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Random Thoughts: The Three-Step Stock Market Shuffle

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Reading the tea leaves into the FOMC.

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

We've been monitoring three levels in the financial markets; the first is Apple (AAPL) $550, the second is NDX 2650, and the third is S&P 1380. Why? All three levels represent previous cycle tops, and as discussed yesterday-and Friday, for that matter-they could be Boo the Bear's last dance, last chance for love in the near-term.

I listed them in order for a reason; presumably, Apple is the carrot to the nose of the Nasdaq which, in turn, has led the S&P higher this year. This may be an oversimplification but it does provide three layers of resistance for those monitoring the tape in real-time. Technical analysis has always been a better risk context than actionable catalyst, in my view, so absorb this discussion with a grain (or three) of salt.

What's interesting, at least to me, is that after a relative disparity in the price action of these three vehicles, they're merged into an "ALL FOR ONE AND ONE FOR ALL" position in the marketplace. While we must give a nod to the bulls for the sector rotation of 2012 (which is more constructive than outright migration, as we've seen in years past), we've seemingly arrived at the point where we'll fish or cut bait (read: rally or fail) across the board.



The catalyst du jour will be Big Ben and his merry band of rate-mavens at 2:15 p.m. EST. Traders and investors alike will be listening for any hint of QE3, although my take is we'll get 'middle-of-the-road' vernacular that leaves the door open for more Central Bank accommodation "if conditions warrant." I don't profess to know how the crowd reacts, but traditionally we can count on two dynamics: FOMC days are always a tale of two tapes (with 2:15 as the toggle) and the first move (following the announcement) is typically the false move.

"Nice and tight" defined risk was one of the reasons I'm trading as I am (updated in real-time on the Buzz & Banter), and while there is the potential for the dreaded Pop (through resistance) and Drop (once the shorts cover), discipline must always trump conviction. I learned long ago that good traders know how to make money but great traders know how to take a loss.

I'm far from a great trader, but that doesn't mean I should ever stop trying.

Random Thoughts:
  • The homies continue to stand out; as they were the first to fall, we need to keep an eye on them as they begin to rise. HGX 132 and HGX 147 are the next tangible technical levels of lore.
  • The goal, as always, is to use price levels to your advantage, so please respect-but don't defer to-the price action.
  • Keep half an eye on the banks as they try to turn BKX 45 into a floor. Remember, past resistance is always future support.
  • Wouldn't you think that Missouri, after winning 30 games and being snubbed as a top seed, will play with a chip on their shoulder?
And Finally….
We interrupt the flickering ticks to announce the launch of our annual Minyan March Madness Tournament.

We do this every year in the spirit of community and with an eye toward helping the kids. The winner will get a lifetime subscription to the MV product of his or her choice-as well as a slew of Critter schwag-while "non-winners" (there are no losers in this event) will have the right (but not the obligation) to make a donation of their choice to The Ruby Peck Foundation for Children's Education.

To enter, click here. The group password is: minyans. You'll need a free CBSSports.com account if you don't already have one; those who participated last year can just log in and make picks.

Brackets must be filled by 12:00 p.m. ET on Thursday. Any questions? Let us know.

As always, you can make donations at any time you choose on The Ruby Peck Foundation page as we do our part to give back to the leaders and dreamers of tomorrow.

Good luck, and let's go Orange!

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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Position in RIMM, SPX, NDX

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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