Wednesday, June 21, 2006

Phantom of the Market

By Todd Harrison

On the heels of a hellacious six week span, the bovine held their ground yesterday and planted seeds of a much needed "higher low." The ability to create a technical catalyst or, at the very least, hold the June lows is the first step towards putting this process of price discovery behind us. As anyone within spitting distance of the mainstream media can tell you, it hasn't been the best of times for financial assets. Stateside Equities, Europe, Asia, India, Stockholm, metals, crude--it's synchronized swimming at its finest, monolithic movement that has been a mirror image of the U.S dollar. I've long opined that our Federal Reserve must make a choice between a strong dollar or firm asset classes. That script is being screen tested each day as we sift through the other side of globalization.

While I was quite cautious into the May 10 FOMC meeting, I've been buying dips in the metal and energy complex and balancing my portfolio with a spate of autumn puts in the financial sector. For those with an active eye, I've set my short side "stops" above BKX 108 and XBD 205, which is technical resistance for the banks and brokers. The risk to that approach is that charts take a back seat to structural forces when the wheels fall off the wagon. Indeed, if we're to assimilate the four primary metrics of fundamentals, structural, technicals and psychology--in the context of a bubble of hedge funds chasing quarter-end performance--it's quite possible that the path of maximum frustration will flummox those reliant on traditional trading approaches.

I won't pretend that all is well in the world or that the worst is behind us. I'm simply looking to shake shekels from the tree and pocket them before the Phantom returns to his rightful home. Who is this Phantom I speak of and what does he want? For me, it's a simple yet unpleasant answer...
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