10 Things You Need to Know for Monday

Minyanville

Last week was a whippy and trippy week in the wilds of Wall Street, and I was not immune.

After a hard-fought effort on the short side for two weeks-and losing roughly 10 handles before finally getting stopped out on Wednesday, I turned around Thursday morning and laid into the tape (read: initiated a fresh round of shorts in and around S&P (^INX) 1530).

"Don't trade scared," I reminded myself as I slapped on the risk, and the tape rewarded me with a 30-handle slide in 24 hours.

Indeed, after a frustrating string of sessions, I got short at S&P 1530, covered half at S&P 1515 (a few hours later), and covered the balance at S&P 1500 the following morning (in real-time on the Buzz & Banter; the confluence of S&P 1500 and NDX 2700, as offered at the time, was an intuitive place for the bulls to circle their wagons).

While naked (read:flat in my trading account), I watched the tape for a few hours on Thursday before unleashing a fresh batch of shorts midday. With a three-day weekend ahead-I took a personal day Friday-I was debating whether or not to hold that downside exposure over the weekend, before sharing the following on the Buzz at the end of the session:
"I dangled my S&P puts above the offer into the close, and I just got lifted (to flatten my pad). This batch was scratched for a small loss but I'm not complaining; it's been a solid (albeit whipsaw) week and it could be worse. We often say, 'work to live, don't live to work,' so I'm gonna try that on for size. Lemme get this to you before the bell..."
While away from the fray on Friday, I checked on the tape several times, whispering discipline over conviction to nobody in particular as the market rallied; the mechanics of the swing once again trumped the results of the at-bat.

I figured the S&P would rally to where it should have closed on a Friday-right to S&P 1515, which was support and resistance several times over the last few weeks. If everything went according to the master plan, the tape would subsequently fade (lower) this morning but alas, Mr. Market didn't get that memo yet (see the importance of S&P 1515 below).

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There's no shame in admitting it's hard, only shame in pretending it's not, right? With that in mind, here are 10 things you need to know for this Monday:

1. I've started this week with a bag full of dry powder, flat risk on my trading pad, and eyes wide open looking for advantageous risk-reward.

2. Europe is screaming higher (on the back of the Italian elections) and the first move for US equities is higher, albeit not as high as it was, as select financials (Goldman Sachs (GS), JPMorgan (JPM), Morgan Stanley (MS)) fade into Red Dye (the financial stocks are one of our best intraday trading tells).

3. It's N's over S's (NDX (INDEXNASDAQ:NDX) outperformance of SPX (^INX)) to start the week.

4. Goldman was a terrific tell last week, as was Facebook (FB) ($28 is the technical toggle, for those looking for defined risk).

5. Market breadth remains more or less flat today; we need to see a 2:1 posture (either way) for it to qualify as a tell. And yes, I continue to watch the relationship between commodities and the S&P for obvious reasons.

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6. For all of you looking for lower prices at the pump, be careful for what you wish.

7. Per Jeff Cooper's excellent missive, one of the better quotes I've heard in a while:

"Did 2009 mark a generational bottom and the trough of a 100-year storm? Or, was it a shot over the bow with the vast majority of market participants and investors finally convinced that lightning can't strike twice? I'm not sure, but if lighting can strike the Vatican the day the Pope resigns for the first time in 600 years, and with an asteroid hitting the earth, perhaps we do need to think the unthinkable."
8. S&P 1475-1480 will be trend line support for the S&P, if and when and per the chart below. The more meaningful level will be IF we get up toward S&P 1575-1580, as that will bring the second chart below into play-with very defined risk for those looking to fade (lower).

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9. Over on the Nasdaq, you can see why NDX 2700 was so important, and why we've been monitoring the levels we've been monitoring, both ways.

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10. In hindsight, my trading platform may have done me a favor in putting some of my cannabis vehicles on the "chill" list. I still believe in the thesis; I'm just not entirely sure what the best way to play it is.

And, one for the "life is what happens when you're making other plans" file:

I went to visit my friends at the Hospital for Special Surgery on Thursday. The good news is that my herniated disks haven't gotten worse. The bad-or better news, depending on how you look at it-is that I have congenital hip dysplasia which "barring a miracle" will require a full-fledged hip replacement. (Take a moment to let this visual sink in!)

This doesn't upset me; I'm actually psyched to be pain-free for the first time in years. I've got an MRI scheduled for tomorrow night, an injection Thursday morning and perhaps some stem cell treatments in a month. If I improve, terrific; if not, Steve Austin better watch his back! And yes, this has been some year on the health front!

R.P.

Twitter: @todd_harrison

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