Random Thoughts: The Markets Are Playing in Their Band
Traders position as Turnaround Tuesday looms large.
"Some folks trust to reason, others trust to might. I don't trust to nothing but I know it come out right."
-- Grateful Dead
Last Tuesday on our real-time Buzz & Banter, we offered the following vibes on the near-term dirction of the equity markets:
"Through a technical lens, we continue to play within the bands on the S&P and NDX, as per the charts below. That's not to say we tag the top end of both-S&P 1420ish and NDX 2700ish-but the tape has "room" to those levels. And yes, the banks are hanging tough above the all-important BKX 44, so we've got that going for us."
Fast-forward six sessions. The S&P and NDX have rallied 20 and 40 points, respectively. While technical analysis is but one of four primary metrics -- with fundamentals, psychology, and structural influences serving as the other three -- we would be wise to note that we're edging toward the above-mentioned targets as Turnaround Tuesday looms large.
Respect, but never defer to, the price action.
I bought half a position in Facebook (FB) last week as the stock probed $20-leaving dry powder for the 50% Fibonacci retracement at $19. I sold 20% of that position at $22 this morning while reminding myself, "Let your first sale be your worst sale." We continue to update that (pure ) trade in real-time on the Buzz & Banter.
NYSE internals are better than 2:1 positive, the financials are firm, the dollar is lower, and we've got mixed commodities. No great shakes from our market tells, but with Europe higher across the board (note Spain +4%), the bears continue to backpedal.
Some of today's move may be a relief rally on the heels of Knight Capital Group (KCG) surviving to fight another day. That may have stemmed perceived disruption in the near-term, but the convertible securities that were issued are massively diluted stock (which is why it's off 25% today).
And, the message that Knight CEO Tom Joyce sent to the market? The same as we've been saying for some time: Survive and thrive.
It's hard to complain about the commute home when so many people don't have a home to go home to.
With regard to the specter of QE3, I don't believe the Federal Reserve is keying off the latest economic data. The stock market is the world's largest thermometer in a finance-based global economy; with the S&P and NASDAQ up 11% and 15% respectively, we'll see more jawboning than stimulus until those averages give back their YTD gains.
Conventional wisdom is that Europe is fine and the worst is behind us. I don't have a crystal ball but I can share that ECB President Mario Draghi, with his now-famous "I'll do whatever it takes (to save the eurozone)" has opened the door to his inclusion in this column!
As always, I hope this finds you well.
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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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