Monday Morning Quarterback: Blinded by the Light!
Traders weigh the rose-colored glasses.
"There is a road, no simple highway. Between the dawn and the dark of night." --Grateful Dead
It's hard to hide from the hurt in the world. This weekend alone, a shooter rampaged through Binghamton, three police officers were shot in Pittsburgh and upwards of 40,000 protesters converged in Strasbourg, France setting fire to a hotel.
Societal acrimony has long been on our radar in the 'Ville, with social unrest and geopolitical conflict a natural albeit unfortunate evolution. The question for Minyans in our midst and the world at large is how that discord will manifest throughout the socioeconomic spectrum.
The great debate of late has centered on whether we've indeed turned the corner, if the worst is behind us and if the new bull market has begun. That's quite a shift from a mere month ago, when the popular press was pointing to The Great Depression as the framework of comparison.
The measuring stick for this discussion and the ultimate arbiter of variant views is the stock market. With investors nursing the worst first quarter since 1939 and March mustering the best monthly gains since 2002 (the S&P is 26% off the devilish nadir of 666), we're seemingly at the crossroads of what was and what will be.
When I shifted my stylistic approach last month, scaling into exposure rather than quick hits, my internal rationalization was that if General Motors (GM), General Electric (GE), Citigroup (C) and the rest of industrial complex was sucked into the vortex, my P&L was the least of our concerns.
It was a time when fund managers wore cash balances as a badge of honor and individual investors finally waved the white towel. It was, through the lens of selling hope and buying despair, the perfect time to buy stocks.
Hindsight can be viciously obvious in this business but there's no time for regret as profitability lies in the ride ahead.
The questions now posed to investors involve field position, psychology and time horizon. Trading moves are characterized by three phases-denial, migration, and panic-with the pendulum of fear and greed played out across four primary time horizons of nuances, trends, phases and cycles.
Given the run into earnings, the permeating performance anxiety and depths of despair that included everything short of R.O.U.S., the rally off the lows made sense-the key for Minyans is to draw the distinction between cyclical and secular rallies and remember that debt destruction is the only true cure for what ails our economy.
Scenarios exist where equities can continue higher (dollar debasement being the most intuitive). And, with mainstay averages cut in half the last few years, we're surely one step closer to recovery through the lens of time and price. We've long said that in order to get through this, we needed to go through this and the process, while painful, is constructive.
I will simply offer that history will measure this daunting dynamic in years, not months, and the percolating white collar depression that is ravaging the financial industry, media sphere, educational complex, legal profession and philanthropic endeavors won't be solved with fancy synthetic acronyms manufactured in
That, perhaps, is the most disturbing element of what we're currently witnessing, the false hope and empty promises that litter the landscape of any bear market. I will ask Minyans to remember that the imbalances were cumulative, free markets are efficient and financial staying power will serve us in good stead regardless of where the next ten percent nets.
And we will get through this, one step at a time and as a collective community.
I enter today's fray light, tight and ready to fight. Trailing stops and risk definition through a technical lens will be my stylistic approach of choice.
From a price action standpoint, this tape is not dissimilar from what old school Minyans and I shared in 2000. It's the structural integrity that's different and therein lies the risk.
Is this a new bull market or a bear market trap? Professor Smita Sadana has done some groundbreaking work on the topic and we're rolling that out for ye faithful with interest.
HSBC (HBC) raised almost $18 billion in a rights offering. Shocker, eh?
Why not-it's one of the best scenes in cinematic history!
Snaps to MV Executive Editor Jon Schwartz for sitting atop the Minyan March Madness leader board with one game to play and UNC circled as his champion. He'll grab some snazzy critter garb while non-winners (there are no losers) have the option but not the obligation to make a donation of their choice to The Ruby Peck Foundation for Children's Education, 100% of which will benefit the memory of our fallen friend Bennet Sedacca through April.
Speaking of Ruby, I had the blessing of vibing time with the Maven while in Boca for business on Friday. I'm happy to report that she's sharp as a tack and busier than I am at the youthful age of 89 (I hit the hay before her both nights).
On a housekeeping note, I'll be traveling to Baltimore midday Thursday to spend the holidays with my family, heading to Orlando next Thursday to hang with the Atlantic Advisors crew and taking a day trip to Chicago the following Thursday, all for business. These trips, so you know, have nothing to do with the needed and necessary vacation that I hope to take in May.
Deep breath as earnings season approaches. This is what we've trained for and this is where we earn our Mott's. Good luck and just remember... you're a Minyan!
In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.
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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