Todd Harrison: The Legend of Turnaround Tuesday
Stocks are looking to open higher, which shouldn't be a shock to anyone.
From a town known as Wheeling, West Virginia, rode a bull with a six-gun in his hand.
It's Turnaround Tuesday and the higher pre-market futures shouldn't come as a shock to anyone.
As I said to Michael Sedacca yesterday around 3:45 p.m. ET, "They couldn't get 'em down today; they'll likely gap open tomorrow on pure inertia."
And so they are, with a time-stamp of 8:45 a.m.
There are several situations floating around: Hong Kong/China (the countdown to Chinese "intervention" continues to tick), Brazilian elections on October 5 (re-election of the incumbant isn't market positive, but some of that is being priced in) and perhaps most destabilizing, the Russian referendum on October 7 that would allow for seizure of foreign assets in response to the Ukraine sanctions.
And that's just the headlines; through a structural lens, the focus remains on the US Dollar. In the last decade, we've only seen four moves of this magnitude in the USD (greater than 6% in a 60-day period). The first was the 2008 financial crisis, the second was The Flash Crash, the third was the Eurozone debt crisis and of course, right now. While it's a small sample set, the smallest drawdown in said instances was 13.7% peak to trough. (Hat tip Michael Sedacca).
Through a technical lens, the song remains the same: S&P 1980 -- do you believe in miracles? -- is an important toggle as it represents Friday's high and a push through (to the upside) would negate the "lower highs" that have been in place since the latest all-time high was registered.
While technical analysis is only one of four metrics, it does provide a decent framework to define risk. We would be wise to remember that structural issues (USD), psychological, and fundamental inputs are also piecing together this market mosaic.
For my part, I used yesterday's weaknesss to leg out of most of the higher strike SPY puts that I owned, which almost completes the "leg" into lower strike puts. My leaves will be traded as a function of time and price; the market will write the script and my P&L will tell the story.
Good luck today.
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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 email@example.com.
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