Watch for gap fillage up to S&P 1037!
Good morning and welcome to the Hump Bump. Yesterday, after another frazzly day in the fray, the menagerie gathered on a grassy knoll to enjoy the seasonally warm weather. There, over a chilled bottle of Pinot Grigio and some warm brie, they talked about ticks, tape and tail. The conversation went a bit like this:
Hoofy: (to Boo) Pass the textbook, please, I'm fairly sure that there's a chapter in there about how a market should act after breaking out. Not only are we basing above the acne level (S&P 1015), a series of higher lows and higher highs in place.
Snapper: (laying on his shell) Yeah, man, and listen to the gap band! As a function of Monday's lower opening, there's a vacuum that works to S&P 1037ish. That's jazzy!
Boo: I hadn't seen another bear in weeks and then POW!--a few pressers entered the marketplace (Monday), initiated shorts and got squeezed into yesterday's close. Bears, groundhogs...what's the difference!
Daisy: Bitter critter.
Boo: I'm bitter, Ms. Milkshake? You bet your brand I am! There wasn't an udder bear before this week's dip and blip. In fact, the weekly Institutional Investor poll was released and (yawn) the bulls increased to 57.4 (from 56.1) and the bears decreased to 18.8 (from 19.4). That's a real shocker, Fokker!
Sammy: But you know that those numbers aren't timing mechanisms, Boo--they've been skewed for months. And I agree that the sector bell curve is lousily lopsided but that can continue for a while as well. That's the backdrop we're all faced with, my friend. The momentum, technicals and fundies are enough to keep the train chugging but the nuts and bolts of the track are getting loose and looser.
Hoofy: You guys keep looking at the track while Daisy and I enjoy the view from atop the Metroliner. You point to the dollar--but it hasn't even broken the summer lows. You point to OPEC's oil production cut (crude is higher this morning)--but it's still 10% lower than it was at the beginning of the month. The only thing loose is your caboose!
Sammy: Your points are well taken Hoofy and, uh, it's hard to argue with success. Still, I think it's important to constantly monitor the backdrop of the marketplace. That assimilation may very well point to higher prices, in your estimation, but you ALWAYS want to see both sides of every trade regardless of your posture.
Snapper: Well, it's very quiet today and outside of tomorrow's cameo by Clarence Beeks and the Wolverine confidence number on Friday, this week is devoid of (known) catalysts. That'll leave the price action in the hands of anxious portfolio managers hungry for performance into quarter end. Wasabi!
Sammy: Just follow the tells, will you please? They've proven to be reliable trading devices, particularly the breadth and the brokerage stocks. (turning to Boo) And think positive, young bear...I know it's been a heckuva long year but as Ruby used to say, what goes around, comes around. Keep the faith--and your disciplines--and everything will be alright.
The sun began to set over the Minyanwood Hills and the critters sat back to enjoy the view. There were few things in life more precious than watching a sunset with your friends and they weren't about to ruin it with idle chit chat. As Daisy leaned up against Hoofy and Boo let out a deep sigh, they soaked in the moment. Tomorrow, as they knew, is promised to nobody.
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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