Low Consumer Confidence Can't Slow Down Amazon
Best way to digest one-off data points is to watch a company's reaction to the news.
Greetings from Hoover-ville where our numbers are few but our spirits are high. The latter is something of a problem, actually, as generating critical Hobo Mass is going to require an even worse economy. Today's consumer confidence dip to 53.1 from an expected 57 is a start, but not exactly going to get us back to the Hobo glory days of marching on DC. Right now we've got about ten former bankers standing outside a coffee shop, sucking up free wi-fi and ironically heckling beatniks for change. At least we can trade on our Blackberrys while we kill time.
Here's what I'm doing when not Googling "libel."
- What's the best way to digest one-off data points like today's confidence number, weekly employment figures, and the like? Watch the reaction, as opposed to the news. The Fed is signaling a shift from preposterously, historically easy money to a more hawkish stance. This shift is as good a reason as any for last week's softness. That being the case, weak data is more bullish than bearish -- at least from a marginal day-trading perspective.
- Another example of a great reaction to a somewhat intentionally attention-grabbing news item: Amazon (AMZN) fighting to go green after being started at "Sell" by a boutique research house. Low fuel prices mean lower shipping costs and, as I've said before, Amazon is simply one of the best merchants going these days. The tape remains forgiving of mediocre results from merchants (witness: Whole Foods (WFMI), Gap (GPS) et al hitting 52-week highs). You can argue about whether or not that should be the case but, take my word for it, there's no money in trading "shouldas."
- In other words -- and stop me if you've heard me say it before -- shorting in anticipation of a breakdown is exactly tantamount to calling a top. It's also the evil twin of calling a bottom by "scaling in" to longs without a stop. Calling tops and bottoms in markets are perhaps the most time-honored ways to lose everything.
- Why do I bring it up? Because, even with an influx of emails offering me loans and e-hugs yesterday (well-intentioned but confusing), the question I get most often by far is "What are you shorting?" and the answer is "nothing." As we make our way through the anniversary month of the 2008 meltdown, the most salient lesson for pure traders is this: There was more than enough time to either get short or, as was more the case with me, go to cash after the meltdown was in bloom.
- The biggest trading challenge I've had in the back half of this year is holding my fire. The "easy" play of the year was getting long in March; the hardest play was staying long. As usual, the less thought you put into it, the more apt you were to follow the best path. Whatever intellectual arguments you can make against the tape, the fact is that the Purple Crayon trendline (a thin and simple line connecting the lows) hasn't been broken by the broader tape since the lows.
- For what it's worth, I remain long Disney (DIS), McDonald's (MCD), a token long in Amazon, and some GLD I picked up when the ETF and ancient metal got rejected by $100 and old highs, respectively. Also, a decent percentage of cash, which is galling, but barring a Weimar Republic inflation ramp, is better than gambling.
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