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The Stock Market: It's Do or Die for the Bearish Try!


Technical levels converge.

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

I used to be a renegade, I used to fool around, but I couldn't take the punishment, and had to settle down.
--Huey Lewis

Greetings from Minyanville HQ, where I just returned after getting a PRP shot into the innards of my right hip. That will presumably tame the arthritis, although the MRI (from Tuesday) shows a labral tear in my hip, on top of severe congenital dysplasia (which is likely causing my herniated disks). Bottom line? My doc -- a terrific physiatrist -- will consult with his colleague at HSS (the same dude who fixed A-Rod and Lady Gaga), but "barring a miracle," I'm gonna swap that sucker out.

Diving right in...
  • Yesterday morning I bought some Potash (NYSE:POT) calls and, late in the afternoon, I shorted the S&P (INDEXSP:.INX) (through the purchase of September SPY puts) on a dollar-neutral basis (the cost of the calls equaled the cost of the puts).
  • The Potash position has a sell-stop below $37 (per the chart below) and similarly, I've set a buy-stop on the S&P position above S&P 1525 (cash).
  • Another stock that remains my shopping list is BlackBerry (NASDAQ:BBRY), which I hope to pick up around $12 (the 50% Fibonacci retracement). It got to $12.60-ish a few days ago, but I didn't pay up (which may prove to be an opportunity cost). That, too, will be a trade, if and when; this stock has been good to me on the long side in a hit-it-to-quit-it sorta way.
  • In terms of the broader tape -- and consistent with the Four Charts You Need to Know from Tuesday -- the S&P didn't quite get to the 1475-1480 support we fingered (1485 was the low tick), the tech tape again held the all-important NDX 2700 level (after a blink-and-you-missed-it false breakdown), the commodity realm is again soft after Tuesday's hot-popper (the chasm between commodities and stocks is still wide as those things go), and the banks are testing the downtrend line at BKX 54-ish as we speak.

  • Again, commodity volatility typically precedes equity movement.
  • As discussed yesterday, some of the "smarter money" I speak with told me they're adding to shorts "in here" as the end-of-month mark-ups -- coupled with a vicious short squeeze -- take the tape to new heights. Is that a valid train of thought? Perhaps, although quarter-end (and year-end) mark-ups are typically more pronounced.
  • Why are the bears making a stand in here? They know they must defend this level if the series of lower highs and lower lows is to continue, per the chart below. That's also one of the reasons I'm keeping my stop so tight on my current directional bet -- and yes, perhaps it's too tight, but you gotta boogie with the discipline that got you to the dance in the first place.
  • I would also note that we've seen more volume on down days vs. up days, which is a stealth sign of distribution.
  • How many traders and investors are using the fiscal cliff script as an analog into this next phase of potential gridlock on the Beltway? Remember, past performance is no guarantor of future results.
  • I've spent a fair amount of time pulling together my presentation for The Social Mood Conference (the early bird special expires tomorrow!). If you wanna join me -- and alotta folks much smarter than me -- in Atlanta on April 13, lock your spot and we'll see you there!
As always, I hope this finds you well!


Twitter: @todd_harrison

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Disclosure: Minyanville has a business relationship with BlackBerry.
Position in POT, SPY.
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