As I sat down to write the commentary for today, Friday, September 26—given what we have gone through in these tumultuous past two weeks—I recalled the words of wisdom of a respected colleague and good friend. These words were bestowed on us as the first salvo in the first chapter of Master Traders by none other than one of the greatest market tacticians in recent years, Jeff deGraaf, CMT, CFA, formerly of Lehman Brothers.
"In the market, arrogance without fear will eventually break you. Fear without arrogance will leave you paralyzed at the most inopportune time. The delicate balance of fear and arrogance fosters appropriate aggressiveness without the recklessness."
As Washington continues to bicker over the fate of our frozen credit markets, while investors worldwide hold their breath, and with Presidential and Congressional elections in less than 40 days, I see our forward near-term game shaping up as a binary trade, with a 1 or 0 outcome. Since the ZERO outcome is not acceptable to our way of life in this great nation, we will march forward with a strong LONG BIAS. Our markets are eager to ratchet up as soon as the Proposed Treasury Authority to Purchase Troubled Assets is approved by both houses of the Congress and the news hits the wires.
For this play, we prefer the financials, capital goods, technology and consumer cyclicals.