Observations on Quarter-End and the Forward Path of Gold

By Todd Harrison  MAR 29, 2012 10:00 AM

The world's wildest reality show continues.


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

The Greatest Story Ever Told.

No, I'm not talking about Jerry and his friends—although that's a worthy vibe!—I'm talking about how news outlets spin the price action.  To say that the closing hours each day are important would be the understatement of our young year; with quarter-end on tap and fund managers schvitzing each and every flickering tick, the race is on, so to speak.

While I've been trading around a short bias—in both the S&P and NDX, through defined risk vehicles—my risk profile tightened before I left for Palo Alto, which is likely a good thing.  I learned long ago that when you can't leave the tape, it's time to take a break; balance is a critical element when trading, and in life.

I’m no perma-bear; I operated from the long side for the better part of the move from S&P 1250 to S&P 1360—it's the last 40 handles that flummoxed me, which may be a function of Mercury Retrograde for all I know.  To make matters worse, we spied the bullish technical pattern together before the latest leg higher and I chose to ‘trade around it,’ rather than cut and run.

And, depending on the time frame—syncing your time horizon and risk profile is one of the most important dynamics of wealth creation—I would offer that I'm extremely bullish as I look out across the horizon—it’s the steps between here and there that scrunch my nose, given the blind ambition that surrounds the Street.

The bottom line is this: The emotional agendas of fund managers around the world are running rampant as they sharpen their No. 2 pencils and prepare to share their fare to those that care. I remember those days and I sure don't miss 'em, but that doesn’t mean they’re not in play.

If the bulls can hold S&P 1400, they’ll claim victory and whisper "Pishaw!" to each other before they run off to do whatever it is bulls do. 

If the bend breaks, so to speak, it will plant a seed of doubt in the marketplace for the first time in some time, and the bears know that every journey begins with a single step.

The Double Secret Reverse Gold Scold?

Yesterday afternoon on our real-time Buzz & Banter (click here for a free trial), I wanted to share a quick thought on gold, highlighting the fact that it failed at the 200-day moving average ($1,688) that we posted the day before. 

But what did my eyes see?  A potentially massive reverse head-and-shoulders pattern that, if triggered above the right shoulder ($1,800) "works" (in a technical vacuum) to gold $2,075.  (Note: The target is calculated by subtracting the level of the head from the lines of the shoulder, and then adding that number to the shoulder level)

It's an if-then equation, but as I haven't seen anyone else discussing it, I figured I would share my eyes with ye faithful.

Random Thoughts:

Twitter: @todd_harrison

Positions in SPX, NDX, RIMM