Todd Harrison: At the Heart of the Stock Market Matter
Japan, Twitter, biotechs, fear, hope, and greed.
A few years ago I had a pretty good health scare -- an episode of pericarditis that almost punched my ticket.
Unfortunately, I had a similar, but entirely less serious, setback late last week that had me admitted -- and since released -- from the hospital. Fortunately, we got ahead of it this time and I'm well on the road to a full recovery.
As members of the Minyanville community, you're entitled to know why I've been "in touch with" during these very important market sessions, hence the communication.
As John Lennon famously sang, "Life is what happens to you when you're busy making other plans." Ain't that the truth.
Some Random Thoughts, in no particular order:
- Last Monday, in A Gut Check for Global Markets, we discussed the importance of Nikkei (INDEXNIKKEI:NI225) 15,000 and, if broken, the beeline potential to Nikkei 13,900. Through a pure technical lens, the price projection has been achieved; while Japan can certainly work lower, the "easy" move is now behind us.
- Consistent with last Tuesday's article, Is the Biotech Bubble About to Pop?, I remain short some biotech -- proxies, not individual stocks -- with the intention of giving it some room and using the January high -- IBB (NASDAQ:IBB) 254 -- as my stop level.
- We buzzed yesterday about how intuitive a Turnaround Tuesday bounce was (given the drubbing we've seen), and noted that we could learn a lot just by watching the tone and tenor of the countertrend move. In hindsight, it was "good but not great" by most standards; following a thisquick 6% drop in the S&P (INDEXSP:.INX), a 1% pop -- and a begrudging one at that -- didn't exactly instill confidence as much as it worked off some of the oversold condition.
- I bought some Twitter (NYSE:TWTR) a few weeks ago for our kids' accounts, when the stock was trading at $56. As a trader, I would probably lighten some into earnings but given it's a long-term holding -- or, at least designated as one -- my inclination is to let it run. Two quick thoughts: One, some, if not much, of the upside surprise was likely priced in after the Facebook (NASDAQ:FB) release, and two, if there was a single winner in the Super Bowl branding war it was Twitter, which was threaded throughout all advertisements as well as the game itself.
- My pal Josh Brown wrote a tongue-in-cheek Tweet yesterday -- would that be "tongue-in-tweek"? -- that read like this: "I've been wrong about everything for the last five years. Here are my top five trading ideas for this week..." His humor is spot on; vicious market downdrafts tend to bring out the grizzlies in the midst, many of whom have been hibernating through one of the most prolific bull markets in history; this doesn't make them wrong, it just requires the audience read them in the requisite context.
- So with that context, I'll pose a question for the collective to ponder, which has nothing to do with the price action for today, or even this month. This is something I've thought long and hard about -- and yes, discussed often in this space. What if the entire 177% rally off the March 2009 low was created synthetically, magnified in effect through derivatives and leverage (much the same way the unwind occurred, but in reverse), carried on the back of momentum, driven by a belief in the policies of the Federal Reserve (in a virtuous self-fulfilling process), extended by the greed of hedge fund managers, and floating ever higher on the shoulders of hope?
- The late January/early February price action has been a distinctive stair-step lower, and until the series of lower highs and lower lows reverses, the bears have the ball. That technical toggle, so you have it, is S&P 1800 (S&P 1770 is resistance) and Nasdaq (INDEXNASDAQ:NDX) 3550.
- Other technical levels of lore include RUT (INDEXRUSSELL:RUT) 1140 (trend-line break; next support is RUT 1060) and tranched support in the banks at BKX (INDEXSP:BKX) 66.20, BKX 64.30 (200-day) and BKX 62.50 (the trend-line from Sept. 2011), per the charts below.
- This is an important close, both through the lens of the technical and psychological metrics, so I want to get this posted... but first, I'll share something that I'm sure you know but it doesn't hurt to repeat. At the end of the day, no matter the stress and regardless of the P&L, the two things that matter, above all and anything else, are health and family. Health and family.
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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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