Todd Harrison: A Gut Check for Global Markets
Japan is at a critical inflection point.
Why we are still seeing volatility is a bit of a puzzle for me because there needs to be a distortion somewhere in the market.
--ECB Governing Council member Klaas Knot, Bloomberg
The stock market is coming off its worst week since 2012 as a confluence of jitters spooked investors. The hit parade continues this week with earnings, economic reports, and a Federal Reserve announcement tossed in for good measure.
Here's a look at some Random Thoughts as we edge into a fresh five-session set:
S&P (INDEXSP:.INX) 1800 and Nasdaq (INDEXNASDAQ:NDX) 3600 (former support) are next-step resistance levels. The 200-day moving average, so you see it, is down at S&P 1700.
We touched on the depressed level of the VXO (INDEXCBOE:VXO) last Wednesday; the fear index rallied 46% in the three sessions that followed.
I am trading cannabis stocks from the long side, albeit surgically, given my big-picture concerns. As I look for real companies that will benefit from (what I perceive to be) an emerging secular growth trend, I'm avoiding pink sheet plays as many of those stocks will go up in smoke.
Why do I perceive the secular growth trend? Continued legalization (which most of America supports) will 1) increase tax revenue and 2) lower the crime rate, which will 3) reduce overcrowded prison populations. I also love the fact that Wall Street doesn't cover the sector yet.
We don't "do" advice in Minyanville, but we did discuss some potential cannabis plays last year.
Corrections, by definition, feel sinister -- although I'm not sure we can call 3% from all-time highs a genuine correction.
We shared this morning in real time that following outsized moves in the market, tapes tend to probe the prevailing direction at least once the following session -- and that an "up" opening was the last thing the bulls wanted to see.
- Japan closed on an important technical inflection point. Given it's such a crowded trade (on the long side), this bears watching. Note the two charts below; if the Nikkei (INDEXNIKKEI:NI225) breaks 15,000, a measured move works 8% lower.
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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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