Random Thoughts: Marry Love and Date Stocks
Massive catalysts are on tap for the tape.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
It was a meaningful weekend: After 43 long but not wasted years, I celebrated my wedding on Saturday night.
Despite the tornado warning - which was in a way fitting - the positive energy was palpable as we cut the rug and shared some hugs. We often say, "Work to live; don't live to work," so I would be remiss if I didn't personally thank my beloved for bringing my dreams to life. You are one of a kind, Jamie - you are quite simply the most amazing person I've ever met.
Settling back into the world's wildest reality show...
We touched on the "Heads I Win, Tails You Lose" jobs report on Friday with an eye toward the massive catalysts that await us this week. The biggies, of course, are the German vote on Wednesday and the FOMC "rate decision" on Thursday - although that's more about QE3 than an incremental rate adjustment (real interest rates are already negative). There is also a Dutch election on Wednesday that isn't getting much press, but it will matter on the margin.
I had a conversation last week about a commodity pundit and the opinion was offered that "he's pretty good, but he dilutes his voice by writing every day." I can relate as I've written roughly five times per day since July 2000. Often times, I was in a zone that benefitted our community; other times, I found myself searching for something to say. All the while, my P&L served as a tangible manifestation of the accuracy of my opinion.
The trick to that trade - any trade, really - is something I learned long ago, and that's to never let an opinion get in the way of making money; the mechanics of the swing trump the results of the at-bat. I didn't enter 2012 particularly bullish, but I've had a decent year thus far because of my stylistic approach: Trade two-sided, hit-it-to-quit-it, and leave emotions for weddings and funerals.
Over the last month, however, I veered from that discipline; while I had some wins, I fought Google (GOOG) on the short side (which cost me coin) and I currently own some QQQ puts with a stop above NDX 2850 (which was raised from NDX 2800). While I sensed the performance anxiety percolating (as the market worked off the overbought condition as a function of time rather than price), I didn't pay proper respect to the animal spirits.
Trading - much like dieting - is a fluid process; you can trip, but you mustn't fall, and you can't celebrate the wins or beat yourself up on the losses (although I don't always practice what I preach). I share this as much for me as I do for you; unless you're a black and emotionless box (which accounts for upwards of 70% of the daily trading volume), you can relate to what I am saying.
There is a fine line between proactive patience and being stubborn - it's called the bottom line. I enter this five-session set with a right-sized tech short, defined risk, and plenty of dry powder. I respect the power of quarter-end (and yes, year-end) agendas, the (perceived) Apple (AAPL) iPhone5 roll-out reaction, the German vote, the Dutch elections, and QE3 that will shape the forward tape.
One step at a time as we together find our way.
- Watch commodities (as QE3 proxies), financials (which have acted fabu; as go the piggies, so goes the poke) and yourself, as there's no shame in admitting it's hard - there's only shame in pretending it's not.
- Please note that I will likely pare some of my short risk in an effort to get back to the disciplined approach that has served me in such good stead. I have a hard stop over NDX 2850, but I will roll that back down to 2800 if given the chance.
Linked-In (LNKD) is tickling an all-time high. Congrats to Jeff Weiner & Co. on terrific execution.
The metals traded great on Friday as opposed to crude, which continued to trade funky. The CRB - the aggregate measure of commodities - matters for obvious reasons.
- Old school Minyans will remember "Asset Class Deflation vs. Dollar Devaluation": a lower dollar is a necessary precursor to - but not a guarantor of - higher asset class prices. Note the technical significance of DXY 81, as seen in the chart below.
- The Minyanville community pulled together last summer to help the kids in tornado-torn Joplin. Minyan JM, who lives out there, offers: "Thank you for your efforts surrounding the recovery. The last of the affected hospital came down this week. Much rebuilding has occurred. The school system is functioning while their rebuilding plans continue."
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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