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Bloodletting!

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Watch that VIX baby--a little spikage is a bullish thing!

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When I was a child I had a fever.
My hands felt just like two balloons.
Now I got that feeling once again.
I can't explain, you would not understand.


(Pink Floyd)

Ever have one of those mornings when so many things go wrong you (almost) have to smile? On top of the Fokker-induced head cold, my tech mavens decided that this was a poifect time to install a new email on my system. Sure enough---the whole shebang crashed and, between sneezes, I spent the better part of the last hour standing over Slaino's shoulder. Gorgeous!

Alas, we're back up and I've shaken off the negative vibes--there's no room for that right now. These are serious times and they demand us to be at the top of our game. The first thing I did was flip to my trusty Bloomberg charts and located Friday's lows (first support). Sure enough, the S's just sliced through them like buttah and the N's are thisclose. Past support is future resistance so throw these levels on your radar (S&P 826 and NDX 951)

It's duck season (not wabbit season!) and, as such, I wanted to walk through our morning tells. The breadth has assumed it's habitual posture (2:1 negative), there's little leadership, the field position is setting up (coiling!), the financials are slippy (I'm keying off Citigroup), fear is starting to emerge (watch that VIX--very important!), the dollar is firming (a positive) and our target level is starting to cweep closer.

What's all this mean? I'm inching towards a more constructive posture and, while there's certainly downside risk, I'm looking to trade 'em from the long side. I still feel that, from a broader perspective, rallies should be used to lighten up--but as I make my living in the guts of the tape, this is how I'm looking to lean.

The natural conundrum is that, as we fail, volatility gets fatter (as it prices in fear). As such, you must be careful of overpaying for fat option premium in your quest for defined risk. It's a subjective thing and something you must determine for yourself--I just wanted to point out the caveat as we edge through this muck.

When in doubt, sit it out--or do a little less. These are dicey times and, in my opinion, captial preservation should be a concious thought (regardless of your style). If your pressing and guessing, take a deep breath and a step back--you don't have to make your life's decisions right here, right now.

Good luck, Mon Frere.

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