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Todd Harrison: The Stock Market Arrives at the Moment of Truth

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Inflection points abound as investors digest earnings.

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

And so it goes, as we edge through earnings and digest information, data, and interpretation in an attempt to map our forward path. There's a lot going on and we'll get to all that; first, a bit of a sidebar.

My writing has evolved through various stages the last 13 years. There have been stretches that were intense and others more reflective; through it all, there has been a healthy dialogue and transparency.

I've always loved financial markets and what they represent: They are, in the most basic form, vehicles to reward foresight. Having traded 23 years, I consider myself well-informed on financial matters, which is entirely different than claiming to be this, that, or the other thing.

In the fourth quarter last year, for the first time in my career, I took a step back from actively trading risk. It wasn't because I was wrong, although I was too bearish. It was to clear the mechanism in an effort to view the world free from cognitive biases.

This isn't a "Mission Accomplished" moment in terms of proclaiming the timing or direction of the next market move; there are many moving parts and competing agendas, and absolute clarity is elusive if not subject to change.

What is clear is that we're navigating one of the more profound eras in the history of financial markets, and we must pay attention to the "why" as much as the "what."

From the outside looking in, there is a notable disconnect as stocks rocket higher while the standard of living suffers. From the inside looking out, the boundaries of normalcy appear stretched as the vicious cycle continues, almost in slow motion.

As we enter the New Year, my intention is to trade surgically with an eye on capital preservation while keeping an eye out for longer-term opportunities.

I don't trust the tape, but I most certainly respect it; animal spirits have minds of their own and tend to pave the path of maximum frustration.

Random Thoughts:
  • The S&P 500 (INDEXSP:.INX) and Nasdaq-100 (INDEXNASDAQ:NDX) are both perched at (what would be) massive breakout levels at 1850 and 3600, so respect that, even if you choose not to agree with it.


  • With the VXO (INDEXCBOE:VXO) at 11ish and the percentage of bears in the weekly sentiment survey at a scant 21% (vs. 39% bulls), we know which way the crowd is leaning.
  • Trading tells today include General Electric (NYSE:GE), Morgan Stanley (NYSE:MS) and Intel (NASDAQ:INTC) as they react to the most recent earnings reports.
  • The forward path of the stock market will trade as a function of where we sit on the stock market's psychological continuum.
  • There is a lot of chatter about the future of cannabis, including this interesting take from Rolling Stone. I will again share that this complex is my single best investment thesis for the next decade, albeit one that will be littered with false hope and empty promises. I view it as biotech circa 1990; Amgens (NASDAQ:AMGN) and Biogens (NASDAQ:BIIB) will emerge, along with a fair share of unclaimed lottery tickets. Do your homework and understand that we're still in the early innings here.
R.P.

Twitter: @todd_harrison

Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
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No positions in stocks mentioned.

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.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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