Stocks Get Slammed: Is It Time to Buy?
Discipline over conviction as we find our way.
We awoke this morning to find a crimson tide rolling throughout the world, the bounce in Japan notwithstanding. The paltry non-farm payroll report (88K vs. est. 190K) was the equivalent of Boo the Bear jumping up and down on Hoofy the Bull's fingers as he tries to hold on to the Cliff Branch.
For those reading the tea leaves -- or anyone who has studied Newton's law of gravity -- the slippage shouldn't come as a shocker.
We've been highlighting the chasm between perception and reality (the market at an all-time high yet nobody feeling like we're at an all-time high), the difference between a stock market rally and an economic recovery (in the system formerly known as capitalism), the price action in commodities (and what it means for stocks) and the technical toggle that is S&P (INDEXSP:.INX) 1580, which I've been leaning against on the short side.
So, I must be massively short, right? Nope; I entered today with 30% (of a full position) SPY short exposure—and I covered that trade in its entirety on the open when the S&P was down 20+ handles, in real-time on the Buzz & Banter (click here for a free two-week trial!).
Why, you ask? Discipline over conviction; I've been trading "in between" and hit-it-to-quit-it and in this market, you can't have your cake and eat it too. For every unit of reward, there is incremental risk, and if you're managing risk (vs. chasing reward) this is the "other side" of that approach.
Another reason is the chart below, which maps the S&P from mid-November 2012. If and when we break this trend line, I can revisit the short side using past support as future resistance, effectively rolling down my stop from S&P 1580 to S&P 1540, consistent with our stair-step approach to risk management.
Am I suffering from premature evacuation (from my positioning) once again? It certainly wouldn’t be a shocker, but as I’m leaving for Atlanta this afternoon, I can do so with a clear head as blind risk is bad risk. In this market -- and life as a whole -- we have to take our journey one step at a time and base our decisions on the information we have at that particular moment.
I’m in the process of scheduling my hip surgery; lest you think this is bad news, I assure you that I’m looking forward to being pain-free for the first time in 15 years. If we're to view obstacles as opportunities and problems as possibilities, I cannot wait to pick up my daughter without wincing, having a lacrosse catch with Gavin for more than 10 minutes, and being able to walk to the subway without limping.
Gold held the all-important S&P 1550 level, which matters on, uh, a few levels.
The Social Mood Conference is next Saturday in Atlanta; hope to see you there!
Jeff Cooper's excellent missive, Is a Waterfall Decline Setting Up?, was quite timely.
The Crib is gone; time sure does fly.
Yesterday on the Buzz (subscription required; click here for a free trial!), we flagged Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL), and IBM (NYSE:IBM) as red beans in a pea-green sea, and they’re following through this morning. If and when Apple gets to the $360 level we flagged in January, I’m a buyer for a trade.
I've been trading "Long BlackBerry (NASDAQ:BBRY), short SPY" for a while; as I took off my directional exposure in the S&P, it stands to reason that I would unwind the long side of my exposure off -- and I have. I will look to lean against $12, if and when, and/or resume my long-side bias when I'm around to manage risk. I'm reminded of the old market axiom, "Nobody ever went broke taking a profit."
I would think the SEC's decision to allow companies to disclose previously non-public information on Facebook (NASDAQ:FB) and Twitter (as long as they communicate that those are viable channels) would be a boon to both; it almost forces folks into the social media sphere.
If Twitter wasn't traded on the second market (being bought up by the big gorillas), I would be genuinely psyched for the IPO, if and when. That process, like so many others in the market, is now muddied.
Snaps to Team MVP on the launch of Peter Tchir's Fixed Income Report. Click here for a FREE week (no credit card required), and good luck, Peter!
- Fare ye well, and no Crashy, you CAN'T come to Atlanta! Go Orange!
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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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