Todd Harrison: Fading Conventional Wisdom
Freaky Friday Random Thoughts.
This morning, Wunderlich Securities raised Twitter (NYSE:TWTR) to a "hold" from a "sell" rating, while trimming the price target to $35 from $38.
As it stands, the Wall Street analyst community breaks down as follows: eight buys (23.5%), 18 holds (52.9%), and eight sells (23.5%).
One of my favorite tells is to look at the aggregate "mood" on a particular stock; in this case, over 76% of Wall Street analysts have Twitter as a "hold" or "sell," which I view as bullish (more upgrades than downgrades are in the future).
I remember back in 2005, at Minyans in the Mountains in Ojai when I noted in my keynote that of the entire S&P 500 (INDEXSP:.INX), only 7% of all recommendations were skewed to the sell side; it was clear that a lot of folks were sitting on the same side of the table.
Twitter isn't as compelling in here, but it's still a favorable indication; sell hope, buy fear, and trade in between.
After my interview with Der Spiegel, it has become increasingly clear that the cannabis craze has gone global. I believe that the first phase -- anything tangentially related to cannabis ripping higher -- is coming to, or has come to, an end, and that the next phase -- separating the winners from the sinners -- has begun.
- We flagged the price action in the financials last week and sure enough, the underperformance manifested in this week's price action. I've updated the chart below so we're all on the same page.
The S&P is sitting on the 50-day moving average, which is the seventh test in the last month. Personally, I don't think 50-days matter too much but there's a contingent that does, which is why I'm keeping an eye on it.
You know what looks like it's coiling for a big move? Gold, which has hugged the 200-day (which does matter) since the end of March.
Sideways action under resistance is churning -- it would be basing above support -- so the edge goes to the bears in the yellow metal, although the ultimate arbiter will be the price action itself.
Gold and stocks going down together? That's a whiff of deflation -- but perhaps it's too early to tell that tale.
- In the interest of consistency, I've updated the Bloomberg SMART Money Index below, which continues to flash caution.
- CBOEO EX Implied Volatility (INDEXCBOE:VXO) was up 8% -- all the way to Bar Mitzvah levels. A little perspective goes a long way, per the chart below.
What did we learn this week? Never anticipate a technical trigger.
I punted my SPDR S&P 500 ETF Trust (NYSEARCA:SPY) puts a few days ago as I had (have) a nutty schedule that requires me to be out of the office. Blind risk is bad risk, that's what I always say, so through the eyes of discipline, I did the right thing -- discipline must always trump conviction.
- Lots going on, and this is before a marathon sports day tomorrow: My boy has four lacrosse games and a baseball game, and my precious Ruby's third birthday party is on Sunday. Being a suburban dad is a world away from my NYC professional bachelor days, but it's the single best trade I've ever made.
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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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