Random Thoughts: What Would Ron Burgundy Do?
Reflections from the front as earnings season arrives.
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.
- 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.
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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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