Randoms: The Pop & Drop
Early optimism fades to red.
As intimated--and in all fairness, not clearly communicated--yesterday, I wanted to stay light and tight with my exposure heading into the stress tests. After getting stopped out on half my short financial exposure (by a penny!) yesterday afternoon, I punted my leaves at 3:59 EST with an eye towards enjoying my night and coming in with a fresh head.
I awoke this morning to that stunning $34 billion number for Bank America (BAC) and immediately reached for a fork. When I pulled into MVHQ and saw the futures--and BAC--indicated higher, I stuck a cork on the fork and blessed the dynamic of discipline. This is one strange world, I'll tell ya, and the margin for error is razor thin.
As I whispered to myself that reaction to news is more important than the news itself, I double dipped my schtick and re-initiated short-side exposure into the opening pop. I respect this rally but I'm playing for a fade lower.
Why, you ask? Let's reflect on last week's five reasons for caution:
When Pigs Fly: Fresh infections in Europe has the W.H.O. on the verge of declaring an outright pandemic, which would be the first such time since 1968. To be clear, I am not a media alarmist--and I most certainly hope this proves to be a non-event--but at a point, investors could connect the dots with regard to economic disruption.
The Pop & Drop: We broke out through S&P 875 and as discussed, got the whoosh higher. While this rally has room to S&P 950, it's long in the tooth through various metrics, including Jeff Saut's buying stampede lens, which has worked quite well through the years.
Pakistan: This nuclear state remains on the radar as the president of Pakistan heads to Washington and militancy spreads towards the capital of Islamabad.
He Said, She Said: On top of the Ken Lewis-Ben Bernanke-Hank Paulson love triangle, news last night that a judge ordered dissident lenders in Chrysler to reveal their identities adds angst to the societal spectrum, like tossing chicken wings to the pitbull public. What was Chrysler's crime? Exercising fiduciary responsibility on behalf of its investors.
Stress Test: Buy the rumor, sell the news? Perhaps--we've seen more leaks than a rusty pipe of late. While "total system meltdown" has seemingly been averted, the capital market construct is only as strong as it's weakest link in a finance based derivative laced financial fabric.
I'm not going hog wild--pun intended--I established partial positions into this morning's hot popper in select financials and the S&P. I also eyed Apple (AAPL) on the short side but the simple truth is that I spent the time I would have used establishing that position writing this content. That may be a good or bad thing, time will tell, but I know that above all else, opportunities are made up easier than losses.
Great 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 firstname.lastname@example.org.
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.
Daily Recap Newsletter