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Listening to the Buzz

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On and on the rain will fall
Like tears from a star, like tears from a star
On and on the rain will say
How fragile we are
How fragile we are

(Sting)

The tale of two tapes continues as the NASDAQ continues to outperform the old economy stocks. The calls that we're getting from our OTC coverage tell me that the "quality" of the buyers today is an improvement versus what they've seen. The question we must ask ourselves is: Will the N's pull up the S's, or will the S's pull down the N's? That's a loaded question (loaded with risk), but one that every trader must answer for themselves.

The price action in the S&P in general (and the banks in particular) coupled with the internals (non-confirmation) are warning signals in today's tape. That, of course, doesn't mean you can't "zag"---but regardless of your current posture, you must always appreciate the caveats (both ways). There is an old saying on Wall Street..."Too smart to buy 'em, too scared to short 'em" Depending on which "tells" you're watching today, this is indeed apropos.

The chatter out there among the bulls is that the Vanilla Gorillas (Institutions) are starting to pick at the tech sector ahead of next weeks earnings barrage, and while I confirm that, I wanted to share the thought. Plus, we saw a truckload of put buying in the Dow Jones today and, from a contrarian standpoint, that's bullish. Conversely, the noise on the derivative desks is that there's a chunk of open interest in the S&P all the way down to the 700 strike, and if we start trading lower, the downside could be exacerbated. Talk about the eye of the tornado! Crosscurrents galore!

As you know, this is NOT an advice column so please don't interpret it as such. That said, it's always been my style to get increasingly bullish with lower prices (I'm a zagger) and the recent carnage, coupled with the pending signals from the stochastics, is intriguing to me. Keep a very close eye on those internals (any rally thesis must include confirmation from this tell) and monitor S&P 775 for its ability to '"hold" (many traders using that level as a stop).

And please, trade within your means and don't bite off more risk than and can chew. This tape is not for the meek.

Good luck

R.P

Long QQQ calls, Long Spy, Long DIA calls


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