Random Thoughts: S&P Road Map, Japan, and Commodities
Where you stand is a function of where you sit.
When I went in for my total hip replacement on April 30, my stated intention was to cover up my short bias in and around S&P (INDEXSP:.INX) 1600. I did so, to a degree, opting to let a bit ride as, well, I traded my way heart surgery a year prior, with stellar results no less.
Alas, past performance is no guarantor of future results.
As discussed at the time - in The Most-Hated Rally of All Time - "In my 23 years of trading equities, I don't believe I've ever witnessed this degree of directional certitude before."
Yes, I was frustrated, not only by the persistent price action, but by the widespread perception that The Greenspan Put somehow morphed into The Bernanke Call. I've seen that movie before and it doesn't end well; one can only contain a controlled forest fire so many times before it burns out of control.
In and around May 22 - that big reversal day that tagged S&P 1687 - we shared a few vibes asking investors to "see both sides." A Signal That Bears Watching and Can the S&P Trade to 1500? were penned, and the S&P subsequently lost 80 handles, pegging S&P 1600, where I flattened my short bias and took a deep breath.
More recently, I've dabbled twice on the short side; the first effort was stopped out for a small loss on Monday, only to walk in on Tuesday to find the S&P indicated down 18 handles. It would have been easy to get emotional, and maybe once upon a time I would have, but this time, I patiently waited for the anticipated Snapper, at which point I entered into December SPY (NYSEARCA:SPY) puts.
(Note: I've been actively trading these as a function of time and price, as detailed in real-time on the Buzz & Banter; click here for a free two-week trial.)
To be sure, there are two sides to our financial future; the bulls will argue that the government will effectively swallow hard and write off the toxic debt they've ingested, while the bears will lay claim to the business cycle, knowing in their deepest innards that what goes around comes around, regardless of what the market has been brainwashed to believe.
S&P 1600 is the bottom of the trend channel; that much I know, because technical analysis is a great risk context. The other way, the bulls want to recapture S&P 1624 on a closing basis in an attempt to set the tone for the rest of the week.
For my part, I "think" lower, but I've covered enough to put 'em out higher if and when advantageous risk reward arrives (closer to S&P 1650). Should they break lower, S&P 1600 will morph from support to resistance, and the bears will have a fresh level to lean against.
- It's raining cats and dogs here on the east coast - the seas are angry, my friends - as I power up my turret from MV East.
The banks are better bid today - Goldman Sachs Group Inc (NYSE:GS) remains a great tell - and that's a notable shift vs. recent action.
Who catches a cold in the summer? This guy.
- Gold $1325 remains the ripcord level for the bulls.
- Does Japan matter? Not until it does; but if it does, the chart below will tell the tale.
- Might as well update the CRB vs. S&P, while we're at it, right?
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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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