Random Thoughts: Bulls and Bears Square Off in a Technical Tug-of-War

By Todd Harrison  JUN 04, 2013 10:53 AM

And it's too early for either side to claim victory.


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

Turnaround Tuesday has arrived with the bulls looking to pull a "21" at the world's wildest casino. 

Between the 20 consecutive "up" Tuesdays and the longest winning streak in the Dow Jones Industrial Average (INDEXDJX:.DJI (without a three-day decline) since at 1900—yes, that streak is still intact—the voodoo that they do is alive and well. 
The bears, for their part, are working on a trend-channel of their own, as shown in the chart below, and if they can whack-a-mole the bovine bravado below S&P (INDEXSP:.INX) 1650, they'll have their fifth "lower high," which is a stealth sign of distribution.

Yesterday morning, we got our anticipated probe lower (I nibbled on 15% of my short S&P exposure) before asset alligators arrived to sell bonds and buy stocks, closing the market on the best levels of the session. 
One could argue that, given the S&P was more than 40 handles off of Tuesday's high print, a bounce was warranted given that bottoms are typically "points" while tops are "processes," but it's too early for either side to claim victory in this current tug-of-war.

Yes, there are two sides to the current ride; the bulls will argue that the government can effectively swallow hard and write off the toxic debt they've ingested, with or without Michael Clarke Duncan, while the bears will lay claim to the business cycle, knowing in their deepest innards that what goes around, comes around regardless of what the market has been brainwashed to believe. "Yeah, it's different this time," Boo the Bear will say while licking his wounds, "until it isn't."

Courtesy: StockCharts
(Click here to see larger version of chart)

Banks, breadth, leadership, and commodities remain viable tells, and levels include S&P 1635, 1640, and 1650 on the upside and S&P 1595-1600 on the downside.  And of course, we've got a monster economic report due on tap Friday—a summer Friday, no less—which will start tongues wagging on whether the FED will taper, and when. 
For what it's worth and so it's said, I continue to feel that a "free" market would be a much lower market, but that and $2.50 will get you on the subway as the market is far from free.
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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