Random Thoughts: Heavy Lifting Coming Out of Labor Day
The bulls rally the tape, but resistance looms large.
In the blink of an eye, Labor Day is behind us and Wall Street is gearing up for the year-end bender.
August, as most of you know, was the worst month for stocks since May 2012. The fact that the Dow Jones Industrial Average (INDEXDJX:.DJI) was down 4.4%, the NDX (INDEXNASDAQ:NDX) was down less than 1%, and the S&P (INDEXSP:.INX) was only 3.1% lower speaks to the underlying strength of the historic buying stampede we've witnessed.
We walked out of the weekend to find green arrows around the world. The combination of a stronger PMI from China, the UK, and the eurozone, along with fresh doubt surrounding a strike on Syria (this issue will be debated on the Hill early next week) has given the bulls some newfound bravado; they understand folks lightened exposure into the holiday weekend, and they're looking to make them pay.
You know it won't come easy; given the technical damage in August -- broken trend-lines, lower highs -- the bears now have levels to lean against. The 50-day (at S&P 1660) will be the first test, and as long as that remains overhead, we could see renewed trepidation into next week's hearings. Readers in this space aren't surprised by the current socioeconomic continuum, and the Russian saber-rattling adds gravity to the situation.
Of course, the onus is on us to see both sides. While I have plenty of concerns -- particularly if the system formerly known as capitalism is allowed to trade free -- I've been in this game for 23 years and understand that psychology drives price.
If the bears can't follow through to the downside, performance anxiety will uptick as we edge toward year-end. In the fakakta world of fund management, losing is OK as long as others lose more -- but winning isn't enough if you underperform the benchmark.
- Hands over ears and eyes wide open, stateside markets are churning under resistance until proven otherwise. I continue to hold a handful of December SPY (NYSEARCA:SPY) puts (defined risk), which doesn't make it right, but it's how I'm positioned entering September.
S&P 1660 (50-day and horizontal resistance) and S&P 1675 (downtrend/lower highs) are resistance to the upside if we see a "gap and go" (the higher levels hold for the first 30-60 minutes).
- If we "pop and drop," S&P 1640, S&P 1600, and the 200-day at 1560 will come into play through a technical lens.
- Gold has room to $1500 before it collides with the downtrend (technical resistance). Back of the envelope, I figure there's $50 worth of Syria angst in the current spot price.
- Why? The specter of geopolitical unrest in the Middle East -- aside from it being an unfortunate evolution of social mood -- is on the margin constructive for both gold and crude.
- The goal of war isn't death; it is economic destruction, which is why I've been increasingly concerned about cyberattacks disrupting our digital dependency. While the attacks on the New York Times (NYSE:NYT) and Twitter are known, there are many more that are never revealed for obvious reasons. Safeguard yourself as you can; this is a brave new world we live in.
- On a "lighter" note, my Raiders are playing for the No. 1 draft pick in next year's draft -- a Teddy Bridgewater or Jadeveon Clowney. That should take some of the sting out of what could be the worst season in team history. All the while, I continue to remind myself that bad seasons define good fans just like bad times define good friends.
- Good luck today; I'm excited to be back in the saddle and side-by-side as we together find our way.
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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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