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Random Thoughts: The Balance of Balance

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Observations from the front lines.

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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.

R.P.

Twitter: @todd_harrison

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

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Position in SPY, BBRY.

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.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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