Random Thoughts: Is Gold Giving Stocks a Warning?
Piecing together the world's most intricate puzzle.
“One dog goes one way, the other dog goes the other way, and this guy's sayin', 'Whadda ya want from me?’”
--Tommy Devito, Goodfellas
Another session in the world's most famous arena is upon us and the bulls are still catching their breath from yesterday. They know that following outsized action, the tape tends to (at least) probe that direction the following session, and while the meat of the heat was in gold—which fell like a rock (because it is)—it planted a seed of doubt in the mindset of the masses. Today—and tomorrow's—action will be telling, particularly given the proximity to S&P 1375 (recent highs, drawn with a crayon).
The news of the morning seems to be the ISDA statement that default insurance on Greek debt won't be paid out. While at first glance this strikes at the heart of our discussion last week, it's not as simple as the headline suggests. Digging a bit deeper, the situation is still "evolving" and the decision is "not an expression as to whether a credit event could occur at a later date." Keep that in mind in the coming weeks as we gain clarity on the CAC process and the March 20 bondholder payout approaches.
A few folks asked me for my take on yesterday's gold action, and away from the obvious, I would offer that it felt like a large fund was forced to liquidate. I don't buy that investors simply "sold the (Bernanke) news" as there really wasn't much there; there was an agenda, and it wasn't natural price action. Be that as it may—and it may be wrong—commodity volatility typically precedes equity movement, so keep that in the back of your crowded keppe as we together find our way.
- Apple (AAPL), for the first time in a long time, traded laggy relative to the tape this morning. We’re trading it in real-time on the Buzz & Banter.
- Watch gold following yesterday's Thumper as the ability to stem the supply will help shape psychology today.
- Gold has not traded at the levels seen during the Gold Scold since the day that article posted. Email indictor, indeed.
- Is it me or are there a lot of mini flash crashes taking place in the last two sessions?
- Yes, I'm still holding my placeholder long in Research in Motion (RIMM) (with a stop below $12.50, which is the December low) and I'm thankful that I was disciplined enough to pare the meat of my exposure into the fast-money euphoria. I'm tempted to nibble anew as the risk becomes more defined, but man; the price action in this puppy is sickly.
We must respect the price action in the European credit markets regardless of whether we "agree" with it or not.
- The financials trading above BKX 45 is constructive on the margin. Deutsche Bank (DB), Goldman Sachs (GS), and Citigroup (C) are my primary tells there.
- It's difficult to remain lucid in this wild world but remember that emotion is the enemy when trading.
- Capital preservation is the first step toward wealth accumulation.
- Happy March, Minyans; let’s get ready for some madness!
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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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