The Roller Coaster Continues: What to Watch for in Financial Markets

By Todd Harrison  APR 18, 2013 8:37 AM

Adapt, don't conform, as we together find our way.

 


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

We like to say the price action associated with options expiration—which is tomorrow— manifests (through increased volatility) in the days preceding the actual expiration.   

That has played through this week, in spades; Monday, the S&P lost 36 points.

On Turnaround Tuesday, they bounced 'em 22 points.

Wednesday, they lost—yep—22 points, to close precisely at Monday's close.

 And true to form, in the early goings of Thursday, the S&P (INDEXSP:.INX) is indicating a higher opening.

I actively traded this stretch, as detailed in real-time on the Buzz & Banter (click here for a free trial!) and consistent with my shared strategy of navigating a short bias under +/-S&P 1600.

Yesterday, after punting all but 5% of my SPY (NYSEARCA:SPY) puts into the weakness, I called an audible and reloaded on my downside exposure, rounding it up to 50% of a full position.

With "my level" 50-odd handles away—too wide, through the lens of risk definition—I'm focused on the back-test of the up-trend line that has been in place since November, per the chart below, which comes into play +/- S&P 1560).



My plan this morning is to let the noise settle (the first half hour of each trading session is crowded), gauge the tenor of the tape and take a fresh look.  Should market internals skew 2:1 positive, or if the financial complex demonstrates strength (Morgan Stanley (NYSE:MS) reported; watch for the reaction to that news), I won't rationalize my risk.

I told Michael Sedacca this morning that "loose grips" will likely reward the bears—and I believe that—but discipline over conviction has rewarded me over the course of my 23-year career, and it only takes a momentary lapse of judgment to give back hard-earned gains. Good traders know how to make money; great traders know how to take a loss. 

Those are my top-line vibes coming into the session—I am writing this pre-market—and as always, we'll update our vibes in real-time on the Buzz & Banter as the market writes the script and Minyanville tells the story.

Random Thoughts:
R.P.

Twitter: @todd_harrison

Position in SPY.

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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