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Todd Harrison: The Legend of Turnaround Tuesday

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

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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.

R.P.

Twitter: @todd_harrison

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Position in SPY

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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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