Randoms: Shallow Hal?
Will conventional wisdom again prove true?
Have you ever thought about the Law of Attraction? You know, when you're attracted to empirical research that supports your particular point of view?
It's human nature, really--we all want to be right, whether the reward is monetary or internal validation. After all, if you can see something, hear it, smell it...what keeps it from being real?
I bring this up for two reasons. First, an exchange I had this morning with Minyan Brendan who offered the following input:
"Who drew the BKX pennant because the starting point is incorrect? It should be from the previous highs (the days before you drew the chart) which means it has actually broke out though given the lack of a move, the pennant is nullified and useless. Thus little information can really be drawn from it."
My response was as follows:
"I did, boss. through the years, I've found that you can 'start' at any given point, not necessarily 'the' high. For instance, if I pulled the chart from September 30 to present day, the pattern would be valid. i simply pulled out the lens for the context of overall direction. Of course, I could be wrong--you're the CM"
"The key statement is "I have found that you can start at any point." But isn't that just framing? I don't claim to no more about this than that just because I have the "CMT" but it seems like everyone is a technical analyst these days and using framed arguments for more or less their emotional beliefs (which is nothing more than guessing). If I am in a good mood I can draw a bullish argument on any chart to support the mood. Perhaps its just me."
My retort (and I enjoy this type of Banter as the friction between opinions is where true education lies):
"That's most certainly a valid point--I've found human nature often finds a pattern that supports an individual's view. And i most certainly didnt mean for that to come off as acrimonious--not my style--it's just that if you have a CMT, you may well know better (I don't have a CMT). Either way, excellent food for thought and maybe something we can pull others in as I truly want to see both sides."
His final offering (as of now):
"One thing I have learned from you is to always see all sides of every argument. Thus emotion comes out of the equation because one's premise is questioned. Keep up the good work."
So there's that, and I most certainly wanna hear from the astute thought leaders in the Minyanville community as we "frame" this debate.
The other point of discussion is the herd mentality. Namely, consistent with my opening missive this morning, it seems like everyone is expecting a Shallow Hal of a pullback which begs the obvious question:
Does that mean we don't get one at all, or will more pervasive pain manifest when few folks seem to be expecting it?
Lots to think about as we edge through our Turnaround Tuesday. Given the tea leaves, which include 2:1 negative breadth, sloppy beta (Google (GOOG), Research in Motion (RIMM), Apple (AAPL), Baidu (BIDU)), a firmer greenback and a mixed bag in the financials (note Citigroup (C) is up 11%, or 30 cents), I've covered 25% of my S&P short (added into S&P 980) and keep my other parameters in place.
Baby steps as I attempt to reestablish some rhythm and hit it to quit it.
Some other Random Thoughts:
- The first stock that popped into my crowded keppe this morning? Deutsche Bank (DB), which is taking a 12% haircut on the heels of earnings. As always, keep your eyes peeled for the reaction to news-and whether it spreads to it's peers-as we edge through the dew.
- Why the peers? The aforementioned pennant formation, if it is in fact a pennant formation.
- Mr. Valentine has set the price! With regard to the S&P trade, I've got one eye on Turnaround Tuesday, my other eye on our trading tells and my Third Eye Blind. As it stands, I'm operating with S&P 956 on one side and S&P 980 on the other.
- And yes, I'm well aware that the S&P "broke out" of the "reverse dandruff" and has room to run to S&P 1150 before it even touches the downtrend line. That's why my stop was set thatclose when I initiated the trade; it was good risk-reward and I'm operating with discipline over conviction (trading "in between").
- We mused yesterday on the "double dip" in retail sales being a possible precursor to the double dip (aka "W") for the tape. Through that lens, I'm watching RTH (retail holders) 83 as a level of lore. Why? Click here: Sometimes a picture speaks 1000 words.
- Seeing both sides, we spoke a few weeks ago about the SOX approaching a multi-year downtrend line. Following up, we should note that Hoofy sliced through that like a hot knife through buttah.
- Yeah, so I've been achy for a few days (which might simply be stress but I'm convinced it's the early stages of Swine Flu (Gawdfabid!)). Still, I went to my 6:00 AM kickboxing trainer today and proceeded to wipe the floor with my face. The best part? I paid for it!
- STOP THE PRESSES! Minyanland and Random House are partnering on a scavenger hunt in the city of critters. If you've got a Mini-Minyan in your midst and wanna teach him or her the benefits of earning, spending, saving or giving, send 'em on over! It's free, and it's fabulous!
- Turnaround Tuesday? Eat your heart out Bonnie Tyler!
- Good luck Minyans and remember, "I slit the sheet, the sheet I slit, and on the slitted sheet I sit." There. I've never been relaxed enough around anyone to say that!
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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