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Random Thoughts: The End of Innocence?

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In today's red tape, green spots are tough to come by.

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To synthesize our conversation from this morning's Buzz & Banter, this is where we netted out...

  • From March 17 to May 13, almost half of the entire NDX gain (311 points) was a function of three stocks-Apple (AAPL), Research in Motion (RIMM) and Google (GOOG).

  • Those stocks have since made lower highs while the index has not. That's a negative divergence in momentum leadership names.

  • We've seen this movie before. On October 23, 2007 half of the year's entire gains (400 points) came from the same three stocks-AAPL, RIMM and GOOG.

  • The NDX proceeded to lose 25% from that point until… yep, March 17th.


More Random Thoughts...

  • The Waiting is the Hardest Part! No, I'm not talking Petty-although I'm pretty jacked for the Boston show on June 13th-I'm talking about the thin line between proactive patience and risk rationalization.

  • I had a strong sense that Turnaround Tuesday was in the cards and while my tertiary risk is rewarding me, albeit marginally, the meat of my heat is in the energy complex, which continues to trade like something frightening is afoot.

  • Did anyone have a tough time sleeping last night? I'm sure the chocolate covered whateveritwas didn't help at 2:00 AM but I couldn't help myself. It was taunting me, calling my name, daring me to consume it...

  • You know what trades relatively dry? Apple, which I covered as I sniffed $180 yesterday. I'm not there (either way) but it keeps calling my name.

  • Yeah, I'm gonna miss watching Chris Paul play too.

  • Richard Bernstein of Merrill, a super sharp cookie, draws the comparison between 9/11 (when the market was down 28% into that 'event') and our current juncture (down 20% into Bear Stearns (BSC)). The net/net is that we've seen a bear market rally littered with false hope and empty promises. I concur, sir, with a respectful nod to The Bernanke Swap.

  • And then there were four... percent between the piggies and a multi-year poke. Keep BKX 75 on ye radar, please, and forgive me for being redundant. Forgive me for being redundant.

  • Mr. Glutton for Punishment (not to be confused with Mr. Blind Risk) is trading around his (always early) short-side energy positions. I'm allowing myself the option to scoop some metals as an upside geopolitical hedge but I haven't pulled that trigger yet.

  • I'm decidedly cranky today and I've yet to discern whether it's the complete lack of sleep or the incessant bid in crude. Likely a function of both, with some frustrating conversations littered in for good measure. Grrr...

  • Emotions aside, I remain of the view that lower crude will lead to lower equities, which could conceivably catch folks napping. Why? Glad you asked...

  • Green beans in a red sea? You mean, other than energy and metals? Apple, Google, Deere (DE), Baidu (BIDU), biotechs and big pharma. If the tape turns, these names will lead the speed.

  • Gotta tough position? Get over it, go out with someone else. I've put alotta stocks on my personal restricted list through the years and it generally helps me identify fresh opportunities.

  • Remember Steve Martin in Parenthood? "My whole life is a 'have to.'" Alas, there's only 2.5 more sessions (count 'em!) before I jet west for some "working relaxation." In that vein, Seattle Minyans take note of the banner at the bottom of this column.


A quick recap for the newbie Minyans in the Hood!

Shorten up on your risk stick.

  • Trade smaller as a function of volatility.
  • Shorten your time horizon.


You can learn a lot just by watching.

  • The financials as a tell.
  • Big beta on the opening.The dynamic duopoly.
  • Goldman (GS) and Google, when pointed in the same direction, are typically telling.


Synch your time horizon with your risk profile.

  • Let history be your guide-it doesn't always repeat but it often rhymes.
  • From tech to real estate to debt, bubbles follow the same path.


Don't Rationalize Risk.

  • The definition of an investment should never be a trade gone awry.


Don't fall in love with your positions.

  • Emotion is the enemy when trading. Leave it for weddings and funeral.


Ready, Aim, Fire!

  • Always have a game plan before you step on the field.


R.P.


In the Emerald City on May 27th? Join us at 4 P.M. at Revolution Bar & Grill (at the Experience Music Project) to mingle with your fellow Minyans!


What are the pro traders saying about your stocks?
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No positions in stocks mentioned.

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 todd@minyanville.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.

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