NEW YORK (Minyanville) -- It's Hump Day in the City of Critters as competing dynamics vie for our collective attention. While you were sleeping, the overnight futes took it on the chin as a combination of sovereign bond spreads (yes, Europe still has issues, the most recent of which is inflation) and the lack of light at the end of the FOMC tunnel reintroduced the notion of "risk" in the heretofore one-sided "risk-reward" equation.To that point, while all systems seem to be screaming "Go!" I remain particularly concerned that the aforementioned light at the end of the tunnel could be affixed to the front of a train. Emotional markets tend to rally (or decline) much longer than perceived possible -- this I know from spending twenty years staring at my screens -- so the timing, as they say, is everything. That's precisely why my stylistic approach dictates taking our journey one stair-step at a time, with discipline and humility for all. Amen.
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Themes and Thoughts for 2011
- What turned the beat around this morning? The ADP employment change, which was gained three times what was forecast. Personally, I don't understand why a home security company would have that much impact on the overall economy but who am I to ask questions? Oh wait, that's ADT... never mind.
- Yesterday we noted the correlation between the Russell 2000 and the S&P 500, as well as the Russell breaking below the 2010 close. Insofar as that relationship remains valid, we must add the Russell -- and his other brother Darol -- to our list of daily "tells."
- The financials -- another "tell" -- thus far act swell, with Bank of America (BAC), Barclays (BCS), Deutsche Bank (DB), American Express (AXP), and AIG (AIG) all up better than one percent. Of course, that's only eighteen cents, twenty-four cents, sixty-five cents, sixty cents, and fifty-five cents in absolute terms, but who's counting? (I am.)
- I'll say it again because it matters; I'll say it again because it matters; I'll say it again because it matters; commodity volatility typically precedes equity movement. Commodities had their worst session in six-months yesterday, and they're getting uppity downside again today. Along those lines, spy the dollar Yo, and understand the implications please.
- Respect, don't defer, to the price action, and remember our Ten Trading Commandments as we together find our way. And think positive, my friends, profitability begins within!