Todd Harrison: Taking Stock of the Stock Market
An ugly day for equities begs the question of what's next?
That odd crimson hue on your trading turret is known as a "down day" on Wall Street, which has been a rare occurrence for the better part of the last half-decade. With the Dow Jones Industrial Average (INDEXDJX:.DJI) notching a 160% gain since March 2009 -- the S&P 500 (INDEXSP:.INX) is up almost 200% and the NDX (INDEXNASDAQ:NDX) is 275% higher in that same span -- the only risk to the market was not being fully invested.
One day does not a market break make but anyone with less than five years of experience has been conditioned to believe that risk is a one-sided sword. Indeed, those with a few cycles under their belt -- 24 years and counting over here -- has learned the hard way that risk management trumps reward-chasing over a prolonged period of time.
To be sure, we've seen some head fakes lower over this span, which has served to strengthen the Pavlovian conditioning to buy every dip.
For the bulls, that has been rewarded time and time again, but for the bears, it's been an exercise in frustration and a contributing factor to "flat" being the new "short." Only time will tell whether this time is indeed different but one would be wise to see both sides as we together find our way.
We've been writing every day over on the real-time Buzz & Banter and I communicated a few days ago that 1) I was selling my Deutsche Bank (NYSE:DB) calls into strength (bought last week) and 2) S&P 1950 felt like a near-term magnet for the tape.
When we got there this morning, I punted my remaining December SPY (NYSEARCA:SPY) puts and took my trade (initiated near S&P 1980). Premature evacuation, but trades are made to be taken. S&P 1900 is the next stair-step support.
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Stocks down, gold down, oil down, dollar firm. If I didn't know any better, I would offer that this smells like a whiff of deflation.
BKX (INDEXCME:BKX) 70 should be on your radar; as go the piggies, so goes the poke.
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High-beta (as a risk proxy) is getting hammered today but you could throw a dart at the tape and say the same thing. I do think Twitter (NASDAQ:TWTR) shakes off the supply and gets to $50 at a point, for what it's worth and so it's said.
Sometimes the ability not to trade is as important as trading ability. And sometimes you've just gotta close your eyes and sell rallies.
I don't frequent Twitter or Facebook (NASDAQ:FB) as much as I used to -- tI'm aking a bit of a digital respite -- but I would imagine the infighting between (pick a topic, any topic!) is raging good and thick.
Yes, I'm still watching GW Pharma (NASDAQ:GWPH). $80 is an important technical toggle.
I do believe that we'll wake up one day and Altria (NYSE:MO) will gap higher on news that it's entering the cannabis space.
I'm not going to comment on what's going on in Gaza other than to say that the rhetoric is indicative of the devolution of social mood. Very sad.
I will admit to being a bit excited when learning that the season finale of The Bachelorette was on the other night. If nothing else, I was paying it forward (to and with my wife) in front of football season.
As always, I hope this finds you well.
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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 firstname.lastname@example.org.
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