Random Thoughts: Navigating Turnaround Tuesday

By Todd Harrison  NOV 20, 2012 10:50 AM

Stair-stepping our way toward some serious tryptophan.



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

The bulls enjoyed a run in the sun yesterday—hey, a broken clock is right twice a day—and the question on everyone's lips is: Was that a one-day wonder or the beginning of something entirely bigger—perhaps even the start of the fabled Santa Claus Rally? 

The honest answer is: I don't know.  (Think Mr. Hand and Jeff Spicoli.)

What I do know is listed below, in no particular order:
As shared in real-time on yesterday’s Buzz & Banter (click here for a free two-week trial—no, seriously!), I sold 80% of my S&P upside call position into yesterday's hot-popper (and the remaining 20% this morning when then financials opened funky).  That may prove right or wrong but is most certainly disciplined (in hit-it-to-quit-it mode, trades are made to be taken).  And yes, if we ramp higher into year-end (which is within the probability spectrum), I'll again be guilty of premature evacuation yet again.

What do I sense will happen next for the stock market? Perhaps an upside probe of the aforementioned S&P 1400 level—but as it stands, that’s a zone I may look to fade (read: short). While the bulls want to break out to the upside (so investors can get their kids the GI Joe with the Kung-Fu Grip), we can’t get excited until the series of lower highs (a bearish sign of distribution) is breached.   Interestingly, that could also be achieved with a push higher through S&P 1400.

In terms of the tech (NDX (INDEXNASDAQ:NDX)) and the financials (BKX (INDEXDJX:BKX)), we're seeing the same patterns of lower highs, and I've included those charts as well.  On the downside, S&P 1350 and BKX 47 remain levels that the bulls will lean against (as near-term support),  particularly as they've been rewarded for defending that zone in a big way already.

Volumes will get thinner into Thanksgiving—I should be so lucky—so factor that into your risk profile as we together find our way.  And think positive, my brethren; profitability begins within.

Random Thoughts

Twitter: @todd_harrison

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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