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A Roadmap Through the Ruins

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The two-week stalemate arrives at the rubber match.

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Despite blood, frogs, locusts, darkness, hail -- no wait, that's not right. Despite earthquakes, tsunamis, sovereign insolvencies, nuclear fallout, raging wars, housing deflation, and a plethora of other issues, the bulls rope-a-doped the bears this week and erased the entire five-session decline from last week. In the process, they've reclaimed the S&P 50-day moving average (1305) and are attempting to do the same in four-letter land (NDX 2317).

While the S&P still has a near-term technical mount to hump (the downtrend from the February highs; see below), I'm reminded of the adage that the reaction to news is more important than the news itself. Granted, volume is anemic, the banks are tracing out an ominous pattern (that "works" to BKX 48) and complacency remains high. But for and with my money, I covered my short-side bets yesterday on the initial move through my predetermined stops (S&P 1305) to take a fresh look, as I'll do this morning (in real-time on the Buzz).

SPX

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BKX

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Setting stops -- and trailing them, if you catch some early wind in your sails -- is my preferred methodology when the news flow is fast and furious, but it's not a panacea. The downside to this stylistic approach is that traders aren't protected against overnight gaps should, I don't know, the government ban short sales or the EU inject a trillion dollars (like that would ever happen!).

One step at a time as we wade through the world's wildest reality show, and those steps are only as solid as the ground beneath them. Given the landscape continues to shift, I've resolved myself to picking my spots and setting hard stops. It's not the sexiest approach I've ever used, but sexy is on the bus; capital preservation is the first phase of wealth creation.

As I eye the final fifth of this freaky week, a headline scrolled across my screen that the Reactor Core May Be Breached at the Damaged Fukashima Nuclear Energy Plant. Call me crazy (and you wouldn't be the first), but that shouldn't give investors the warm and fuzzies into the weekend. I may reinitiate some downside exposure early this morning with a very tight risk leash, but that will be determined by what I'm seeing and how I'm seeing it.

Goldman (GS), Bank America (BAC), JP Morgan (JPM), Apple (AAPL), and commodities -- including the GLD and SLV -- remain my individual tells, while market breadth, the dollar, and the price action in global bourses remain tertiary indicators.

Random Thoughts

R.P.

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