Todd Harrison: Geopolitical Tensions Consume Earnings Euphoria
Traders fade Apple and Facebook news.
I woke up this morning to find the markets indicated higher: The Nasdaq-100 (INDEXNASDAQ:NDX) futures were up over 50 points.
I grabbed my tablet and headed to the stationary bike -- summer is coming! -- to read the news and digest earnings. As I peddled in place, a thought began to crystallize in my mind's eye: Rallies typically end on good, not bad, news.
"This is setting up to be a pretty nice fade (lower)," I thought to myself. "The tape had a nice run into these Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) earnings. And now, with the geopolitical situation heating up..."
I cut my workout short (give me an excuse, any excuse) and headed upstairs to my desk, where I sat down, still sweating, to scribe some vibes. It was then that my wife walked into the room to remind me that we had the twins' parent-teacher conferences and we had to leave in a few minutes.
I thought about contesting the timeline but thought better of it. I got up, showered, and headed to the school. Happy wife, happy life.
The beauty of the burbs is that it's not the city -- the downside, of course, is getting to the city, particularly during rush hour. By the time I once again had online access, the bloom had already faded from the pre-market rose. "Balance," I thought to myself as we sat in standstill traffic. "Opportunities are made up easier than losses."
Back in 1998, I said to my boss, "Do you see what's happening in Russia?" -- to which he replied, "Russia doesn't matter!" It, of course, did matter, and unless someone blinks (and soon), it may very well matter again. Remember, the world remains an interconnected place, tied together with an insane amount of derivatives that few people fully understand.
We've been keeping an eye on the SMART money index and through the lens of consistency, I've updated it below. The chasm is still there, if you care.
If you take Apple out of the NDX, the tech index is having a pretty tough day; then again, if you take chocolate out of my diet, I probably weigh 210 pounds.
I peeled out of my GW Pharma (NASDAQ:GWPH) yesterday between $66 and $71. On a shakeout lower, I'll look to add some exposure back, but I want to demonstrate a little patience. The last go-round, my initial purchases were a bit aggressive (I still have an odd-lot position, which is why you see the disclaimer below.
I'm fairly certain that the next crisis won't look like the last crisis; it won't be dot-com or housing or credit-driven; it could be plumbing or OTC derivatives or geopolitical counterparty contagion.
Yesterday we touched on the preteen VXO (INDEXCBOE:VXO). It's interesting to note that, as of this post, it's still down on the day. It's not a predictive indicator, per se, but historical perspective goes a long way.
After five years of gains, "flat" is the new "short," or so it would seem. A time will come, however, when buying dips will be viewed as contrarian.
- Lots to be thankful for -- let's keep it in perspective. As always, I hope this finds you well.
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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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