Random Thoughts: Markets on Edge as Syria Strike Looms
It's the calm before the storm.
The stock market started the week on an upbeat note, although it finished well off its best levels after Speaker of the House John Boehner backed President Obama’s plan to strike Syria.
The specter of further unrest in the Middle East continues to weigh on the collective psyche, in large part because 35% of the world’s crude oil supply emanates from that region. Of course, the saber-rattling from Russia isn’t helping as President Vladimir Putin is demanding proof that chemical weapons were used.
I suppose the 1,400 dead bodies, many of whom were children, weren’t enough.
The irony of ironies; 10 years after we invaded Iraq on the premise of weapons of mass destruction—an allegation that proved false—we are again at the precipice of military action. The US Senate is proposing a course of action that will limit the offensive in time and scope, a half-pregnant response that screams of “unintended consequences.”
I remember 2003 like it was yesterday; the bulls charged into the market as the statue of Saddam Hussein fell—and they didn’t look back. Some have openly wondered if history will repeat; to that, I offer the chart below. The field position of today’s tape is drastically different than it was then—we were cautiously on our heels, as opposed to delicately balancing on our toes.
Of course, there are no guarantees in life and there are certainly none in the marketplace, which is why we navigate the landscape one stair-step at a time. Yesterday morning, we observed that the market, through a pure technical lens, was churning under S&P (INDEXSP:.INX) 1660-1675, the early strength notwithstanding. That dynamic remains in place, with S&P 1600 and S&P 1560 (the 200-day) providing the next tangible support.
Indeed, the bears have a window to press the downside—but if they don’t take advantage of the opportunity and demonstrate their resolve in short order, performance anxiety (to the upside) will percolate as year-end comes into focus.
Miley Cyrus is the latest addition to our Short Sale of American Icons list; while Moral Indignation Is Big Business, these type of shifts are cumulative through the lens of social mood.
Karsch Capital is the latest example of smart money going dark. It remains to be seen if these big hitters are prescient, burned out, or simply part of a broader rotation in the long hard road (that we first fingered 13 years ago) for the financial equation.
The Jewish holidays begin tonight at sundown, which will thin the ranks. If only I can remember if we're supposed to buy Rosh Hashanah and sell Yom Kippur, or the other way around.
Between high frequency trading and the heavy hand of the government, there is no debating that the DNA of this market is much different than it once was. The question, of course, is whether that's a sign of danger or a progression that will take hold whether we like it or not.
The banks held tough yesterday in the face of downside pressure and they remain a proxy for the broader tape. Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Deutsche Bank (NYSE:DB), and Morgan Stanley (NYSE:MS) are my tells on that front.
- Good luck today, and for those observing, a healthy and happy new year!
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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 firstname.lastname@example.org.
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