The Stock Market Toes the Maginot Line

By Todd Harrison  APR 26, 2013 10:30 AM

The bulls and bears battle for technical supremacy.

 


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

Freaky Friday has arrived and not a moment too soon!

I'm not sure if it's the specter of my total hip replacement next week, the rigors of navigating this fakakta market, or the massive amount of information we’ve assimilated this week, but I for one look forward to taking a deep breath and being surrounded by some friendly faces.

Soon enough.

Yesterday afternoon, I penned a Minyanville Alert: The Moment of Truth that pretty much sums up the financial scene through a technical lens.

I'm not going to revisit the path we took to get here, but rather the forward probability spectrum. It's do or die for the breakout try—while the tape feels great, akin to Apple (NASDAQ:AAPL) at $700 or gold at $1900, past performance doesn't guarantee future results, although history has been known to rhyme at times.

We can debate the GDP (which missed consensus estimates by 16%) given the obscene—and I mean X-rated—levels of intervention in global financial markets, but folks don't care; they're conditioned to look through bad news because the Greenspan Put has been replaced with the Bernanke Call.

There are two ways to view the dew: The market is far from free, which will come home to roost, or the market is at all-time highs, and getting juiced. In other words, we’re witnessing the classic battle of fear vs. greed, and the latter is spanking the former like its Friday night in Jed’s basement.

While my personal take is that these imbalances are cumulative—and that means they've piled on top of the problems that caused the first phase of the financial crisis as risk transferred from one reality to another—it won't matter until it does because perception is reality.

The Devolution of Social Mood, as we continue to witness, is the "other side" of that trade, but given it's amorphous and unquantifiable—this is still a fertile frontier—most folks, or those who remain in the stock market, are following the tape higher like a pied piper on steroids. Given price is the ultimate arbiter of variant financial views , I'm not saying that's wrong; it's just not without risk.

Europe is taking a breather—the German DAX recently rallied 5%, to edge it back positive for the year—Asia was mixed and the stateside tape is winking pink in the early going.  For my part, this week has been a real-time demonstration of how not to manage risk—here and here—as I've rolled up my short-side stops to the top of the range, which is a stone's throw away from the levels today.

Emotion is the enemy when trading, this we know, but being on the wrong side of the market ride still weighs on one's psyche.  And to think, it was only a week ago that it felt like I had the market's script.  Stay humble or the market will do it for you indeed.

Some charts that help paint our current field position:

The importance of +/- S&P (INDEXSP:.INX) 1600:



A longer-term perspective; aka “The Triple Lindy”:



Why the gold rally is “countertrend’ until $1550 is recaptured:



A curious case of “lower highs” in the Transports:



The Russell (INDEXRUSSELL:RUT), meanwhile, is trying to pull a Tim Hardaway (Sr., not Jr.) and will do so IF they can cross over RUT 950:



Finally, some 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.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.