Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Razor Burn

By

PrintPRINT
Good morning, and welcome back to the Kojak tape. After shrugging off negatives for three weeks, we walked into Monday with a handful of upgrades and some dovish chatter out of Washington. Naturally, the tape reversed 2% from the manic opening and closed near its lows. I'm not quite sure if the Minx has a secret partnership with the "hair club for traders," but she's doing a fine job of reducing the aggregate follicle count on the street! Speaking of wigs, Lord Tush called in this morning to let us know that the European bourses are slippy on the back of soft earnings from British Pete and a punk stateside performance yesterday. Double down of that Rogaine, my friends, today's gonna be a hairy one.

With tension on the street near DEFCON levels, you can almost hear the angst with each tick of the futures. I've always believed that if you hold onto the handlebars too tight, your bumpy ride will not be an enjoyable experience. The goal in our business is to be in a position to trade proactively and think clearly. If your risk profile doesn't allow that, you've got some manicuring to do.

While we must take our journey one step at a time, I must admit that my minds been aflutter as I attempt to craft a year end thesis. The thought that's beginning to crystallize in my keppe is a compromise, of sorts, that factors in the current psychology, the underlying fundamentals, the technical landscape and the structural forces. Granted, new data points will always present themselves and we must remain adaptive in our approach but, as of now, this is where I stand.

The tape is short-term overbought but there is clearly an underlying bid and a constructive psychology. Over the past week or so, the major averages have been relatively range bound with an upside bias. As you know, I'm of the opinion that the current overbought condition (and "extended" stochastics) will be resolved with a consolidation. The trillion dollar question remains: will that be a pause that refreshes (before continuing to rally) or the beginning of a bigger downside situation?

It's my sense that the resolution of the overbought condition will plant both the seed of doubt (for the bulls) and the seed of hope (for the bears). As a function of this, the weak longs will be shaken out while the anxious shorts are sucked in. After (if) this occurs, I could "see" another leg higher as fund managers make their last gasp bet for a yearend rip (ala 2001). It's my (humble) opinion that this second rally will ultimately fail and the crowded long side will get spanked (for a trade).

Now, I know better than to tempt the Minx with brazen predictions, so I'm going to approach each day with my right hand up, my head down and one foot in front of the other. We're sure to pick up a flurry of new data points from the conferences and I'm going to juxtapose those inputs against a short-term S&P support of 875 (then 850) and resistance of 905ish. For the NDX, I'm eyeballing short-term support at 950 (then 900) with a resistance of 1000ish. As an FYI, if the Dow Jones ticks at 8250, it will trigger a triple bottom sell signal.

I know that each day brings new readers to the site, so I must repeat that this is not an advice column. I use this space as an open forum of communication with the sincere hopes that, at some level, my nutty thought process adds value. This market has repeatedly flummoxed the most seasoned professionals and it will continue along the path of maximum frustration. It remains my big picture belief that capital preservation will be the most important investment thesis for the next 7-10 years but, with a little luck and a lot of discipline, perhaps we can make a few shekels along the way.

Good luck today.

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.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE