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Minyan Mailbag: What Will the Catalyst Be?

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Boo's bandits will likely fly under the radar.

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Hi Todd,

It's truly an interesting juncture in the market, and I think your commentaries and insights have been terrific over the past year!

I pay attention to Demark as well as many other analysis geared towards market timing. My sense is that this weekend, once option expiration is out of the way, there is a very intriguing risk reward set up for many macro trends to possibly begin a reversal.

The Daily Demark chart of the DXY is supportive that a "possible" exhaustion is looming for the dollar, and at the same time for other macro instruments like the VXN, Silver and the SPX (provided we don't close above 1063 weekly).

The question for you is what's the spark that ignites a reversal? Are the hearings of the House Financial Services Committee on the Federal Reserve's Transparency scheduled for Sept 25th a possible risk factor?

Thanks,
Minyan Richard


Minyan Dick,

Thanks for the email; after almost 20 years of trading and ten years of writing, I've got a decent handle on my feel. After seeing the seams on the baseball as it hurled towards home plate for a mighty long time-bearish into the financial crisis, bullish coming out of it and trading the summer range-my vision has clouded of late. I offer that as a context for discussion; there's no shame in admitting it's hard, there's only shame in pretending it's not.

To your question, a litany of variables could turn the tide but I'm not sure they're on the mainstream radar. Few knew Microstrategy (MSTR) would emerge as the pinprick of the tech bubble just as American Home Mortgage was an unlikely catalyst for the debt disaster. In both instances, relatively obscure companies served as the final straw on the back of the cumulative camel.

To that end, while the market acts fantastic, risk management should trump reward chasing regardless of what pundits are preaching. While we can certainly continue higher-S&P 1120 is circled across the land-the uniformity of opinion that we've sidestepped the crevasse is perhaps the most bearish element nestled in our midst.

I don't think the financial crisis is over; it's simply changed shape. This isn't financial or economic anymore, it's social and that opens up an entirely different can of worms. I'm not smart enough to know how that will manifest but I'm seasoned enough to understand it most likely will.

As we attempt to make sense of it all, I'll remind myself that opportunities are made up easier than losses and financial staying power will serve me in good stead. Emotions are high and tension is thick and I'll pick my spots as we edge through the eye of the storm, which will arrive in waves and phases.

I'm not sure if I answered your question but hopefully, there was benefit in the exchange.

Thank you sincerely for your Minyanship.

Todd
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