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Todd Harrison: The Stock Market Digests the Geopolitical Risk


The summer staff prepares for a fresh five-session set.

Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

Get busy living, or get busy dying.
-- Andy Dufresne

A few days ago I wrote, "I recall the Friday when the Ukraine didn't matter, which provided a tell that higher prices were in the cards. [Iraq] is a completely different situation but the same premise applies: We can learn a lot just by watching, and crude should be among the proxies on our radar."

On cue, the market effectively "blew off" geopolitical concerns into the weekend, from Russia to Iraq, and ground higher.  Whether that price action will again prove telling remains to be seen; one thing is for sure -- there are plenty of sobering signs and widespread complacency, but thus far, the "bend, not break" mentality continues to continue.  All the while, the "breakout" we flagged a few moons ago continues to "work" to S&P (INDEXSP:.INX) 1975 through a pure technical lens.

The bulls will argue that the market is behaving as it should, lead higher on Friday by the semiconductors following Intel's (NASDAQ:INTC) upward guidance. The bears -- bear? -- are quick to note the semis are up 80% since the end of 2012 and that good news is already baked into current levels.  There is a case to be made both ways, which is why it is a market of stocks, not a stock market.  It ain't easy, but nobody ever said it would be.

We know that bullish sentiment is at the highest level of 2014 and that every time the VXO trades near 10, it has paid to fade (read: sell) stocks.  So, there's that -- writing on the wall of worry, the timing of which has been elusive.  Even the Bloomberg Smart Money Index has remained at levels that suggest softer prices, but even that has moderated, at least on a relative basis. 

For and with my money, I'll continue to monitor our tells (banks, beta, breadth, crude) and operate with a surgical lens until the dust settles, while enjoying the journey that is the summer of 2014.

Random Thoughts

  • In honor of Father's Day, I pulled this oldie but goodie from 2003.  Hope all the dads out there enjoyed their weekend.
  • Just a run-of-the-mill 47% gain for OpenTable (NASDAQ:OPEN) on Friday.  The more interesting aspect of the deal (to these eyes) was the $40 downside reversal in Priceline (NASDAQ:PCLN) the day prior, almost as if someone knew that news was coming.
  • Europe trades a tad softer, but it's all relative after the monster run to the upside.
  • I remember 15% moves in the Nasdaq (INDEXNASDAQ:NDX) in a single session. 
  • How many crude bulls are leaning against $105 as a bovine backstop?
  • I continue to do work in the cannabis complex as I believe the secular winds of opportunity will be at its back for some time.
  • Speaking with my peers on Wall Street, there is a sense of lethargy out there; I wouldn't call it "financial fatigue" but it's not all that dissimilar.  I once mused, way back in 2000 in a column called "The Long Hard Road," that the financial process would become increasingly difficult, and that it would take three times the work to make half the money.  I would venture to guess that we're there, or at least close.
  • Good luck today; let's make it count.

Twitter: @todd_harrison

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