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There's a place in the world for an angry young bear
With his working class ties and his radical plans
He refuses to bend he refuses to crawl
And he's always at home with his back to the wall


(Billy Joel)

Well, Boo, you wanted the chance to fade (read:sell) higher prices and you're getting that in the early morning session. The dull tape is ripping higher as we enter the second hour of trading and we continue to see short-side capitulation. I can't say I blame them-the tape acts great (thus far)--but it is worth noting the pickup in the trading flow. One hedge fund just walked in and scooped 15,000 Dow Jones (DIA) calls, another bought 10000 S&P calls and a macros just covered five million QQQ's. If you listen carefully, you can hear a chorus of "uncle" echoing down Wall Street!

There is increasing chatter of window dressing by the gorillas (mutual funds) and while I have no insight there, I wanted to pass it along. Yesterday, it seemed as if the sellers just walked away and that theme is continuing during the early hours today. This is another example of how important the psychological metric is when trading. During "good" markets, no news is good news. During "bad" markets, the same lull is greeting with sell tickets. Perception is indeed reality.

For my part, I continue my process of "trading around" a short bias. It's surely not fun when you're playing salmon to the market's stream, but our disciplined picks yesterday enable us to fade higher prices today. Such is the life of a zagger-sometimes you're the windshield and sometimes you're the bug. It's too early to tell which role we'll assume today, but thus far it's feeling gnatty. While it's always important to adapt and augment, I've never been one to get bullish higher and bearish lower. I've known traders like that and I've always viewed them as contrary indicators.

That said and totally objective, our trading tells are thus far bullish. The banks are up two percent, the SOX is up six percent, breadth is strong, the bellwethers are painting the tape with bullish comments and I'm seeing total give up on the short side. It's a zaggers dream or a bears nightmare...only time will tell.

I hope this finds you well.

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