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Random Thoughts: The Most Important Levels in the Financial World!


Chewing through a slew of crosscurrents as we edge toward year-end.


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

It's the morning after the FOMC decided to peg QE-finity to jobs -- good luck with that! -- and the tape is weighing that effort (after an evening of digestion) and juxtaposing it against the animal spirits that emerge this time each year. Performance anxiety is a powerful force -- just ask Bob Dole!

Some random thoughts:
  • How much of a perceived fiscal cliff resolution is baked into the current tape, and does it remind anyone else of the ramp into QE3?
  • How many spending decisions are on hold pending resolution of the fiscal cliff?
  • There is a huge difference between a stock market recovery and an economic recovery; could it be that when we resolve the political discord, at least this latest manifestation thereof, those switches will flip and the economy will improve as the market ratchets lower?
  • Just when we got used to Apple (NASDAQ:AAPL) as the most important stock in the world (hand raised), the Cupertino crowd-pleaser has fumbled the baton on the path of maximum frustration. It will regain its status as the super-tell of the universe if the Nasdaq (INDEXNASDAQ:.IXIC) gets sloppy into year-end.
  • I haven't touched my risk profile for a handful of reasons. Among them:
    • My attention was focused on the important stuff earlier this week.
    • I've booked the lion's share of my pad after a decent year of fighting the good fight.
    • I'm long "situations" and short the tape (smallish) against them via S&P (INDEXSP:.INX) February out-of-the-money puts.
    • If you press for performance, as many people are, odds are you'll nick yourself with 1,000 paper-cuts.
    • I've got more meetings than eHarmony as we tie-up another thriller in the 'Ville, and I know that if I'm not 100% laser-focused, I'm at a natural disadvantage to my counter-party!
  • The downside price action in the metals jumps out; commodity volatility is typically a precursor to equity movement, per the chart below.
  • While Research In Motion (NASDAQ:RIMM) may be extended following the 100% rally in the last few months, it would be wise to sync your time horizon with your risk appetite if you've got a longer-term lens. I've included the chart below for your viewing pleasure. Remember, the trick to successful investing is to buy low and sell high.
  • S&P 1435 and NDX 2700 remain the levels of lore for traders galore and both were rejected yesterday by da bears.
  • Why do they matter so much? If the S&P can bust a move higher, through that level, it "works" through a pure technical lens, to S&P 1520.
  • If the NDX can giddy-up through NDX 2700, it "works" to NDX 2900. I've added those charts below as well, but remember -- technicals are a risk context and not, in and of themselves, a catalyst.

Twitter: @todd_harrison

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