Trade smart today and have a fantastic weekend tomorrow!
I do have a test today, that wasn't complete bull. It's on European socialism. I mean, honestly, what's the point? I'm not European. I don't plan on becoming European. So who gives a crap if they're socialists or not? They could be fascist anarchists. It still doesn't change the fact that i don't own a car.
--Ferris Beuller's Day Off
Talk about a test, Cameron, jeez! The lunch crunch has taken the techs back to unchanged and dutifully filled the opening gap. As Dr. Fleck points out, the leadership names that started the manic panic are southbound and that leads to the natural question: Is it a rotation, a healthy pause or an ominous signal? One thing I think we all agree on is that an emotional apex of sorts is occurring. The trick, as we know, is identifying when the mental masturbation subsides.
The most constructive inputs on my screen are the breadth and the brokers (although both have started to turn). I've rolled some puts up in Goldman Sachs (GS:NYSE) this morning because I'm of the opinion that the parabolic action is a precursor to a serious reality check. My view is nothing new -- I've "hated" the financials for some time--but this is an educational community and I wanted to communicate my stylistic approach. The takeaway? I'm exercising my opinion via defined risk instruments.
A lot of traders are sitting on lofty gains after this recent rip and there's a few ways to approach a potential sell-off. You can use "rolling stops" that trail the upside price action (allowing your winners to run while locking in a gain). If you're option savvy, you can buy some protective puts which and morph your risk profile into that of a call option. Finally, if you're still bullish, you can make "partial" sales and take a 'lil off the table.
That's not to say that this dip won't be treated like all the others--an opportunity to buy. Still, after the run we've had, a pullback (at the very least) is plausible and mapping out a game plan for all possible scenarios is smart. There are strong crosscurrents in the marketplace and the action is borderline irrational. That can continue for as long as people want to watch the movie, regardless if we already know how it's gonna end.
So you know, I've gotta scoot around 2:30 and catch a flight to Chicago. Watch the leadership sectors (particularly the financials) and the breadth as trading tells in my absence. One could argue that this initial reversal (downside test) was an intuitive move, how that masses react to the lower prices will dictate their fate into the closing bell.
At the risk of being the ultimate jinx, it looks as if we'll finally see some nice weekend weather so take the time to enjoy it. It's easy to say "work to live, don't live to work" but entirely more difficult to walk the walk. It takes a conscious effort sometimes to remind ourselves of what's truly important. As I've recently said, be good to others and better to yourself. The rest will fall into place.
Have a peaceful weekend.
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 email@example.com.
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