Random Thoughts: A Bear Runs to Daylight
Where you stand is a function of where you sit.
The earth, moved, under our feet yesterday, and Wall Street took it in stride
Perhaps I'm sensitive to these seismic shifts given the last time I felt an earthquake was almost ten years ago on another beautiful Tuesday in Manhattan... but it wasn't an earthquake.
What's even spookier (in terms of timing) was the back-of-the-envelope analysis I did yesterday morning when I realized that the S&P was off 13.6% in the three month period prior to 9/11 and... 13.6% (on the nose) in the three month period entering yesterday.
I didn't mean to plant that seed, but it was too freaky not to share.
Want another trippy statistic? The Dow Jones Industrial Average has endured more than 10,000 points of intraday swings thus far in the month of August -- and you thought the summer season would be a relaxing stretch!
There's no rest for the weary but that's alright, and it's better than the alternative! Those of us left to navigate the price action, read the policy tea leaves, finger the pulse of psychology, and fit together the interwoven pieces of our global financial puzzle will operate with a competitive advantage.
The market often speaks. The question is, are we listening?
I've written several columns in recent weeks that speak to various scenarios within our forward probability spectrum as we navigate the second side of the financial storm.
I'm genuinely enthused to "see through" to the other side for the first time in years, although I'm bridling my enthusiasm given:
There's a lot of "stuff" between here and there.
I was early in foreseeing the crisis and it stands to reason I'll be early on the recovery (as the point of recognition -- what we've long warned of -- permeates).
The next few years will likely be profoundly painful and we must prepare for that.
Where do we go from here in the near-term? Tell me what the regulatory landscape looks like (short-sale ban, CDS), share the forward path of the greenback, and lemme know if the powers-that-be will let the free market trade free. Then I'll offer an educated opinion.
In the absence of that, I'm keeping my right hand up, making trades to take trades, and traversing this process of price discovery with steadfast discipline and an eye towards opportunity.
- Bank of America (BAC) and Goldman Sachs (GS) were the flies in yesterday's upside try, and I will note that credit default swaps in Bank America have again widened this morning (which has negative implications).
- With that said, I'll also say that the time to be a grizzly bear in the financials was 80% higher. This we know, for it was lonely at the top! That doesn't mean the financials can't trade lower but it's hard to run to daylight in a dark corner.
- Google (GOOG), Apple (AAPL), and Netflix (NFLX) all traded with a firm tone yesterday, albeit on light volume. The market needs leadership and the utilities won't cut it. Keep your eyes on the four-letter freaks.
- The nuclear reactor near the epicenter of the Virginia earthquake is designed to withstand a 5.9-6.1 quake. We got a 5.8 yesterday. Wow.
- Mind the Gap! Please note the "upside vacuum" in the S&P from last Thursday. It's where the index is probing, and what the bulls are hoping.
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- Taking a step back, the S&P is attempting to establish a new range between S&P 1100-1200 after breaching the previous channel of S&P 1250-1350. See the chart below, as a picture speaks 1000 words!
Click to enlarge
- The New York Times ran a big article yesterday on how well the boutique investment banks are doing. "Last week was a boutique week," said a notable source, "It's a strip of the financial services market that's experiencing secular growth."
- This should be old hat for ye faithful. As we've long expected this shift. As discussed as recently as July, "While big banks are cutting back, boutiques -- BTIG, WJB, MKM -- are thriving on a relative basis, adding capacity and human capital, many of whom used to work at bulge-bracket shops."
- If you're looking for a little something extra to help with your trading or investing, check out our subscription products. You can take a free trial to the one you feel fits you best.
- And finally, if news broke that someone who was widely considered to be the best chef in the world actually poisoned all his patrons in the process, would you still ask him for a recipe for success?
- Me neither. In other news, Alan Greenspan is waxing profoundly on the future of the euro and some other stuff (although I'm not sure what he's saying because I refuse to open the link!).
- Wait -- was that acrimony? I'm SORRY! That's not our style, we now return to our regularly scheduled reality show!
- Good luck today Minyans, and remember that profitability begins within. You can catch me over on the Buzz & Banter.
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