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Random Thoughts: QE or No QE -- THAT Is the Question!


Traders ready for the busiest session of the year.

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

Turnaround Tuesday arrives in the 'Ville-and boy is it busy! On top of this being the busiest earnings day of the season-'tis true, with Apple (AAPL) the main course this afternoon-we've also got the European dynamic in full swing (we're seeing some bounce after yesterday's drubbing) and Mr. Bernanke heading to the Hill tomorrow.

I offered last night on Twitter-after chugging Theraflu PM and before fighting to stay up to watch the Rangers force game seven-that all things considered, the market traded quite well yesterday, thank you very much. I learned long ago that it's not how the market opens, but how it closes that matters-and the bears had every excuse imaginable to crack equities into the close. Everyone and their sister is conditioned to buy dips-particularly in front of Apple and Big Ben-but hands over ears, the price action was constructive.

Those who prefer to respect-but not defer to-the price action will be quick to note that 1) short covering is on-the-margin bearish (as it removes a forward layer of demand), 2) Europe is ticking-and it's not a Swiss watch, and 3) the S&P is tracing out a picture-perfect (negative) head & shoulder pattern that works to S&P 1260, which will trigger if and when we breach S&P 1340 (see the chart below).

For my part-after flattening both sides of my book late Friday (typically early but always honest)-I eased into smallish positions on both sides of the ride-buying Banco Santander (STD) against S&P puts-consistent with my desire to buy Spain with US exposure as a downside hedge (the S&P is up 100% since March 2009 while Spain is effectively flat). While one could argue that the euro issues are structural, I would offer the same is true here, printing press or no printing press. In a globalized interwoven world, there is bound to be some regression to the mean.

I've set the stop on my short-side risk above S&P 1400ish, and will use S&P 1340 as the level of lore for markets galore (read: S&P 1340-1400 is the range; Mr. Valentine has set the price). Between here and there, I will trade both sides of my book as a function of time and price. It should also be noted that when I cleaned house on Friday afternoon, LinkedIn (LNKD), Research in Motion (RIMM) (with the exception of some remnant front month 15 calls), and my QQQ (QQQ) puts were part of that personal exorcism.

Good luck today, and I'll see YOU over on the Buzz!


Twitter: @todd_harrison

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