Todd Harrison: The Market Attempts to Break Out in a Polar Vortex
Traders brave the elements to start the holiday-shortened week.
The holiday-shortened week is upon us as "Polar Vortex: Part Deux" bears down on the East Coast.
The wintry sequel is gathering steam as we speak, according to those who follow such things, and we're expecting more than a foot of snow, 40 MPH gusts, and wind chill readings near 10 below. That's excellent football weather (to watch from home), but a problematic commute for those looking to get to and from work. The storm will get nastier throughout the day, so don't be surprised if market liquidity thins as it does.
We enter this trading stretch with the fundamental and technical metrics vying for our collective attention. Earnings continue to dominate the headlines—IBM (NYSE:IBM), Johnson & Johnson (NYSE:JNJ), Verizon (NYSE:VZ), Texas Instruments (NASDAQ:TXN), TD Ameritrade (NYSE:AMTD), Baker Hughes (NYSE:BHI), Xilinx (NASDAQ:XLNX), Advanced Micro Devices (NYSE:AMD) report today, among others—as the tape attempts to break out through S&P (INDEXSP:.INX) 1850 and Nasdaq (INDEXNASDAQ:NDX) 3600, respectively. All the while, the structural metric (tapering, interest rates) and psychology (Gambler's Fallacy) must be factored into our forward equation.
After a relatively quiet stretch on the trading front, I've dipped a toe in some risk of late. I nibbled on some Twitter (NYSE:TWTR) at $56 with a longer-term lens and I've been active in select cannabis stocks consistent with my view that secular tailwinds will continue for the foreseeable future. I've been reticent to name names given how thin many of these stocks are, not to mention the scams in the space, so I will encourage you to do your own work and understand there will be winners and sinners, as there are in every industry.
We start this week with higher stocks and lower gold, both of which are subject to change; there has been a lot of chatter about how well the gold miners have traded thus far this year, consistent with a vibe shared in December 2013, and while they have room to run, trailing stops are a smart approach when managing risk. Indeed, "stick and move" (both ways) is a viable strategy until we gain resolution on the technical levels discussed above.
Goldman Sachs (NYSE:GS) opened in the hole; I wonder if the insider sales window opened (I believe it has) or if this is sympathy selling alongside Deutsche Bank (NYSE:DB) given Morgan Stanley (NYSE:MS) and Barclays (NYSE:BCS) are also lower.
I'm being "pitched" a ton of penny stocks from different directions, which raises my antennae; we are likely late in the risk cycle. So it's said, I rarely play in that space; too many wolves for my liking.
BlackBerry (NASDAQ:BBRY) is knocking on double-digits after news that the Department of Defense may order 80,000 smartphones. Hoofy and Boo have to be happy about that!
The NDX has traded "stickier" than the S&P around the breakout levels, which would indicate that it will lead the upside speed if it heads in that direction. In a perfect world, the bulls need to see both breakouts to feel good about the next leg higher. Should that happen, S&P 1850 and NDX 3600 would morph into support for those looking to stair-step their risk profiles.
- One step at a time as we continue to find our way; good luck this week, and I’ll see you on the Buzz & Banter!
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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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