Randoms: The Hand-Off!
Can the government pass the upside baton to corporate America?
We pride ourselves on seeing both sides in the 'Ville and I can guarantee that Hoofy called his friends on Friday when the S&P uptrend line from the March lows-which also happened to be where the 50-day resided-was probed. With recent pullbacks thinner than Ken Klaiman's hairline, the knee-jerk upside response was "the easy trade" as a first fade.
With support nestled below and the "Mini-Me" downtrend line above, the natural question is "What's next?" Warner Wolf would shout, "Let's go to the video tape" with an eye towards earnings and he might be right. Everyone and their sisters are looking to post-rationalize this rally and, quite hopefully, receive optimistic outlooks from corporate chieftains that will fuel yet another leg higher into year-end.
For my part, after covering a slew of downside bets late last week, I continue to trade from the short side through the lens of defined risk. I most certainly respect the potential for higher prices, which is a different conversation than whether this is a cyclical bull in a secular bear (as I believe it is). Time and price, Minyans, and one step at a time as we together find our way.
A few thoughts as we edge through the early afternoon price action:
- A Pause to Reflect: Today would have been Professor Bennet Sedacca's 50th birthday and I'll ask ye faithful to remember our fallen friend; a gentleman who was very good at what he did and better at who he was. R.I.P. Blue Steel. You're missed more than you know.
- Today's tea leaves? NYSE internals are 4:1 positive, the financials are well bid, beta has a sturdy tone and the dollar is dancing in Red Dye. Further, traditional "safety plays" (pharma and consumer non-durables) trade on the heavy side, suggesting they maybe a source of funds in a sector rotation to higher risk arenas.
- American Insurance Group (AIG), Amazon (AMZN), United Health (UNH), Microsoft (MSFT), and MBIA (MBI) are among the red beans in the green sea.
- Where, you ask, would that "defined risk" that I referenced above be? The other side of NDX 1710ish for the four-letter freaks, as that's both where they recently "broke," in addition to it being the downtrend line from the recent highs.
- With regard to the old school, where nibbled anew on some S&P puts into this circle smirk, I've got an eye cast towards the S&P 1040-1050 resistance zone.
- Earnings, by definition, are rear-view. The trillion-dollar question is whether the market embraces the perception of a fluid hand-off in the financial relay race. In Hoofy's perfect world, the baton pass from the government sponsored euphoria to corporate spending to consumer end-demand to Usain Bolt.
- My chief beef with that progression is the massive difference between debt induced largess and legitimate economic growth. Again, that might not matter yet but please remember that it most certainly will.
- Seeing old friends-especially of the savvy soothsaying sommelier variety-is always good for the soul.
- Turnaround Tuesday?
- San Dimas High School Football Rules!
- You say respect? I'll say Mel Brooks, William Goldman, John Hughes and Ruby Peck (for unique and different reasons, naturally).
- As for the anchor of that relay-respect team, I'll invite YOU to join us December 4th in NYC to raise money for the kids. Great tunes, rib-sticking BBQ, top-shelf smiles, multiple Minyans, hugs and handshakes are a heckuva way to support a wonderful cause!
- What was my immediate takeaway from the interview with Steve Forbes? That I have, in fact, gained fifteen libbies after I quit smoking. Even still, that's a great trade and a long-time coming. I can lose weight but I can't gain healthy lungs.
- Finally, I "mailed in" the final chapter of Memoirs this morning. Thanks for indulging me during this 18-week stretch as I recounted mistakes made and lessons learned during my journey. There isn't a day that passes when I don't feel blessed to do what I love with people I respect while serving the greater good.
- For that, I sincerely thank you for a dream is only as powerful as those who believe in it.
- Great luck, and let's be careful out there!
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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