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Todd Harrison: The Legend of Turnaround Tuesday


Stocks are looking to open higher, which shouldn't be a shock to anyone.

Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time.

From a town known as Wheeling, West Virginia, rode a bull with a six-gun in his hand.
-Billy Joel

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.


Twitter: @todd_harrison

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