Mini-me, You Complete Me
No, I'm not talking about JJ and the adorable way he follows Bucky around the office-I'm actually looking at a six month chart of the S&P. There's a daddy head & shoulders formation in the middle of the chart and then a little baby head & shoulders to the right...and that's where we are now. If (big if) we meander sideways and the pattern confirms (lower), Hoofs likely won't be taking his squeeze to breakfast at Tiffany's this Christmas. Don't fret Daisy, there's a lot of trading left between now and then and, worst case scenario, you've got me!
I'm not sure why the last week of November and the first week of December keeps resonating in my mind but it's a recurring thought and I wanted to pass it along. It actually lines up nicely with the abovementioned pattern but, as we know, two weeks is a lifetime in our business. Call me crazy, but I get the sense that we'll see plenty of volatility (both ways) between now and then.
In her typical minxy fashion, there were both positives and negatives to point to in today's action. The S&P shook off a 12% drubbing in Home Depot and that, coupled with the curious traction in the financials, was clearly bullish. The internals, meanwhile, never confirmed the attempted midday squeeze and as market tried to rally, we saw guys lacing the tape with futures for sale. I've put on my detectives cap and I'm trying to ascertain if these we're long sellers (getting out) or short sellers (pressing the action). How important is that distinction? In a word-really important!
The other theme that stood out today was the size sellers of front month volatility. It seems that the street woke up and decided it's going to be a quiet December and they're willing to risk negative gamma for positive decay (if you're short an option, you receive the drip). There are many schools of thought on option strategies (coming soon!), but suffice to say I do NOT recommend that the individual investor short premium. It's an involved discussion, but suffice to say that as the market moves, you get longer lower and shorter higher-and that scares the sprinkles out of me!
I'm going to sign off but please know that I'm biting my tongue as I type. There are so many cool things that I'm dying to share with the readers but Casey wants to surprise you. Hmmph! I will offer that The Ruby Foundation for Children's Education is in motion and I'm super-psyched about its prospects. Anybody who knows anything about me knows how much I love and miss my grandpa and I'm now gonna have a vehicle that honors his memory by helping kids. That, my friends, is the best trade I've ever made.
Have a peaceful night.
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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