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Random Thoughts: Will the 2003 Stock Market Analog Play Through?


Trading our way through this freakish fray.

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

As we're apt to say in Minyanville, there's a fine line between patience and stubbornness-it's called the bottom line.

Over the last 22 years of trading, I've been wrong plenty. There were BIG losses (after I flipped a massive position from long to short), times when I swung at a pitch outside my strike zone (while feeling emboldened) and of course, plenty of "par for the course" losses (if there was no risk, it would be called "winning," not "trading").

Wednesday afternoon, after a two-week argument with the stock market, I stopped myself out on my S&P (INDEXSP:.INX) short-side bet; it was perhaps the most frustrating 10-handle loss I've ever experienced as I got dinged directionally and my chosen vehicles-April puts-dripped decay each and every day.

Discipline over conviction, I told myself as I bit my lip; the mechanics of the swing always trump the results of the at-bat.

Yesterday morning, I awoke early, raced to the office and as soon as the stock market opened, I slapped the position on anew-with May paper-and reminded myself to "trade to win; never trade, 'not to lose.'"

This time, in a reversal of fortune, the market agreed with me to the tune of 30 S&P handles in 24 hours (note: I covered half my risk into the close yesterday and nibbled anew this morning at S&P 1500.)

Time and price are the arbiters of variant financial views and that's playing out in real-time as we speak. If you take a needle away from an addict, they'll go through withdrawal. Yesterday, the market experienced "anticipatory withdrawal" as the FOMC minutes demonstrated dissention in the ranks.

As we've written for many years, credit of a different breed-that of credibility-will be the issue at hand for markets. Only time will tell if the market will finally call the Fed's bluff.

One step at a time as we together find our way.

Random Thoughts:
  • What is it that my grandfather taught me? That's right, money comes and goes.
  • Check the chart below of commodities vs. the S&P. Sometimes you can learn a lot just by watching.

  • Thus far, the dollar (+35 bips), breadth (2:1 negative) and the price action (SOX (INDEXNASDAQ:SOX) -1.65%, Deutsche Bank (NYSE:DB) -3.5%, Europe (down a deuce across the board) suggest that S&P 1500 is more of a pause (in the selling) than a pivot. Still, trades are made to be taken.
  • Yes, I've got BlackBerry (NASDAQ:BBRY) $12 circled, if and when it gets there, for an upside trade. That's the 50% Fibonacci retracement of the stellar move from $6 to $18.
  • In 2003, the S&P rallied 7%, quickly dropped 15% and then rallied 40%. Yesterday on the opening, the S&P was up…yep, 7%, before getting waxed lower.
  • The Reverse Gold Scold? No, I'm not talking about when I got chastised for daring to question gold at $1900; I'm talking about the sneaky rally this morning. We wrote last week that the yellow metal should find support in the $1525-$1550 range and it touched $1555 today. Keep an eye on this precious metal as it's one of the few signs of hope for the bulls thus far.
  • There was (obviously unconfirmed) chatter yesterday that Russia will ban citizens from holding Foreign Accounts. I have the edge of a marble on this BUT that would square with thoughts shared long ago in this space: the frustration of foreign holders of dollar-denominated securities, which remains cumulative in cause and effect.
  • Lest you missed it, Minyanville contributor Fil Zucchi deep dove into DeMark analysis, the recent signals and what it means for the markets.
  • Hoofy and Boo are coming soon to a screen near you! If you don't know who they are-and if you're in need of some smart smiles-you can check them out here.
  • Forward catalysts include stateside brinkmanship (too obvious?) or perhaps the Italian election on Monday. Europe has been quiet-perhaps, too quiet; per reader Minyan Gian from Italia: "A strong performance by M5S that secures a blocking minority in the Senate will lead to a massive risk-off reaction." See both sides; always see both sides.

Disclosure: Minyanville has a business relationship with BBRY.

Twitter: @todd_harrison

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