The Stock Market Toes the Maginot Line
The bulls and bears battle for technical supremacy.
Freaky Friday has arrived and not a moment too soon!
I'm not sure if it's the specter of my total hip replacement next week, the rigors of navigating this fakakta market, or the massive amount of information we’ve assimilated this week, but I for one look forward to taking a deep breath and being surrounded by some friendly faces.
Yesterday afternoon, I penned a Minyanville Alert: The Moment of Truth that pretty much sums up the financial scene through a technical lens.
I'm not going to revisit the path we took to get here, but rather the forward probability spectrum. It's do or die for the breakout try—while the tape feels great, akin to Apple (NASDAQ:AAPL) at $700 or gold at $1900, past performance doesn't guarantee future results, although history has been known to rhyme at times.
We can debate the GDP (which missed consensus estimates by 16%) given the obscene—and I mean X-rated—levels of intervention in global financial markets, but folks don't care; they're conditioned to look through bad news because the Greenspan Put has been replaced with the Bernanke Call.
There are two ways to view the dew: The market is far from free, which will come home to roost, or the market is at all-time highs, and getting juiced. In other words, we’re witnessing the classic battle of fear vs. greed, and the latter is spanking the former like its Friday night in Jed’s basement.
While my personal take is that these imbalances are cumulative—and that means they've piled on top of the problems that caused the first phase of the financial crisis as risk transferred from one reality to another—it won't matter until it does because perception is reality.
The Devolution of Social Mood, as we continue to witness, is the "other side" of that trade, but given it's amorphous and unquantifiable—this is still a fertile frontier—most folks, or those who remain in the stock market, are following the tape higher like a pied piper on steroids. Given price is the ultimate arbiter of variant financial views , I'm not saying that's wrong; it's just not without risk.
Europe is taking a breather—the German DAX recently rallied 5%, to edge it back positive for the year—Asia was mixed and the stateside tape is winking pink in the early going. For my part, this week has been a real-time demonstration of how not to manage risk—here and here—as I've rolled up my short-side stops to the top of the range, which is a stone's throw away from the levels today.
Emotion is the enemy when trading, this we know, but being on the wrong side of the market ride still weighs on one's psyche. And to think, it was only a week ago that it felt like I had the market's script. Stay humble or the market will do it for you indeed.
Some charts that help paint our current field position:
The importance of +/- S&P (INDEXSP:.INX) 1600:
A longer-term perspective; aka “The Triple Lindy”:
Why the gold rally is “countertrend’ until $1550 is recaptured:
A curious case of “lower highs” in the Transports:
The Russell (INDEXRUSSELL:RUT), meanwhile, is trying to pull a Tim Hardaway (Sr., not Jr.) and will do so IF they can cross over RUT 950:
Finally, some Random Thoughts:
While I continue to believe that cannabis is a solid long-term theme (despite not knowing pure plays; Archer Daniels (NYSE:ADM) and Altria (NYSE:MO) remain front-runners but there is too much tracking risk for my liking), I'm also looking into Juice plays (such as Juicepress, Project Juice...there are a few of them). Personally I'm hooked on the product; professionally, I sense this could be the front end of a large secular trend.
The hip replacement on Tuesday is 51 weeks to the day since my emergency heart surgery. Nestled in between the scalpels were two family moves, an office move, my wedding, Hurricane Sandy and a ‘honeymoon that wasn't’ due to my wife Jamie's pneumonia and my daughter Ruby’s croup. Yes, it's been an eventful year-over-year stretch by any measure, but I’m pretty grateful all the way around.
A few folks pointed to the Boston Marathon bombings as a tragedy "fit" with many of the themes we've discussed through the years (here, here, and here). I didn’t touch on it because, quite honestly, it cut too close and I opted to send white light and leave it at that.
Do I think that was an isolated incident? Unfortunately not; there was an article in the New York Post this week about how the NYPD is planning "summer tests in the subway to study possible chemical attacks." I wish I had been surprised to read about it but I wasn’t. In fact, if "social complacency" was publicly traded, it may well be in bubble territory.
Truth is, the trajectory of social mood is why I moved my family out of NYC. That is not fail-safe, as we learned the hard way in Newtown, but presumably, our children will be safer than they were in the heart of midtown, and that’s a smart step that continues to pay psychic dividends.
- And the Dow (INDEXDJX:.DJI) had its best week in months. Take that, Karl Marx.
- Every day's a new day, that's what I've been told, so let's make this puppy count. Good luck today and I’ll see YOU over on the Buzz & Banter.
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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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