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Random Thoughts: The Balance of Balance


Observations from the front lines.

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

Greetings from MV East -- also known as my home office -- as I'm under the gun to get something out to our community before my attendance at our twin's parent-teacher conferences at, yep, 9:30 a.m. EDT. Old-school Minyanville readers will remember my decade-plus of bachelorhood when I pined for balance between work and life; little did I know that when I finally achieved it -- and I'm blessed to have done so -- I would have to balance the balance

Yesterday, in Random Thoughts: The Great Escape, we talked through my current thought process, which more or less remains the same save the fact that I peeled out of 20% of my SPY (NYSEARCA:SPY) short into the Debbie Downer (I tried to pick at another 5% when the S's were down 20 handles, but by the time I hit send, they already up-ticked). The other dynamic of note was the price action in gold, and the potential ramifications we touched on Monday.

The most bearish possible opening would have been a gap higher, and indeed, it appeared that we would have had that with the S&P (INDEXSP:.INX) futes up seven handles earlier (after an outsized move, the markets tend to probe that direction at least once the following session). That has since faded -- no doubt I'm not the only one who thinks that way -- so that trade has passed, at least for those of us who didn't pound the pre-market futures, which are now flat to lower.

In the interest of seeing both sides, I shared Brian "The Iron Horse" Reynolds CNBC interview yesterday. He's extremely talented so it warrants a listen, although nothing is fail-safe in this environment. Some within our community reminded me yesterday that his tells turned after a meaningful drop in equities in 2008, which is worthy of a mention (and again, said with respect).

As go the piggies, so goes the poke; the financials -- and Goldman (NYSE:GS) in particular, for a second session in a row -- opened lower, and that was the wink that the crimson dogs were about to be unleashed. Watch that complex today, particularly if gold breaks $1550 in sync. The key to successful trading is to identify a high quack count (when your ducks align either way).

I remain in hit-it-to-quit-it mode, and that stylistic approach has served me in good stead (no jinxies). In "A System Formerly Known as Capitalism," we must expect the unexpected and respect the unprotected risk. Whereas I used to trade around positions (as I'm currently doing with BlackBerry (NASDAQ:BBRY) on the long side above $12), I don't trust the tape (either way) and therefore strive to use price to my advantage while managing risk (rather than chasing reward).

Taking a step back, the S&P trend-line from mid-November 2012 comes into play in and around S&P 1540, which is the first tangible support. The 50-day is slightly lower (1530) and the 200-day resides at...wait for it...S&P 1440.

Will we get there? I hearken back to early 2010 when I made a bet that the 200-day would get tagged, and sure enough, The 1000-Point Plunge (aka The Flash Crash) arrived shortly thereafter. Of course, the following session, when the 200-day got tagged, I was doing a live segment on Bloomberg TV and arrived back to my turret to find a Snapper right off that zone (where I would have covered). I traded out of that situation, but I'll never forget the lesson: If you're not there to monitor risk, you shouldn't be taking risk.

I will say this, and it will be the gist of my speech at The Social Mood Conference: The market is at/near all-time highs, yet nobody feels like we're at all-time highs. And that, to me, is as telling as any chart, graph, or research report. It very much reminds me of this (time-stamp December 2006), for what it's worth, and so it's said.

And now, some Answers I Really Want:
  • Have you read Jeff Cooper's excellent missive, Is a Waterfall Decline Setting Up?
  • Y'all see gold sitting on the $1550 level we've fingered?
  • Was it bush-league for me to circle back to The Gold Scold, or is there value in sharing the herd mentality (and venomous push-back) when we dared challenge the yellow metal at $1900?
  • Or, is now the time to buy after an almost 20% pullback?
  • OR are the big gorilla hedge funds trapped in this perceived safe-haven?
  • You know there's no such thing as a safe-haven, right?
  • How do you shoot the devil in the back; what if you miss?
  • How do you not root for Louisville to reach the Championship Game after that horrific injury to Kevin Ware?
  • Even if I'll be there to root, root, root for my Orange?
  • Will Michigan pose the biggest threat to my Orange's championship aspirations?
  • Atlanta two weeks in a row?
  • As they discontinued crib-nets for safety reasons, is it wrong that we've done away with the crib altogether for our 22-month-old who thinks she's Spiderman?
  • Should short-side directional traders now use S&P 1562 (former support) as newfound (and defined risk) resistance?
  • Who isn't expecting the market to snap back?
  • Wouldn't now be a good time to revisit The Three Phases of Leave, which are denial, migration, and panic?
Lots of moving parts; the key is to compartmentalize and take our journey one stair-step at a time. Good luck today, and I'll see you on the Buzz mid-morning.


Twitter: @todd_harrison

Disclosure: Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.

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