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The Two Most Important Charts in the World


See both sides as the Dow hits all-time highs.

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

Greetings from Minyanville headquarters, where I'm settling in after a crack-of-dawn interview with twin-daddy Aaron Task and the Yahoo Finance crew. The question on everyone's lips is: The Dow (INDEXDJX:.DJI) is at all-time highs -- can it continue? The answer, of course, is yes it can continue. The real question is: for how long?

Yesterday, in Will the Bull Breakout Last?, we shared two charts that sorta sum up our forward equation.

The first, a snapshot of tech, couldn't be more bullish; after basing for this entire calendar year, the tech sector finally broke out with authority yesterday, turning NDX (INDEXNASDAQ:NDX) 2750 from resistance to new-found support. And this is despite Apple (NASDAQ:AAPL) trading 40% lower than it was in September 202. How about that?

The second chart -- the other side, if you will -- is a longer-term chart of the S&P, which is quickly approaching the vaunted "Triple Lindy." Only time will tell if the decade-plus long trend of investors getting punished at tops and savers being screwed at bottoms will continue, but as Mark Twain famously said, "History doesn't always repeat, but it often rhymes."

I will say that entering the session flat, as I did today, provides an entirely different perspective than walking in with big risk on. A while back, I penned 12 Cognitive Biases That Endanger Investors, and I would be lying if I said I'm not prone to a few of those internal vibes. That's OK; it's entirely natural, at least for those of us who drive the 30% of daily trading volume still controlled by humans.

Look for a fade (lower) attempt out of the gate before a truer tenor emerges at the 10:00 a.m. EST hour. The financials (BKX (INDEXDJX:BXK) 44), our levels, Europe, market internals, and commodities will all play a role as forward tells. S&P 1530-1580 and NDX 2750-2880 (2012 highs) are the new stair-step risk parameters; Mr. Valentine has set the price.

Random Thoughts and Early Eyes:
  • A wise man once said that there is typically an easy trade each session -- and if you miss it, don't overtrade in an attempt to recapture lost ground. That's the camp I'm currently in; plenty of dry powder and (not to mix metaphors) pounding my glove near the third base line.
  • Wait -- was yesterday the blow-off that the bears needed to see? Or, are the banks too strong to have that discussion? Successful trading requires the highest possible "quack count" (when your "ducks" align); that includes the fundamentals, technical analysis, structural forces, and perhaps most important, psychology.
  • Say goodbye to your Bar Mitzvah, VXO; you've lost your teenage status.
  • Barclays (NYSE:BCS) is a redhead out of the gate. Mother Morgan (NYSE:MS) is pretty in pink behind it.
  • S's over N's on first blush today; Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) are leading the bleed there.
  • Technical analysis dictates that the time to buy (sell) a breakout (breakdown) is upon the retest of those levels. In real-time parlance, that's S&P 1525/1530 and NDX 2750/80.
  • The Russell (INDEXRUSSELL:RUT) -- as measured by the IWM (NYSEARCA:IWM) -- is trying to trace out a double-top. If you're bearish on that complex, you can get short with a tight stop above IWM 93, per the chart below.
  • Gold is soft, as well; $1,555 is the low print of the recent malaise. Remember, commodity volatility typically precedes equity movement.
  • I can't believe Pat Benatar is 60 years old; where does the time go?
  • Remember to breathe and keep that chin up; profitability begins within.

Twitter: @todd_harrison

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