Warning: Dangerous Curves Ahead!
The denial-migration-panic continuum is due to shift.
"We are in this era where financial innovation and product structuring, particularly in the debt markets, has been very stimulative," says Henry H. McVey, chief US investment strategist at Morgan Stanley (NYSE:MS).
"VIX doomsayers are out of data; options markets are confirming the recent strength in stocks, and to such an extent that we may be looking at a new, calmer volatility environment for quite some time," says Jared Woodard of TheStreet.com
“We will not have any more crashes in our time,” said John Maynard Keynes in 1927, as highlighted in our Question Conventional Wisdom series on Minyanville.
Peter Atwater—and Bob Prechter, for that matter—has written extensively on the notion that social mood and risk appetites shape financial markets, not the other way around. Through their lens, the stock market crash didn't cause the Great Depression—the Great Depression caused the stock market to crash. It's a subtle, yet critical distinction.
I'm in their camp, as evidenced by recent work that includes The Devolution of Social Mood. In fact, I'll be joining like-minded individuals at The Socionomics Institute Social Mood Conference in Atlanta on April 13. I find this school of thought fascinating, in part because most of the world is trained to think in a completely different way.
The headlines above are consistent with what we would expect at five-year highs. Fear has morphed to greed—at least in the institutional realm—and the denial-migration-panic continuum that has been tried, true and tested, remains very much in play. We touched on this yesterday in The Three Phases of Leave and would be wise to respect the unexpected despite headlines and highlights to the contrary.
While the bulls are quick to point to the earnings in Google (NASDAQ:GOOG), IBM (NYSE:IBM), Netflix (NASDAQ:NFLX), CSX Corp (NYSE:CSX), and McDonald's (MCD) as validation of the recent ramp—while dismissing the Apple (NASDAQ:AAPL) miss as company-specific—I would offer a few words of caution.
First, the market is a leading indicator; so much of this news is baked into the tape (although, through objective eyes, the reaction to news is always more important than the news itself).
Second, social mood is bifurcated at best and the disparity between a stock market rally and legitimate economic recovery is palpable. There are haves and have-nots, red states and blue states, Wall Street and Main Street—and that’s just stateside. This dynamic continues to manifest internationally, be it Costa Rican capital controls or Chinese currency manipulation.
Third, as flagged back in December 2012 when the S&P (INDEXSP:.INX) was at 1420, the technical pattern "works" to S&P 1520 and we're a kitten's whisker away from that level.
In short, the easy trade for the bulls is in the rear view; that doesn't mean we can't climb higher, it simply means you should see both sides before risking your hard-earned coin, and practice discipline over conviction as we together find our way.
- I enter today's trade with some pared situations, a tight and defined trading short in Goldman Sachs (NYSE:GS) and some tertiary risk that I've been IN-N-OUT of like a double-double with cheese.
- The Research In Motion (NASDAQ:RIMM) BB10 launch is six days away. Keep that in mind if you're trading the stock and define your risk as the catalyst approaches. Two-hundred percent since September 2102. Wow.
- If and when Apple (NASDAQ:AAPL) gets back to $500, remember that Technical Analysis 101 dictates that the time to short (buy) a stock is on the re-test of resistance (support). Just sayin', because you know if/when, the bull case will be louder and more vociferous.
- Note to Tim Cook: If you're feeling the heat on the downside—losing 36% of your market capitalization in five months will do—a 10-1 stock split would likely do wonders for the stock (or the perception thereof).
- Wow, in 13 years of writing real-time vibes, I don't think I've ever used the word vociferous. Kumquat? Yes. Vociferous? Not so much.
- OK, I checked—I used that word four times—in May 2004, October 2004, March 2005, and again that same month. I all of a sudden feel pretty old.
Did I mention the VIX (^VIX) is edging toward 15-year support?
- Gold, with lower highs (sign of distribution), has edged through the 200-day at 1663. That level hasn't been influential of late but it bears watching nonetheless. Commodity volatility is typically a precursor to equity movement.
- Minyan Mark writes: "S&P at 1500, jobless claims lowest in five years, bank balance sheets 'strong' again, JPMorgan (NYSE:JPM) thrives despite losing $5 billion in the derivatives casino, corporate profits at an all time high...I must be missing something but why does the Fed feel the need to print $100 billion a month?"
- Best guess? Because deflation in a fractional reserve banking system means that policymakers have, for all intents and purposes, lost control of the economy.
- The bulls won't raise an eyebrow until NDX (INDEXNASDAQ:NDX) 2700 and/or S&P 1460/1435 is breached.
- So my wife bought me a scale as a present. Subtle, right? While the January cleanse didn't quite pan out as expected (I'm a lush), I'm trying the healthy lifestyle approach by eating better and committing to yoga twice a week, biking twice a week, and weight training twice a week. The goal is to lose 25 lbs without having to chop off an arm.
I know, I don't care much about that either, but a little
levity humanity...just keeping it real.
- Have a great day and enjoy the weekend; you’ve most certainly earned it, and I’ll see you over on the Buzz.
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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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