Todd Harrison: Iraq Plays a Familiar Catalyst for the Bears
Geopolitical worries permeate as bullish sentiment spikes.
Stephen prospered in his time, well he may and he may decline.
Did it matter, does it now?
Stephen would answer if he only knew how.
It's a brand-new day throughout the world. The World Cup begins. The Rangers are still in the hunt for the Stanley Cup. The Spurs are feeling pretty good about themselves. And the specter of a power grab in the Middle East has become on-the-margin more likely.
The bulls will argue that this is the latest case of the bear who cried wolf. Over the last five years, Greece, Cyprus, Syria, Ukraine, Russia, China, Ireland, Portugal, Spain, and Italy have all had their turn in the hot seat, not to mention other false catalysts such as QE, tapering, the debt ceiling, Obamacare, and sequestration, to name a few.
Perhaps it's no coincidence that this latest geopolitical headwind emerged as bullish sentiment spikes to the highest level in 2014. While I can't say I'm surprised to see conflicts escalate throughout the world, whether its geopolitical tension or unfortunate school shootings, this is one 'theme' that I wish I was dead wrong on.
The Devolution of Social Mood has been persistent and pernicious, all-time highs in the stock market notwithstanding.
I fired off a column yesterday, which was more or less a follow-up to the bear camp capitulation vibe on Monday. It spoke to my increasing sense of the state of suspended reality, one that will result in "a most unpleasant comeuppance for anyone within spitting distance of financial assets." Simply put, the chasm between perception and reality seems particularly acute.
With that said, there is a massive difference between being bearish and being short -- not just technically, but mechanically, through the lens of supply vs. demand. It says something when only a select few are willing to admit they're bearish for fear of being flogged in the social media sphere.
Indeed, it very much feels like March 2009, only in reverse.
The charts point to S&P (INDEXSP:.INX) 1975, which may be necessary to squeeze out whatever shorts are left, but as I said earlier this week, the easy money has already been made.
I've long said that technical analysis is a better (risk) context than catalyst, and that bears repeating.
Who knows, maybe 2014 will shape up like game three of the NBA finals, with the bulls shooting 75% from the field in the first half before the bears make a push in the third quarter.
- It feels like déjà vu all over again in Iraq; keep an eye on crude as a proxy for unrest in the region. Crude $105 is/was an important technical level.
Evidently, the market didn't like the Twitter (NYSE:TWTR) COO; the stock is up 4% on his resignation.
- The oil patch is the place to be today on fresh geopolitical concerns. We touched on crude above; OSX (INDEXNASDAQ:OSX) $300-305 is the zone to watch for the oil service sector.
- I would almost feel naked without updating the Bloomberg Smart Money Index. Given how horrific that visual is, I've included the chart below.
- The trannies are getting hit on higher fuel prices; I seem to remember running this correlation years ago and not finding much there. Below is an 11-year look, for what it's worth.
My three-year-old daughter had her year-end school party yesterday. While I was the only dad in a room full of moms, I had no regrets. As I turn toward the "back nine" of life, my priorities have shifted in kind, including an insatiable desire to see my children grow up, and to play as large of a role as possible in that process as they do.
- One day our grandkids will ask us about this stretch of time and we'll be blessed with the benefit of experience when we share this tale. What a long, strange trip it's been.
Follow Todd and over 30 professional traders as they share their ideas in real time with a FREE 14 day trial to Buzz & Banter.
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.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter