It's Decision Time for the Stock Market: Trick or Treat?
Investors see few reasons for caution with 47 sessions left in the year.
It's a brand new day on Wall Street and the early morning tape is edging higher. Call it a trend, call it Groundhog Day, call it par for the course-but don't call it a given. As with any market, one at all-time highs or otherwise, there are two sides to every trade.
The bulls will point to the Bernanke call; the bears will note the widespread perception of their hibernation, as demonstrated this morning when the percentage of bears in the AAII weekly equity sentiment poll fell to the third lowest reading in the last eight years.
The bulls argue that the dips have become increasingly shallow; the bears will counter with the non-confirmation in the Dow Jones Industrial Average (INDEXDJX:.DJI) and a McClellan Oscillator that is extremely overbought.
The bulls pull up charts of Google (NASDAQ:GOOG), FedEx (NYSE;FDX) and Chipotle Mexican Grill (NYSE:CMG); the bears will do the same with Netflix (NASDAQ:NFLX), Caterpillar (NYSE:CAT) and Tesla (NASDAQ:TSLA).
The bulls will take solace in the ever-present performance anxiety that is permeating a "long squeeze" to the upside; the bears will highlight the chart of Caterpillar revenues versus world GDP (hat tip: ZeroHedge).
With 47 sessions left in 2013 and the Dow up 18%, the S&P (INDEXSP:.INX) up 22%, and the Nasdaq (INDEXNASDAQ:.IXIC) up 30%, the investment community is split into two camps: The first is riding the rally and afraid to step off the Matador Express for fear of being left behind. The second is underperforming and sweating sprinkles that there won't be a pullback. What you don't see or hear are bears making a big bet to the downside; it would appear that "flat" is the new "short," haven't your heard?
Last night, while hosting an excellent Fireside Chat with Brandon Perry, he spoke of his ability to remove emotion and suspend judgment and simply trade the trend. It's hard to argue with that approach as most other methodologies have been left in the dust. The question facing investors into the home stretch of 2013 is simple if not binary: Will the market continue to reward the dip buyers, or will the path of maximum frustration pave an entirely different path?
It's a spooky riddle, but with Halloween a week away, one could argue it's apropos.
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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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