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March Madness: The S&P Alley-Oops

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Will the upside lob be rejected?

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Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Lighten up while you still can, don't even try to understand; just find a place to make your stand and take it easy.
--"Take It Easy," The Eagles

We've shared plenty of thoughts on the global financial construct in the last few sessions.

We've weighed the Pros and Cons of the 1987 vs. 2013 Analog.

We asked if Cyprus would trigger the Next Phase of the Financial Crisis.


We had a fascinating discussion with Bob Prechter on the implications of Social Mood.

We discussed how I was Positioning Risk into the Cyprus Vote on the deposit tax.

We had a Midday Alert on Tuesday, when we saw a Bull in Headlights!

And yesterday, we attempted to Navigate an Unsure World into Quarter-End.


And that's just the content in front of the firewall.

Over on our real-time Buzz & Banter - click here for a free two-week trial, or here for a custom Buzz or a bulk license - we scribe vibe all day, each session, on the ins and outs, ups and downs, back and forth. It's one thing to have a passive interest in the stock market and quite another to climb into the nuts and guts on a daily basis and eat what you kill (so to speak).

I've spoken to my current positioning - see above - and I will continue to update, modify, and manicure my risk in real-time. What I would like to share today is something I saw late yesterday, which I posted (of course) on the Buzz.

As a result of this week's price action, a potentially bullish reverse head & shoulders pattern has emerged on the dailies, per the chart below:



IF this pattern triggers (with a move above S&P (INDEXSP:.INX) 1565), it "works" (in a technical vacuum) to…anyone?

Yep, our level of lore, or the vaunted triple top (if there is such a thing) at S&P 1580. It would also take us to the top of the trend-channel in the S&P that's been in place since October, while simultaneously paving a path of maximum frustration for the bears - and perhaps too, the bulls, depending on the timing (with quarter-end on tap). (Note: To calculate the price target, subtract the price of the "head" from the price of the "shoulder," and then subtract that from the price of the "shoulder.")


20-year chart of the S&P



Whether you want to play for a pop (before a drop), have partial short-side exposure and leave dry powder to add risk higher (with a stop on the other side of S&P 1580), or not play at all (nowhere is it mandated that you must assume risk), is up to you. Different strokes for different folks, and where you stand is a function of where you sit.

As Jerry once sang, "There is a road, no simple highway, between the dawn and the dark of night, and if you go, no one may follow, that path is for your steps alone."

Random Thoughts
  • I bring this up to help paint the visual - boxes galore - and in an effort to share the journey, as we have for the past dozen years. It's been some ride, I'll tell ya, and it continues to continue!
  • Consistent with my stylistic approach, I've covered my Facebook (NASDAQ:FB) short and peeled out of my BlackBerry (NASDAQ:BBRY) trade, both of which worked well. The latter matter remains on my laundry list as I like the stock (and yes, MV has a business relationship with the company).
  • The VXO (INDEXCBOE:VXO) was down 12% yesterday, back at an 11-handle, which is nuts, in a way (given Europe) and intuitive in others (volatility is the opposite of liquidity).
  • A few notable bears - Adam Parker from Mother Morgan and Meredith Whitney - turned bullish on Wednesday. They may be right - time will tell - but I was struck by Ms. Whitney's level of conviction. When asked if she would buy stocks now, after a four-year 125% rally that took the Dow Jones Industrial Average (INDEXDJX:.DJI) to all-time highs, she said, "Without a doubt." I've been trading for 23 years and for the life of me cannot understand how any view can be "without a doubt" when there are always two sides to every trade. Not a dig; just saying.

R.P.

Twitter: @todd_harrison

Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
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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.

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