Tying Up a Tricky Two-Week Stretch for Stocks
Signs surround us as we map our forward path.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
Following two weeks that have been nothing short of surreal, the stock market—and many of those of us who trade it—are limping toward the weekend.
On Monday, following a dark time on the Eastern Seaboard, I penned The Post-Hurricane and Pre-Election Financial Markets. After holding down a fort full of kids with no power or heat, we cast an eye at the Beltway, forecast an Obama win, and noted that the S&P (INDEXSP:.INX) was churning under resistance as the VXO (^VXO) was basing above support, both of which were negative technical patterns.
On Tuesday, as folks made their way to the polls, we shared The Perfect Storm of the Presidential Election that spoke to the societal consequences of the storm and further negatives that had emerged in the marketplace (lower highs in the banks (INDEXDJX:BKX), the Russell (NYSEARCA:IWM) and the semiconductors (INDEXNASDAQ:SOX)), as well as the importance of Apple (NASDAQ:AAPL) as a leading indicator.
Later that same day, we wrote Positioning Into the Presidential Election—first (as always) on the Buzz, and a few hours later on MV Proper as it was an important column.
That missive weighed the positives and negative road signs in the marketplace before netting out that "Odds favor a downdraft tomorrow" while adding, "with a Nor'easter on the way and a powerless house in the 'burbs, my focus is on my family and my business—in that order—with my P&L a distant third."
We often say that if opportunity is our greatest cost, we should consider ourselves fortunate. I didn't slap on a massive short-side bet despite (what I perceived to be) 3-1 odds that we would see serious slippage; I focused on investments that have nothing to do with financial markets. This, of course, preceded the worst two-day decline of the year and yes, opportunities are made up easier than losses.
On Wednesday, after Bam secured another four years—and as the sovereign sequel to the first phase of the financial crisis flared—we wrote Trading the Presidential Election Results, which mapped stair-step support levels for the stock market, most notably S&P 1380 (the 200-day moving average) as THE line in the sand.
The S&P only tested this level once this year and after a false breakdown, it rallied 16.5% (into September), per the chart below.
So, where does that leave us, as people and market practitioners?
Tired and scruffy—but, speaking from personal experience, extremely appreciative for what I do have and all of the simple things I took for granted. While the storm(s) left a profound health, energy, and financial impact in its wake—and yes, for some, devastation entirely worse than that—it also provided perspective and enabled a bonding of sorts, be it within the family construct or amongst neighbors.
There's something about trying times that brings out the best in each of us, or that's how I've chosen to cope with this, my eleventh day without power and heat. One could make the case that this mindset should also extend to our "prolonged period of socioeconomic malaise," but that's a different discussion for another time.
Suffice to say that without TV or Internet at home, I've had plenty of time to reflect on what’s truly important in life while rationing gas, feeding our fireplace, and tucking our displaced children into warm beds each night. Work to live, don’t live to work, indeed.
But alas, I digress; we have a job to do and before I hop over to our real-time Buzz & Banter (click here for a free two-week trial), I’ll leave you with these market thoughts:
When the Nasdaq-100 (INDEXNASDAQ:NDX) was up 20% for the year and performance anxiety was gripping fund managers, we wrote that the buyers were higher and the sellers were lower.
That may seem like a cop-out statement—playing both sides against the middle—but anyone who has read Minyanville—and the Buzz & Banter in particular—knows that signs have surrounded us for some time; all we had to do was open our eyes and pay attention.
With the S&P now dancing at its 200-day, and the NDX down 10% from its best levels in September, I will again ask you to see both sides and remind you to follow our daily tells (Apple, Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) as year-end bang-for-the-buck proxies and the financials—JPMorgan (NYSE:JPM), Deutsche Bank (NYSE:DB) and Goldman Sachs (NYSE:GS), which encapsulate our finance-based derivative-laced global economy, along with market internals and the price action in commodities) as we together find our way.
Good luck today, and remember to be kind to others and better to yourself.
The Ruby Peck Foundation for Children's Education—Minyanville’s “giving” arm—will hold our seventh annual Festivus on Friday, December 7 (one month from today). We’ll take over Hill Country BBQ, feature three terrific rock bands (U2, Journey, Police covers) and host 500 "thought-leaders" from the business community to eat, drink, and dance (western attire is encouraged). There will be TV coverage and so forth; it's a rocking event (check out the video here).
We always donate 100% of the net proceeds to charity; this year, we are raising money for Jr. Achievement of New York, which will be using the funds to help local area children affected by Hurricane Sandy.
Tickets and donations are great—you can register here—but sponsorships really help us make a difference in the education of children impacted by this storm. Please contact me directly if you would like more information; title sponsors will join me on the podium to ring the NYSE closing bell on 12/7 to officially ring in the philanthropic festivities.
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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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