Bear Market Denial?
S&P 920 is paramount into the close
As discussed earlier, the headline that jumped out and bit me this morning was the hintage that the G-8 was planning on reversing the stimuli as signs of a rebound grow. That struck a chord for two reasons. First, I feel like we've seen that movie before. Second, it reinforced how "headline reactive" the masses have become.
To be sure, this is a tenuous time to be a trader. We flagged S&P 950 three weeks ago, offering that it would "Make or Break the Market. " We also mused that the reaction to last week's positive news (Texas Instruments (TXN), Home Depot (HD), Qualcomm (QCOM)) spoke volumes about what was baked into the current cake.
Easy enough, right? The high tick last week was S&P 956 and Boo played Whack-a-Mole every time Hoofy tried to break on through to the other side. They say hindsight is 20/20 and nowhere does that truism play out more than the market.
The trick to that trade--and why it was far from obvious--is the psychology surrounding quarter-end. With eleven days left until fund managers scribe vibes, the fear of missing completely replaced the fear of losing. Indeed, the only thing worse than absolute losses, in their minds and as strange as it sounds, is relative under performance.
If market moves are characterized by denial, migration and panic, we must now ascertain whether the "panic" phase of the bull run has morphed into the "denial" phase of a bear scare. We don't have to answer that question right here, right now, we simply have to respect both sides of the trade, manage risk as we find our way and allow for an ample margin for error.
As it stands--seeds of strength such as American Express (AXP), Baidu (BIDU) and TXN notwithstanding--the downside line in the sand is S&P 920 and headwinds exist in the form of the higher dollar (+1.25%), negative breadth (9:1 negative on the big board) and pink piggies (financials).
We could conceivably see an upside try by the end of the session (those curious end-of-day buy programs have everyone looking over their back) but, pure eyes, Hoofy will likely have to wait until Turnaround Tuesday if he's to have a run in the sun.
As always, I hope this finds you well.
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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