Random Thoughts: An Earnings Avalanche Awaits

By Todd Harrison  APR 09, 2013 1:12 PM

The fundamental metric steps up to the plate.


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

Turnaround Tuesday is upon us with active traders looking at two particular price points.

The first is S&P (INDEXSP:.INX) 1560, which was the post-NFP downside gap from Friday, which “filled” yesterday after the rally.  The second is the mother of all levels at S&P 1580, which I’ll again lean against (on the short side) as we edge closer (risk definition).  As such, S&P 1560-1580 is the zone to watch in the near-term; Mr. Valentine has set the price.

The style that rewarded me over the last few years has been to play two-sided individual situations "between the 20s" and broader directional bets in the red zone (market cusps). I do believe we're in the red zone, but I'm trying to remain patient in my approach as I've learned not to take risk for the sake of risk.  That said, I will re-visit the SPY puts I punted into Friday's hole (S&P 1540) into further lift as you can do anything as long as you’re disciplined.

I don't see an edge in making a directional bet quite yet given today’s price action (this is subject to change; we update our risk in real-time on the Buzz & Banter; click here for a free two-week trial.  Banks are firm (note Goldman Sachs (NYSE:GS)), breadth is skewed positive, and tech is mixed (Google (NASDAQ:GOOG) higher, Apple (NASDAQ:AAPL) lower; $360 remains a level I’ll look to get involved). 

In terms of our four primary metrics, earnings will take center stage in the weeks ahead, so respect the fundamentals while remembering they’re rear-view (guidance will move stocks but the truth is, nobody knows what the future will hold). I still believe that psychology is the top dog in our metric mix, followed by structural (central banks, global debt dynamic) fundamentals and finally, technical (which are always a better context than catalyst).

These are trying times in the system formerly known as capitalism, but it's not impossible to make money in the marketplace. Manage risk rather than chase reward, define exposure instead of swinging for the fences, and always remember that opportunities are made up easier than losses.

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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