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Random Thoughts: Will the Hamburger Hamlet Get Flipped?


Forward thoughts as we open our five-session set.

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

To be, or not to be; that is the question surrounding the specter of eurobonds, which has lent a bid to the earning morning stock market. Retail sales were also better, but one could argue that's on-the-margin negative in this Bizarro World as it eases the need for the next iteration of quantitative easing.

As discussed a few weeks ago, I'm extremely bullish as I cast I gaze through the current muck. I want to buy stocks like LinkedIn (LNKD) and Twitter (when it becomes public) to play the socialization theme, as that's where the needle is pointing (portal traffic is down 24%, search is flat (+1%) and social is up 52% year over year).

What isn't as clear, at least to me, is what happens between here and there. In fact, if I were a betting man-and I am-I would argue that it will get worse before it gets better, and as the destination we arrive at pales in comparison to the path we take to get there, my intention is to collect as many acorns as I can as we navigate the trees in this ever-so-twisted forest.

I left last week with some S&P and NDX June downside exposure (nothing crazy) against assorted longs, which include a handful of defined risk upside calls in Research in Motion (RIMM). My intention is to build further downside directional gamma (what's this? click here) while keeping my eyes peeled for entry points in select stocks (including LinkedIn) with solid risk-reward.

As always, signs will surround us if we pay attention-the reaction of Citigroup (C) to less-then-stellar earnings, the price action in Europe (currently higher, including Spain)-and while I picked at some market-oriented puts on the opening, it's important to note that I'm right-sized as a matter of course given the litany of forward catalysts (earnings, Europe) that are coming down the pike.

Random Thoughts:
  • I highlighted LinkedIn early Thursday morning on the Buzz & Banter (click here for a free two-week trial). I was extremely impressed with its operations in Palo Alto, and the more I explore its services, protocol, and model, the more I'm warming up to this as a pure social play (if you haven't downloaded the Card Munch App, I would suggest you do so; it's a game-changer). I didn't buy the stock up $2, where it opened-and it closed up $8-but hopefully, some of our Buzz subs did. Check the chart below.
  • Mohamed El-Erian recently offered that the Fed may have aggravated income inequality through their policy directive. Minyanville contributor Peter Atwater offered the same vibes-only, his were shared in December 2010 before the fact. Snaps to Peter for offering the financial views you need to know before you know you need 'em!
  • The NDX 50-day is still 35 handles to the downside, while the 200-day moving average is 310 points lower. The S&P, meanwhile, is trading at the 50-day and the 200-day is over 100 points lower. I am short both for a trade (updated in real-time on the Buzz), as I believe we'll tag some or all of these levels.
  • The IBEX 35 (Spain) is trading at levels last seen in March 2009, while the S&P has doubled over that same period. If I had to make a trade, it would be long Spain-short S&P dollar neutral.
  • Loose grips-and June paper, for that matter-take the water pistol away from our heads when trading. If you're staring at every tick, you're likely out-sized relative to your comfort zone.
  • I met a girl named Drew and asked her if her name used to be Draw.
  • The next tangible technical resistance for the S&P will come into play around 1395-1400. If you asked me which direction the next 100 points are, I would humbly point lower.
  • I get that we need to trade the tape we have rather than the tape we want, but these are sad days for The System Formerly Known as Capitalism. When the entire world hinges on the latest musings from central bank chieftains regarding the round of artificial stimuli, you know we've wandered off the reservation. It's too bad, because there are legitimate reasons for optimism in today's digital day and age.
  • Stocks that are overbought are typically sold on good (not great) news while stocks that are oversold are bought on bad (but not horrible) news.
  • JPMorgan (JPM) is up a stunning 35% since the year began-but it's interesting to note that the stock is flat vs. the end of 2010 and 2009.
  • Google (GOOG)? More or less flat for 2012 and, for what it's worth, within $50 (7%) of where it closed at the end of 2010 and 2009, as well.
  • We recently spoke about our primary metrics and while earnings certainly matter, the structural metric-or the perception (psychology) thereof-trumps the fundamentals, in my view. As such, if I were to rank the metrics on a totem pole, I would list them (in order of importance) as psychology, structural, fundamentals, and technical.
  • Note to Jamie: In the future, particularly when we're traveling and using an unfamiliar bathroom, please don't put the Crest next to the Clearasil when both tubes are the same size. Such was the case yesterday morning when I proceeded to brush my teeth and tongue with pimple medication. It's funny now; at the time, not so much.
  • Fellow Minyan Charlie Poe's great flick, Redemption Road, is now available on iTunes and Amazon, for those who absorb media that way!
  • Have a great week, and remember, profitability begins within!

Twitter: @todd_harrison

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