raiders look like a bunch of old men. How the heck are we supposed to know what to listen to and which is noise?
The answer, my friends, is blowing in the wind--but the gusty crosscurrents are fierce. If you try to absorb everything at once, chances are that you'll be blown away by the sheer magnitude of information. Focus on what matters to your particular style of trading or investing. If you're a day trader, don't be concerned with the macro evolvements that shift the underlying tenor of the investment landscape. Conversely, if you're a long-term investor, paying attention to each and every tick is a waste of precious time. One of the most important distinctions you can make is to correctly juxtapose your time horizon and risk profile such that they mirror each other in size and scope.
This is a simple yet often overlooked aspect of money management. I've fallen prey to it myself at times and allowed my focus on the destination to stand in the way of the journey. With that said, my current assessment stands as follows: I've little doubt of the eventual rout and the bubbles in psychology, debt, derivatives and housing will be viewed, in hindsight, with the same distain (and widespread pain) as the wreck in tech that cleared the decks.
When that occurs, however, remains the single biggest question in my keppe but, until it does, the current metric base continues to spur the chase. The technicals, outside of the skewed sentiment and lopsided bell curves, are constructive. The fundies are offering enough incremental positives to satiate the bulls. Psychology, while bubbly, has remained that way for a while and, outside of an exogenous shock and/or lower prices, can continue. And finally, as evidenced once again by yesterday's open faucet, Elmer is pulling the structural strings at every turn.
I suppose the message is that there remain two sides to the current coin and before you flip it, you should know what you're looking for. The ajita and anxiousness will only increase as we edge closer to quarter end and, with it, the potential exists for an emotionally exacerbated marketplace. Keep your cool, remove emotion and understand that opportunities are made up easier than losses. With a little luck, a lot of patience and some positive thinking, everything will work out just fine. You'll see.
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.
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