The US Stock Market: Where Do We Go From Here?
Weighing what was versus what will be.
Greetings from the new Minyanville Headquarters, which following a weekend move, we're operating from for the first time. While I'm not one to make proactive excuses—or excuses in general—there are often glitches during office switches so please bear with us as we get up to speed. I will offer that after a few days off last week—overdue vibe time with my family—I'm raring to go as we enter Q2.
The stock market had a terrific first quarter, thanks largely to the historic policy measures currently in place. Don't just take my word for it; David Stockman, who should be very familiar to old school readers, echoed that sentiment over the weekend in the New York Times. You can agree or disagree with his assertions but please absorb them as the "other side" of the all-time highs in the S&P (INDEXSP:.INX).
While we at Minyanville have warned of cumulative imbalances since Shock & Awe hit Wall & Broad—I am in agreement with Mr. Stockman that there is a substantive difference between a stock market rally and an economic recovery—we must trade the tape we've got rather than the one we want (per my Power Trading Radio interview). This aligns with the axiom to never let an opinion get in the way of making money.
To illustrate that point—and for no other reason—I'll share that I'm coming off the best quarter (on a percentage basis) in my career (FAR from the best quarter on an absolute basis, but that's a different discussion). I did so with a hit-it-to-quit-it approach, concentrated risk (few positions), and defined parameters, a style I'll look to emulate this quarter.
That same stair-step approach will kick off Q2, which of course starts today, and we scribe those vibes in real-time over on the Buzz & Banter (click here for a free two-week trial).
When I left for vacation—doing less, as I was—I had a 20% short position in the SPY (through September puts) and a placeholder long position in BlackBerry (NASDAQ:BBRY). No great shakes from a P&L standpoint, and consistent which the mindset shared prior to my requisite respite, the plan is to lean against S&P 1580 (on the short side per the chart below) with a stop on the other side of that line (fat crayon—let's call it S&P 1600).
As always, I will continue to look for individual situations (both sides) to augment my risk profile (the individual stock trades drove my performance in Q1). Stay tuned on that front, and please remember that it typically takes a few days for me to re-find my feel.
Speaking of March Madness, Minyan Matt Davio is high score in Minyan March Madness, where the winner gets bragging rights and some snazzy Minyanville schwag while "non-winners" (there are no losers) have the right (but not the obligation) to make a donation of their choice to The Ruby Peck Foundation for Children's Education.
For my part, I couldn't be more proud of my Orange for their gritty play, which earned them a trip to Atlanta for the Final Four.
An article caught my eye during the commute this morning: "Stocks, Commodities Break Up the Band," which was featured prominently on the front page of Money & Investing section of the Wall Street Journal.
If that theme sounds familiar to anyone else, it's because we harped on it throughout the first quarter. Given the historic correlation between these risk assets (stocks, as measured by the S&P, and commodities through the lens of the CRB), it would appear that either commodities must rally, stocks must fall, or a combination thereof.
See the 3-year chart below—commodities vs. stocks—and remember that commodity volatility typically precedes equity movement.
Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.
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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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