Random Thoughts: Scatter Plotting the Dog Days of August
Taking stock of the trend channels, trading positions, and life.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
I do this once and a while; it's sort of like random random thoughts, or the second derivative of randomness. It's whatever comes to mind, makes it through my neurons, arrives at my fingertips, and transmits through the keyboard to the screen through the Internet to your screen.
Ain't technology grand? Yeah, in some ways.
In no particular order:
I don't know if Mercury Retrograde really works but I, for one, have found things to be a bit smoother since the end of last week and it has nothing to do with a P&L one way or the other.
The bulls will argue that this is the seventh straight session of working off the overbought condition through time rather than price and they're 1,000% correct-until (and if) the market trades lower.
I'm getting hitched two weeks from Sunday and you know what that means.... I'm off to Iceland on Thursday for my bachelor party. Never been; heard it's awesome.
There's a very thin line between hope and patience and the hardest part is that it's always on the move.
The good news? I covered 20% of my Google (GOOG) short on Friday when it was down $6 and change. The bad news? I didn't cover the rest and I've been forced to pay up for a fair amount of the balance today. Harumph.
Good traders know how to make money but great traders know how to take a loss.
I carried my right-sized NDX (QQQ) short position into the new week. Doesn't feel right but the best trades are typically the toughest fades.
- We've spoken a lot about the trend channels in the S&P and NDX, as well as the potential that both could work off the overbought condition as a function of time rather than price. Nowhere is that more evident than in the trend channels themselves. As a function of the upward sloping channels, the top end of the respective zones has risen in kind, as demonstrated in the charts below.
There's a rumor that Mr. Practical will soon return to the 'Ville. I'll keep ya up.
- Times are tough; Hoofy and Boo need to start pulling their weight!
Oh yeah-the reason I mentioned the bachelor party is that I plan to flatten my risk by Wednesday. Each of us has unique risk tolerance levels, so for what it's worth, that's the plan.
Orange whip? Orange whip? Orange whip? Three orange whips!
A wise man reminded me that markets don't crash from the highs, they crash from the lows--and he's right.
Everyone on Wall Street knows that the Facebook (FB) lock-up frees up on Thursday. Now, with the coverage in the press, everyone on Main Street knows that as well. While I won't be here, I will note that IF Facebook trades to $19 into (or on) this news-which is a 50% retracement of the entire public price cycle-it would be a better long than short, in my view.
Hands over ears, the price action thus far is constructive. We tend to see what we want to see at times-self-reinforcing behavior-but the tape hangs tough.
Met my first neighbor; five minutes into the conversation he asked, "What was your name again?" I told him. He said, "That's funny, I'm reading a book by a guy with the same name." As he fumbled for the title, I asked, The Other Side of Wall Street? "Yeah, that's it," he said, "Wait-is that you?"
I've got a few others in me; So I Married My Cougar, The Other Side of Media, and Hair Deflation and Weight Inflation: The Modern Man's Dilemma are jockeying for mind-share.
Gillian Tett at the Financial Times (who is very good) published this article (subscription required). It is strikingly similar to this article by our own Peter Atwater that was published in February 2011. If you missed it then, it's as relevant now.
- It's sorta sad that the capital market construct had to get to this point, but thinking positive, we had to go through it to get through it. As a matter of fact, I forgot to share the amNY column from Friday. They titled it, The Upside to Downturns, which is actually pretty clever. I've included it below:
There is a lot of talk lately that investors have checked out of the stock market. That, after 12 years of booms and busts that punished investors at the top and screwed savers at the bottom, they've lost faith in the system. Bond king Bill Gross actually proclaimed the death of equities last week.
Minyanville forecast the housing crash in 2006, spied a "prolonged period of socioeconomic malaise entirely more depressing than a recession," warned of class warfare and posited the financial industry was "technically insolvent" in 2007, and pointed to the sovereign sequel to the first phase of the 2010 financial crisis.
We rarely mention such things because, quite honestly, nobody cares; people don't want to hear about who was right, they want to be informed about what comes next -- how to prepare, prosper and stay ahead of the curve. The simple truth is that nobody knows the future; there are no pundits and each of us is responsible for our own decisions.
I believe we're in the middle innings of a cleansing that is healthy through a long-term lens. It will be a prolonged process -- one that might take a few years -- but in order to get through it we needed to go through it and we're going through it now. That's a good thing; it beats the pants off the blind ambition of our last, lost decade.
Look at it this way: A forest fire is scary and dangerous yet necessary for a fertile re-birthing. History will view this stretch through a similar lens; the leaders who emerge from this crisis won't be the same as those who entered it and the greatest opportunities will be born from the most profound obstacles.
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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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