It's spring: Pay attention to the market setup

On Wall Street, the setup is a technical formation, usually the harbinger of a profitable trade.

  • close
    Cherry blossoms were coated with rain drops on opening day of the annual Cherry Blossom Festival in Washington, D.C., last March. Each spring, thousands of blossoms are just waiting to burst out, just like opportunities in the market.
    Jacquelyn Martin/AP/File
    View Caption
  • About video ads
    View Caption
of

I plucked a bud off the cherry blossom tree in front of my house yesterday. Although the outside of it was gnarled and winter-brown, inside was the the soft, moist green of a honeydew melon. So much potential inside of that little brown bud - a setup for the imminent pink and white explosion that engulfs my tree every spring.

Talking to traders everyday, I continue to hear the term "Setup".

This is a noun that denotes a technical formation, usually the harbinger of a profitable trade. In a market with hundreds of stocks, exhibiting bullish setups, it is hard not to think of the hundreds - thousands - of buds that will shortly burst with the colorful pageantry of renewal.

And technical analysts do not have exclusivity on the concept of setups. Many fundamental and quantitative setups are being crowed by the practitioners of those art forms. "How about the fact that $800 billion in cash still resides on the balance sheets of US corporations just waiting to be put to work?" asks one. "Or what about the fact that the dollar value of U.S. company takeovers is up 46% to $144 billion this year?" asks another. And what of the record number of biotech drugs in the pipeline and the new development of passive money managers embracing activism to improve stock returns?" inquires the chorus.

This can be taken away from us in a moment - in the time it takes for a black, threatening thundercloud to appear on the horizon - but for now, it is ours.

Technical Setups, Fundamental Setups, Quantitative Setups - all are apparent in this tape. But more importantly, there is a Qualitative Setup, one that may trump all the rest: The people I work with and trade with and invest with here in New York and across the country are smiling again. Smiling on the way to work and smiling on the way home.

Ear to ear.

Setup City is in full bloom.

"To whom it may concern: It is springtime. It is late afternoon." - Kurt Vonnegut

Add/view comments on this post.

-------------------------

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...