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Random Thoughts: Cold Spell for a Hot Market?

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Levels of note for a freaky Friday.

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

Hot town summer in the city; back of my neck getting burnt and gritty.
-- "Summer in the City," The Lovin' Spoonful

Good morning and welcome to THE HOTTEST DARN PLACE ON THE EAST COAST!

With temperatures expected to tickle triple-digits today, you can't blame traders for feeling the heat-particularly after the longest short week in recent history! Stay hydrated and focused, my friends; in less than seven hours, it'll be time to unplug for our requisite respite.

Yesterday, in real-time on the Buzz, we discussed the "dollars vs. dimes" bull-bear debate, noting that the third "lower high" came into play in and around S&P (INDEXSP:.INX) 1662, which happened to be the high tick yesterday.

One overnight session does not a market make, but we would be wise to keep an eye on our stair-step levels, which include S&P 1650 and S&P 1635 (neckline of the dandruff that potentially "works" to S&P 1595-1600). Seeing both sides, S&P 1660-ish, 1675, and 1690 are layered resistance to the upside if the bulls again find their groove.

I am trading around a short bias in the S&P which doesn't make it right, but it's where some of my chips are currently stacked. Perhaps I'm being a bit stubborn-a bubble in complacency can last longer than out-month paper-but I've got levels to lean against in an effort keep my outstanding risk on a tight leash.



Random Thoughts:
  • If you were ever curious how the bull came to represent "up" moves and the bear came to represent "down" moves, the full story can be found here. Nobody ever said history had to be boring!
  • Yesterday, my longtime buddy Doug Kass' "Observation of the Day" was from Jeff Gundlach, who is a pretty sharp cookie in his own right. And I quote:

    "Perhaps it started yesterday. I think that the complacency regarding stock market risk is very similar today to 1998, 1999 and and 2006 and 2007. This concept that it's the only game in town. This reason to own the stock market is TINA (there is no alternative). That's ridiculous. There's just as many alternatives as there's ever been. There's cash, there's bonds, there's real estate, there's hedge funds, there's commodities, there's foreign markets. What a strange world. I can't even think of a worse argument to own a market than TINA. It's transparently flawed on the surface of it. We'll see what happens. I think we're at 92% bullishness right now in the world of advisors on stocks. The most extended sentiment I've ever seen is 98% bearishness mid-March of 2009. I'd say the bullishness today looks remarkably similar to the bearishness of March 2009."
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.

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