On Turnaround Tuesday, Important Levels Loom
See both sides and define your risk as we together find our way.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
Turnaround Tuesday has arrived with everyone and their sister using S&P (INDEXSP:.INX) 1400 as some sort of magical toggle.
I've been there and done that over the course of my 22-year trading career -- "Short 'em!...sigh, cover." "Buy 'em!...grrr, punt it." -- and I guarantee that more than a few traders are absorbing those types of paper cuts as we dance on either side of that line.
A few hints on that front: Expand the parameters on your defined risk; it will make for a much smoother ride, and use tertiary (less obvious) tells as risk guides, such as the financials (which are currently mixed) and the high beta realm (which trades soft, thus far).
Recall from yesterday's Buzz (or, if you missed it):
"Where do I think Apple (AAPL) -- and by extension, the tech tape -- can trade to on the upside? The 200-day on each, $594 and NDX (INDEXNASDAQ:NDX) 2664 respectively, are as intuitive as any other levels...but given my chosen stylistic approach of 'hit it to quit it,' I will likely be long gone by the time, and if, those levels arrive."
True to form, I prematurely evacuated from my upside rentals -- the rally back to the 200-day in the S&P was the "easy" trade -- but I wanted to draw your attention to these levels, which now reside at $598 and 2667 respectively.
While we've got some wiggle before those corresponding levels in tech arrive, the slope of hope has gotten steeper for the bulls. My ducks aren't aligned quite yet -- we've still got some mixed signals, as discussed in real-time on the Buzz, and that's OK; oftentimes, the ability not to trade is as valuable as trading ability.
Market breadth is 9:5 on the big board (not yet qualified as a tell), Europe is mixed, and commodities are tame. All the while, the lower highs remain in place (as evidenced in the S&P chart below) and that's traditionally a (negative) sign of distribution. Food for thought as the NDX inches back toward the 200-day (which seemed like a long shot a few short weeks ago!).
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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 email@example.com.
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