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Random Thoughts: The Most Important Chart in the World

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Musings from the front lines.

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MINYANVILLE ORIGINAL

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

After a nutty strut that included twin epidural shots in my back, a marriage license at City Hall, and a bevy of housekeeping activities, I've turned my attention back to the tape as we navigate our wild world.

My current approach--trading surgically, whether it's leaning against the syndicate bid in Facebook (FB) on the first test or buying JPMorgan (JPM) into last week's earnings and selling the news-allows me to avoid sweating each and every tick as I'm more inclined to identify advantageous risk-reward (we do so each and every day on the Buzz & Banter; click here for a free trial!).

Be that as it may, I'll offer some top-line vibes as we edge through the Thursday dew:
  • The channels we've discussed-S&P and NDX-remain in play, which is on-the-margin positive for the bulls (higher lows and higher highs). Ditto BKX 44, which is now 5% below where the financials are currently trading. As go the piggies-so goes the poke.
Click to enlarge
Click to enlarge
  • I've been eyeing crude ever since I read the news that the Pentagon was sending warships to the Gulf months earlier than expected.
  • This is one forward-looking prognostication that I sincerely hope to miss the mark on.
  • Why didn't I pull that trigger? The Phantom of Deflation knows no allies on an absolute price basis. And lest you think I'm smoking a silly pipe, The New York Times ran an article this morning entitled Citing Deflation, IMF Asks Europe Central Bank to Buy More Sovereign Debt.
  • As we've written over and over and over again, "Deflation in a fractional reserve banking system means that they have, for all intents and purposes, lost control of the economy. It is an admission of defeat, albeit one that may be unavoidable."
  • Five weeks until I "officially" retire my bachelor cleats, although they've been hanging on the hooks for a few years now.
  • Remember those "TV shoots" I did right after the Heart of the Matter hit home? They'll start airing this Monday, which will allow me to talk more about what it is and why we're involved.
  • We had a great Buzz & Banter Fireside Chat yesterday with Mark Dow and Peter Tchir. When I pressed them for their "single best idea into year-end" (I couldn't help myself), Mark 's was "short silver" (but perhaps wait until the next whisper of QE3 first) while Peter was bullish on Spain. If you wanna get involved in these discussions, click here!
  • We offered on yesterday's Buzz that "The semis held right where they had to; through a technical lens, SOX 350-400 is the zone, with a hat-tip to the 200-day (where it's failed twice) at SOX 390." Fast-forward to today and the SOX is up 2%.
  • The Apple (AAPL)-Google (GOOG) spread has narrowed to $20 (from $35 last week). If this continues, I may reinitiate my long Apple-short Google pairs trade with an eye toward a $50 divergence.
  • The most important chart in the market might be the chasm between commodities and stocks, as per the chart below. Either the former must rally or the latter will decline. Water pistol to my head, I believe we'll see the latter.
Click to enlarge

  • Through a trading lens, if we see a push toward S&P 1400, I will likely initiate a negative bet with defined risk (a stop set on the other side of that line). I've been trading more stocks and less market but you can do anything as long as you're disciplined.
  • Mother Morgan (MS) messed the bed this morning with a 50% drop in earnings; it will cut more jobs as trading revenue dropped the most among Wall Street banks. I bled Blue for many years but I can't help but think that the leaders coming out of a crisis won't be the same as those who entered it.
  • Good luck today and as always, I hope this finds you well!

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.
No positions in stocks mentioned.

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.

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