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Taking Stock of a Fresh Five-Session Set


Gauging field position into earnings.


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

What goes up must come down; spinning wheels got to go round.
-- Blood, Sweat and Tears

There was a moment last week-as I was trying to recharge the batteries and spend some QT with a family I only see on the weekends-when I inexplicably found myself in front of my screens. It was July 4 of all days-the market was closed-and I started picking up bearish data points: Several technical indicators were extended as we tickled the underbelly of a bullish trend channel; all the while earnings-which I don't foresee as being very good-loomed large on the horizon.

I thought about buying some downside paper in the S&P when the market opened the following morning but decided against it. For starters, I abhor blind risk, and if I added that exposure, my attention would have shifted away from my 13-month-old daughter, eight-year-old bonus twins, and the woman of my dreams (who I will marry next month). I would likely make money, I remember thinking, but at what opportunity cost? I maintained a flat bias for the rest of the week and didn't think twice about it-that is, of course, until I arrived at my turret this morning.

As I sit in front of my eight screens, following the 3.5-hour commute this morning, I've begun to assimilate the flickering ticks and identify threads, patterns, and setups that will add value to ye faithful. In that regard, and with respect for your time, I offer some top-line thoughts in no particular order:
  • Wow, the spread between Apple (AAPL) and Google (GOOG) has widened to $27. I still think it hits $50 but the easy trade is slipping away.
  • Market breadth is 2:1 negative on both the big board and the Nasdaq (^IXIC).
  • Speaking of the Nasdaq, The Ruby Peck Foundation for Children's Education will be ringing the closing bell today to officially kick off the seventh annual holiday Festivus, which will be held on Friday, December 7, 2012.
  • If the market continued to rally-perhaps toward S&P 1400-I would have swung a pretty sizable risk bat (to the downside) into earnings.
  • I can't see how Q2 (on the aggregate) was a good quarter although 1) estimates have come down across the board (read: the bar is now set lower) and 2) given the recent pullback, the field position (no longer overbought) isn't as compelling for a short side bet.
  • The banks remain above our stealth tell of the young year-BKX 44-and that's constructive on the margin.
  • I read Scott Patterson's Dark Pools last week and officially recommend it to anyone who wants an eye-opening account of how the financial markets have given rise to the machine. Indeed, it was one of the best books I've read on the current state of our financial fate.
  • My sense is that if there is a "gap" following JPMorgan (JPM) earnings, it will be to the upside, but I have not found an advantageous risk/reward with which to play that.
  • Debt destruction is the only viable long-term solution-all roads will ultimately lead to debt deflation. The question, and really it's the only question, is how long the people will allow the same policies that got us into this mess to be positioned as a solution to get us out of this mess, and whether or not we have the political will to change it before the financial markets fade in terms of our front-and-center priorities.
  • Gonna get my trading legs under me-so I'll be back in a flash, over on the Minyanville Buzz & Banter (click here for a free two-week trial!). Have a great week, and remember please, profitability begins within.

Twitter: @todd_harrison

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