A Surgical Approach to the Stock Market

By Todd Harrison  MAY 06, 2013 11:55 AM

One man's approach -- and missteps -- as the market trades to all-time highs.

 


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

Greetings from MV East—also known as my home office—on this, the fifth day following total hip replacement and third day back from the hospital. 

When folks ask how I’m feeling, I offer that "I’m trending in the right direction," although it’s not a linear path as I’m still in a fair amount of pain.  Meanwhile, I’ve decided to cut the dosage on my pain meds in half—these things scare me—just as my rigorous two-week physical therapy regimen starts to heat up. Only time will tell if this is a smart “leg” or unnecessary risk.

We spent some time the week before last discussing The Critical Juncture of the Technical Landscape, including how a jump through S&P (INDEXSP:.INX) 1600 (to clear out the shorts) may have been a necessary precursor to the path of maximum frustration (Pop & Drop).  As I gingerly sit here on May 6, 2013, however, the price action continues to impress with the S&P hovering around 1615. 

The financials (Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS)), as well as select tech (Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL) -- not-so-much Amazon (NASDAQ:AMZN) and IBM (NYSE:IBM)) are better bid while traditionally defensive sectors (consumer non-durables and big-cap pharma) are a source of funds.  Sector rotation, as we know, is traditionally a whole lot healthier than outright migration.

Consistent with March 2009 vs. April 2013: A Lesson in Discipline, I covered a slew of my S&P short prior to my going under the knife but—and this is me being honest—I didn’t punt my September SPY (NYSEARCA:SPY) put position in its entirety.  I got cute and tried to peel out of my remaining leaves on Wednesday’s close, still loopy from surgery and into the 15-handle S&P drop, but my remote-access system wouldn’t connect from room 614 at The Hospital for Special Surgery, which helped drive an important point home once again: Blind risk is bad risk.

Of course, the tape hasn’t looked back since; the market recaptured Wednesday’s loss on Thursday and on Friday, it sprung through S&P 1600 on a better-than-expected jobs report (or, jobs that were reported to be better than expected).  All the while, the buying stampede is now at 85 straight sessions—vs. the previous record of 53—in a streak that would make Joe DiMaggio blush.  As with most things in the market and life, that won’t matter—until it does. 

(Note: The savvy Jeff Saut, who turned me on to the buying stampede, shared his most recent weekly thoughts here, and fails to mention the buying stampede, so I am double-checking these particulars.)

In terms of a forward lens, I will scribe missives as I can for the next week or so as I cannot sit for more than an hour at a clip (this promises to improve).  My intention is to recover well and not do anything that will set me back, which requires diligent PT, plenty of rest, and “being good to others and better to myself.” 

As we say all too often at Minyanville but mean now more than ever, one step at a time as we together find our way.

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.

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