Random Thoughts: Measuring Market Metrics Into Year-End
Taking stock of the drivers of stocks.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
It's been a long time since I put some real elbow grease into a column, or at least one that's not nuts and guts financial stuff.
That's what I did for the better part of yesterday, and the result was The Devolution of Social Mood. I, like every other human being, was profoundly impacted by the events of last Friday, and I thank you-and Minyanville-for the opportunity to share those feelings.
In terms of the stock market, our twin levels S&P (INDEXSP:.INX) 1435 and NDX (INDEXNASDAQ:NDX) 2700 remain the levels of lore for investors galore. We've been talking about them for a while as they matter in a big way (for the "why," click here). While those emerging patterns look pretty snazzy, I will again remind you to respect -- but never defer to -- the price action.
That's the pure technical lens; in terms of fundamentals, we've got bullish balance sheets (credit) in corporate America squared off against the headwind of higher taxes and austerity measures, neither of which is pro-growth. The bulls will argue that fiscal cliff concerns have stemmed business activity, but that's conjecture until proved otherwise.
Structurally, Europe seems to be kicking the can up the hill (read: it'll be "fine" until it's not) and currency markets warrant attention (there are only so many "release valves" for the cumulative compression in the marketplace; one of them is social mood, another is the currency construct). We broached this topic in 2009 when we asked, How Realistic Is a North American Currency?
Through a psychological lens, you know the deal: performance anxiety galore with seven days left in the year; the buyers are higher and the sellers are lower. Losing money as a fund manager on Wall Street is acceptable, as long as others lose more. Making money? That's fine, but not good enough if others-particularly the benchmark-made more.
It's a relative dynamic in an absolute world, but as we know, perception is reality in the marketplace.
I'm playing small with house money after a hard-fought year. I'm doing this in part due to the emotional crosscurrents (which are always tough to game this time of year) and because I'm up to my eyes with year-end to-do's, planning, budgeting and the like.
I touched on my posture recently and it remains the same, which isn't to say I won't strike if I see an advantageous risk-reward (in real-time on the Buzz & Banter; click here for a free two-week trial!).
While the stock market was -- or appears to be -- the big winner in 2012, hedge funds may well be the biggest loser. Not in terms of net performance; I'm talking about them being an acceptable casualty in The War on Capitalism, both in the eyes of the government and through the lens of John Q. Public.
- Gold was the fly in the upside try yesterday; only time will tell if that predictive prowess will play through as it did on December 13. I've updated the chart of the S&P vs. the CRB below as commodity volatility typically precedes equity movement.
- Watch the banks as they're the tell with the best smell. BKX (INDEXDJX:BKX) 47-52 are the levels of lore and yes, you could drive a truck through that channel, per the chart below.
- Finally, and non-market related, I have a flag pole on my (relatively new) property, which is odd because it's not something that I would have put up (being honest), but since it's there, I've embraced the responsibility. Old Glory is flying at half-mast for 26 days for reasons that should be obvious to us all. Continued peace and prayers to those suffering in the wake of the recent tragedy, and let's keep this "other" stuff in perspective as we continue to find our way.
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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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