Random Thoughts: Stocks Arrive at a Critical Juncture

By Todd Harrison  APR 22, 2013 1:30 PM

A technical toggle is upon us.


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

I return from yet another trip to the doctor—I will be getting a right hip replacement next Tuesday, leaving the left hip for another time—to find the S&P (INDEXSP:.INX) meandering under our all-important S&P 1560 level. 

Pulling up my trusty systems, I see that the S&P rallied out of the gate to S&P 1560.10 before dipping roughly 12 handles.  If I had been around to manage and monitor the risk, I would have faded that move (the first fade was the easy trade) and perhaps picked against that overage on the subsequent pullback. 

Then again, if wishes were knishes, I would weigh 300 lbs.

There are a few things we know, and a few things we believe. We know the options expiration hangover is over as firms have presumably squared their extraneous risk following Friday's April expiry. 

We know earnings have beaten estimates (on the aggregate) and the reaction has been mixed with a bearish bias, as evidenced by the lower highs in the S&P. 

Finally, we know there is tranched technical resistance on the S&P between S&P 1560 and S&P 1610.

What do we believe?  Well, a few things; first, we believe social mood continues to deteriorate despite market proxies at or near all-time highs. 

We believe central banks are taking historic, extraordinary measures to morph the stock market rally into a legitimate economic recovery. 

We believe there is inflation in things we need (health care, food, energy) and deflation in things we want (cell phones, plasmas, laptops). 

Finally, we believe that nobody is bigger than the markets for an extended period of time, if markets are to remain free.

While the first fade (lower this morning) was the easy trade, I continue to trade my September SPY put position in real-time over on the Buzz & Banter (click here for a free two-week trial).

Below is the confluence of resistance in and around S&P 1560, so you have it; sometimes a picture speaks 1,000 words.

Some Random Thoughts:

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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