Random Thoughts: Navigating the Year-End Stock Market Stretch
Levels and events that will shape the tape.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
Cyber Monday has arrived, and on cue, we had some early technical issues in the City of Critters.
Coincidence? Perhaps, although my money is on something entirely more sinister. It is, after all, Mercury Retrograde, and these things tend to happen when the planets align in such a way. Fear not, however, as today is the last day of the cycle -- which started, interestingly enough, on Election Day -- and the worst, in terms of communication snafus, is seemingly behind us.
I made a few observations in the weeks heading up to our collective Gobble.
On November 12, I offered that the Research In Motion (NASDAQ:RIMM) BB10 operating system was awesome and the following day, opined that the stock would trade to double-digits. That puppy is indicated around $12 this morning, a stunning 90% move since late September. The launch is January 30 and while the stock is certainly extended, it should find an underneath bid into that launch (and perhaps beyond).
On November 13, I noted that Facebook (NASDAQ:FB) held the all-important $19 level, which represented a 50% retracement of the entire corporate lifecycle, and that stock has since rallied 26%. How much of that was a short squeeze (in front of the much-anticipated expiration of lockup stock) remains to be seen, but for those long (or short, for that matter), it doesn't really make a difference. Price is the ultimate arbiter of variant financial views.
- And, following outward vibes of a post-election downdraft -- fingering Apple (NASDAQ:AAPL) as the dog that wagged the broader market tail -- we covered our shorts and took a ride on the bullish side, which was dutifully recapped in our Anatomy of a Rally. All of that, of course, transpired while the East Coast was buried by Hurricane Sandy, perhaps the single largest manifestation of this latest Mercury Retrograde cycle.
Jeff "As Good as It Gets" Saut wrote this morning, “To be sure, it is kiss and tell time inside the DC Beltway, and in my 42 years in this business when something absolutely had to happen, it has typically happened.” I agree with my savvy soothsaying friend on this; I believe the fiscal cliff is averted. What remains unknown is how much of last week's rally handicapped this.
While I don't believe there is a sustainable solution for Greece -- and perhaps, the euro at large -- timing and sequence will play major roles in how the market handicaps these events. This dynamic -- or the perception thereof -- is the single biggest headwind to performance anxiety feeding on itself to the upside (remember, the buyers are higher and the sellers are lower).
- The one caveat for the bulls is the persistent pattern of lower highs and lower lows, which is traditionally a sign of distribution. This is a negative until it isn't, which is one of the reasons that technical analysis is a better context than catalyst. Bottom line? Respect, but don't defer to, the price action.
- In terms of a stair-step approach, and as shared last week, "I'm a seller at S&P (INDEXSP:.INX) 1400 and a buyer at the intersection of S&P 1350 and BKX (INDEXDJX:BKX) 47, both for a trade." Inherent in that approach is identifying a high quack count (when our tells are aligned) and through that lens, we'll need to keep an eye on the financials (Goldman (NYSE:GS), JPMorgan (NYSE:JPM) and Deutsche Bank (NYSE:DB)), which are under pressure this morning, the high-better realm (Google (NASDAQ:GOOG), Apple and Amazon (NASDAQ:AMZN)) as performance anxiety proxies (mixed bag there), and market breadth (the broader the better).
- Festivus 2012 is NEXT Friday, December 7! After ringing in the festivities by literally ringing in the festivities (when we close trading by ringing the NYSE closing bell), we’ll again gather at Hill Country BBQ and cut some rug to three rocking tribute bands (Journey, U2, The Police), chow down some great grub, and share hugs and handshakes with the best and brightest human capital around. If you would like to join us—and I suggest you do—please register here as we do our part to help the children impacted by Hurricane Sandy.
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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 firstname.lastname@example.org.
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