Game On! Europe Triggers Markets Into Quarter-End
See all sides as we enter a thin holiday week.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
That's the sound of relief you're hearing across the globe as investors walk in to find S&P futures 20 handles higher and NDX futures up twice that. The headlines offer that there are signs of a stabilization plan for Europe, including a "whole array of possible interventions and measures." Experienced eyes will note that other dynamics may be in play.
Last week we were Taking Stock of a Global Financial Inflection Point and noted potentially positive catalysts that included "quarter-end is approaching next week," and "many market participants moved to the sidelines/are sitting in cash and may be vulnerable to a "long squeeze" (the buyers are higher). I believe there's an element of those dynamics in today's price action, one of which will expire on Sunday.
This bipolar stroller--death by shmoopie one day; world peace breaks out the next--is not an easy tape to trade. Yesterday I was loathe to carry my JPMorgan (JPM) position (I cut it in half as a function of discipline) and today it appears that I prematurely evacuated anew (above my sell-stop level). We've said it before and we'll say it again: There's no shame in admitting it's hard, there's only shame in pretending it's not.
Our eyes today will spy the dollar (down 1% in early trading), the financials (above BKX 44), the high-beta realm (Apple (AAPL), Google (GOOG), LinkedIn (LNKD), F5 (FFIV)), which will presumably offer the most bang-for-the-buck into quarter-end (if they don't, that would be telling), and the action in the metals (commodity volatility typically precedes equity movement).
And of course, we'll have the requisite headlines from the modern day Debbie Downer as Angela Merkel throws cold water headlines on the rally. Wah-Waah!
There's a lot to be thankful for--including the fact that it's Friday! Buckle up, take a deep breath, and know that a weekend--of for many, a full week--of the important stuff is right around the corner.
I remember writing twelve years ago that the high-flying four horsemen—Intel (INTC), Dell (DELL), Microsoft (MSFT), Cisco (CSCO)—would eventually trade with “single digit midget multiples.” As I survey their current status, I can’t help but quietly nod my head.
It’s been a tough few weeks—there’s a lot going on, even by my standards—and then I got a note yesterday morning from a dear friend down south. You see, David is the happiest, most optimistic guy I know; he’s been an inspiration from the moment we met. He has been paralyzed from the shoulders down for the last 34 years and writes emails through a voice-recognition breathing tube but that doesn’t define him, nor does it stop him from spreading sunshine through his ways and being. Sorta puts things in perspective, eh?
We’re doing our part to nudge the economy along as we close on our new home on Tuesday. This, of course, comes after legging out of the NYC residence last month, which is why I’ve been living in a NYC hotel during the week and seeing my family on the weekends. It’ll take about a month to get it gussied up—just in time for our wedding—which means the monster commute will continue. I sure do miss them—I’m told Ruby took her first steps yesterday.
Despite the agita---or the perceived agita—the VXO, a layman’s gauge to market anxiety, is still a teenager. During the height of fright, this puppy popped upwards of 50 and at times, 100. Yes, those were "outlier" situations but the half-lives between events is getting shorter as a function of technology, which has sped up the rate of change in everything from mating rituals to economic cycles. See the chart below.
I’m likely to boogie east to see my family around high noon—the kids have a camp production and I wanna surprise them with a cameo—so I’ll use price to my advantage, sell my remaining exposure into strength, and enter the holiday week with a flat pad and a clear head. For those fighting the good fight, I will note that the S&P will run into resistance in and around 1350-1360 although, seeing both sides, we must respect that the reverse head & shoulders we flagged last week (that works to S&P 1400) remains in play after the recent back test. See that chart below, and have a great holiday respite!
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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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