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The Real Deal

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Since it cost a lot to win
And even more to lose
You and me bound to spend some time
Wondering what to choose

(The Grateful Dead)

Well, the Bank of England and ECB left rates unchanged and the European bourses initially sulked...but are now attempting to make a stand. Personally, I think rate cuts are like a band aid on a gusher but, in this fragile environment, I suppose sentiment needs all the help it can get. The focus now turns back to our market and traders are wiping their brow as they prepare for battle. If you're feeling maximus stressimus, I would encourage you to do breathing exercises or splash some water on your face. When that opening bell sounds, you'll need to remove emotion and stay extra sharp.

Aside from our standard "tells" (banks, breadth, CSCO, Semis), keep an eye on the retailing sector today. A couple of negatives pinged the group this morning and their ability to absorb the news (or not) will be worth noting. Also add General Electric (GE) (for reaction to the Merrill Lynch downgrade) and those pesky Utes (Utilities) as tells du jour.

My good friend (and former options maven) Jordi points out that the last two times we had a TRIN below 1.25 and the S&P down more than 2 ½% were 7/23/02 and 9/20/01---and in both of those cases, the market staged rallies of greater than 20%. Of course, this is not to say that past history is a good predictor of future performance but I found that statistic interesting and wanted to pass it along.

Next week brings us a slew of earnings reports and options expiration which is usually a wild ride. A quick thought: There always seems to be a view heading into expiration with regard to whether it's "for sale" or "to buy." I've been trading derivatives for twelve years and, while I'll be the first one to tell you I am not an authority on the expiry game, I will offer that trying to game this "flow" is a lesson in futility. My view is that expiration always exacerbates volatility in the sessions that precede the actual day of expiry (Friday). Not necessarily something we can play, but certainly something to factor into the mix.

Meanwhile, the report card from my dentist came back and, well....I have issues. All four wisdom teeth? See ya! Root canal? Probably! My mother always told me to take care of my teeth and I thought she was just being, well, a mother. Next time, Carole...I'll pay attention!

See you after the opening.

R.P

No positions in stocks mentioned

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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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