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Random Thoughts: What Would Ron Burgundy Do?


Reflections from the front as earnings season arrives.

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

What would Ron Burgundy do in a tape like this? You mean, other than sing this little ditty?

I have no idea, but it was a worthy opener today as a little levity goes a long way.

Now, it's time to focus…

Late yesterday, into the meat of the heat, I offered the following thoughts on our real-time Buzz & Banter:

"With S&P 1370 now above and earnings dead ahead, both bulls and bears know how high the stakes are.

In the interest of full disclosure, I intend to pick further against my S&P and NDX short positions into the close. While I had set a trading stop above S&P 1370, that provides limited protection as we meander further into the hole. I have two options; "roll" my stops lower, or take the money and run. Given what's ahead and what's behind, I'm inclined to book 'em Dano, or at least a healthy portion thereof.

Where you stand is a function of where you sit, and your stylistic approach must mirror your risk tolerance and time horizon. Keep in mind that the NDX 50-day -- not the 200-day, the 50-day -- is still fifty handles away on the downside; if we're talking 200-day moving averages, we're looking at another 88 points on the S&P and a whopping 315 handles on the NDX. More likely than not, they won't arrive in a straight line (but hey, you never know).

All I can do is communicate my actions in real-time -- for better or for worse -- and that's what I'm doing now. As a matter of fact, as I'm writing this, I just toggled to another screen and peeled out of another batch of short-side exposure. I'm still there, so to speak, but much lighter and tighter than I was this morning. If we close sloppy, I plan to piece out of my remaining market shorts; if Snapper shows up, I will trade around' this short bias with S&P 1370 as my defined risk."

Fast-forward to this morning; the S&P and NDX futures are 10 and 20 points higher, respectively, as the yields on Spanish debt -- the next domino -- fall and earnings, in the form of Alcoa (AA), surpassed muted expectations. Insofar as I kept small short-side placeholder positions in the S&P and NDX, my plan -- and I imagine I'm not the only one -- is to fade (read: short) the opening in and around S&P 1370 and maintain an extremely tight stop above that level.

Given I have back-to-back-to-back-to-back-to-back meetings today (that's five backs), I certainly wouldn't mind a flattish posture (on directional exposure) for the first time this year. Blind risk is dangerous risk and sometimes the ability not to trade is as important as trading ability.

Random Thoughts:
  • Microsoft (MSFT) paid a boatload of money for AOL's (AOL) patent portfolio. Is that on-the-margin bullish for Research in Motion (RIMM) or am I looking for a catalyst given I have a small defined-risk upside call position?
  • I have a history of premature evacuation -- cue the Fannie Mae saga or vibe an Oil of Oy Vey moment -- but given 1) the "easy" trade (cough, cough) is behind us, 2) forward catalysts abound (in the form of earnings), and 3) we're a headline-driven market, sad but true, I'm in stick-and-move mode both ways.
  • Gold has enjoyed better tenor of late -- and a quiet one at that (a 10% haircut in a month will do that). I have no horse in that race -- I punted my gold in 2007; how am I doing? -- but it is an important piece of an extremely intricate global puzzle. I suppose the (potentially bullish) reverse dandruff is still in play, but if the phantom of deflation wades back into play -- and Big Ben pulling the punch bowl could do that -- all bets are off, and I mean that quite literally.
  • Play it again, Sam!
  • Spain, while almost two percent higher this morning, traded yesterday at the lowest level since March 2009; in the same span, the S&P is up 100%. Take that, decoupling.
  • Watch the financials (Barclays (BCS) and Deutsche Bank (DB) are our overseas tells) and monitor the four-letter freaks -- and Apple (AAPL) in particular. It's not only the highest weighting in the tech market, it's the most psychologically important stock in the universe.
  • The S&P breached the uptrend that has been in place since the October 4 low, and today is the first real test for the Dip Schtickers after being rewarding in an almost Pavlovian manner for the past six months. See the chart below; a picture speaks a thousand words.

  • And remember, past support (S&P 1370) is future resistance.
  • Discipline is like an old friend; you don't realize how much you missed him/her until you reconnect for an embrace.
  • If you missed it the first time, portal usage is down (-24%) and search is flat (+1%) but social is up 52% year over year. The purest play in that space? Yep, you guessed it: LinkedIn (LNKD).
  • If a P&L is your greatest concern today, consider yourself lucky. White light to those in the Far East as they brace for yet another tsunami. May peace be with you.

Twitter: @todd_harrison

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Position in SPX, NDX, RIMM
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