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Bloodletting!

By

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.

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.

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