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Monday Morning Quarterback

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Human nature and trading psychology are funny creatures...

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"Fellows, let's be reasonable, huh? This is not the time or the place to perform some kind of a half-assed autopsy on a fish. And I'm not going to stand here and see that thing cut open and see that little Kintner boy spill out all over the dock."

--
Mayor Vaughn, Jaws


Good morning and welcome back to the sweltering pack. On the heels of record setting market heat, traders towel off the salty seas for a fresh five session set. The bulls have been tacking hard, ignoring negative data points and embracing incremental positives. That tenor will be put to the test as we edge into the meat of the earnings beast.

Human nature and trading psychology are funny creatures. When things are good, as they've been of late, reactive rationalization tends to kick-in. If equities slipped, sub-prime woes, higher rates, earnings snafus and consumer caveats would have made waves. As we rallied, focus instead shifted to market resiliency and the lessons inherent therein.

The reaction to news, as we've learned, is more important than the news itself.

The weekend press issued a number of all-clears, assuring investors that the water was safe and creature free. However, they failed to mention an observation passed along to me on Friday by Minyan Doug Kass. Many hedge funds only take money in January and July. Those cash coffers, coupled with technical triggers above S&P 1540, likely played a large part of the mad dash higher.

Be that as it may-and it may be academic-the "offer vacuum" that existed on the other side of the buy-stops is now gone. All eyes will now shift to earnings and outlooks, which will include reports from Merrill, Intel and Yahoo tomorrow. Remember, after the run we've had, the bar of relative expectation increases in kind as the margin for error continues to thin.

Trade smart, Minyans, as the last thing we need during a snazzy summer is any more boating accidents.

Random Thoughts…

  • In thin Friday trade, we say a buyer of 30,000 XLF (financial spiders) August 38 calls and a seller of Google January '09 600 straddles for $160 each.

  • We asked the question on Thursday "If the homies can't run with this rally, what will it take?" That answer came on Friday when we picked up chatter that Warren Buffett was scooping up some Hovnanian Enterprises.

  • We've long talked about the 'stair-step resistance' for the financials and they're now looking at a triple lindy level. BKX 115.50-116 is the 50- and 200-day as well as the level from which they broke.

  • As past support is future resistance, S&P 1540 now morphs into support, if and when.

  • And finally, many thanks to everyone at MVHQ for their tireless weekend work. MV 3.0 looks fantastic and the hard work certainly shows. I've always said that the definition of professional nirvana is to do what you love with people you respect while serving the greater good. Amen to that.

  • Good luck Minyans-have a fantastic week!


R.P.

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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