Stock Market Recap 04/08/11 {Video}

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Since the inception of the “chessNwine” tab here on iBankCoin, I have relentlessly looked to Freeport-McMoRan Copper & Gold, Inc. as the one individual stock that matters the most in terms of broad market directional tells. Indeed, looking at its performance over the past several years, the well-run copper giant has been a steady leading indicator for the S&P 500. In early 2011, FCX clearly formed an intermediate-term top and proceeded to roll over nearly two months before the S&P followed suit for the latter’s 7% correction. To be sure, the correct strategy was to respect Freeport’s weakness during the winter months by at least becoming increasingly defensive as the S&P diverged and wedged towards 52-week highs.

In a similar vein, ever since FCX bottomed and then broke out last month, the stock has basically given the all-clear signal to “Freeport Watchers,” rendering each ever-so-slight dip in the market to be a solid buy. Even with today’s broad market weakness, Freeport is far from giving any kind of sell signal, as price has negotiated all moving average nicely and looks poised to continue higher. Also note the absence of any serious selling volume since it bottomed out last month.

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This morning’s earthquake in Japan might as well have happened ten years ago, as many market players have already moved on to freaking out about the rise in crude oil. As you can see pretty clearly, there will just about always be macro headlines that cause great consternation amongst traders. Regarding crude oil, the work that I have done leads me to believe that it is only when we see a breach and hold above $120 a barrel (on WTI light sweet crude), that there is just cause for concern with regards to a direct negative impact on equities.

With respect to the broad market, you can see on the intraday 30-minute chart of the SPY above that we remain range-bound, despite the news out of Japan and the rise in crude. I am holding several longs now, but an open to changing my posture should we lose support. In other words, if you are a trader who seeks to profit from the fluctuations in the prices of equities, you would be best served to stay on point, and leave the macro arguments to blowhard economists on television.

You American central bankers are so stupid and lazy with your dual mandate. Le French Trichet will raise le interest rates and burn le countries in the le monde into le ground. Le inflation is so bad, it hurts. Time for lunch of le salad nicoise, excusez moi si vous plait. Oh, before I go, learn how to dress and stop being such a stupid American. Au revoir les enfants.

Japan was just hit with another 7.4 earthquake. Yet, here the S&P 500 is, still coming to terms with 1332, and the Nasdaq Composite Index with 2800, for good measure. To be sure, many traders are anxious, and even a bit jittery, about catching and not getting caught in the next big market move after the past several sessions of consolidation and indecision. The logical presumption is that the earthquake would serve as a catalyst for a move lower, but the market already seems to be stabilizing from the quick spike down this morning after the news hit.

The reality is that we must acknowledge and live in Mr. Market’s version of reality, for better or worse. What that means is that we appear to be well on our way for a seventh consecutive trading session centered around the 1332 price level, which we know has been significant over the past several months. Individual stock selection based on high probability setups and protective stop losses command your attention above all else, at this point.

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