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Hunkering Down


Watch for my cousins at each of the previous trading lows.


You can spend all your time making money
You can spend all your love making time
If it all fell to pieces tomorrow
Would you still be mine?

(The Eagles)

It's a hectic morning in Minyanville (as measured by the deep breaths index) and the news flow is pumpin'. The unfortunate events in the Philippines has ratcheted up the intensity level and traders are a bit on edge. Before we get started, I would like to (once again) stress the importance of removing emotion from your process. There's a fine line between controlled aggressiveness and emotionally charged decisions--it's necessary for us each to walk that line.

With that said, let's dive into the muck. At least 17 people are killed (including four Americans) when a bomb exploded at Davao airport and this has put the terror card at the front of the deck. The concern, or I should say one of my concerns, is that the capture of the Al-Qaeda operative this weekend will spark reactionary situations such as this. It's not actionable, per se, but it's certainly something to keep in the back of your mind in more ways than one.

On the heels of this attack, the greenback has slipped to a four year low vs. the Euro while gold and crude have rallied. After yesterday's bearish reversal, these concerns are the last thing the Minx needed but we can't change the news, we can only adapt to it. In company specific news, Deutsche Bank downgraded GM, F, DPH and VC, UBS Warburg upped the foundries (TSM, UMC) and XLNX guided to the high end of their forecast.

We broke the five-day uptrend in the S&P yesterday while the NDX was rebuffed at our 1020 resistance level. In the process, both of these indices (along with the SOX and BKX) formed "outside days" which is a historically negative pattern. Yes, it's worth noting that last week was littered with poor performances and the bulls stepped up when they had to. However, each juncture of the market is independent and we must weigh them with unique eyes.

That nasty feeling continues to linger in my trading bones but my risk profile remains guarded. With one leg in my bear costume, I'm admittedly smaller than usual but it's consistent with my tactical trading approach. There are risks to the tape (both ways) and I'm looking to grind our three yards and a cloud of dust until Charles Woodson trips--then I'll go deep. Until I identify that disconnect, I'll likely continue to trade 'em from the short side and define my risk whenever possible.

Tells today include the semis (XLNX), BKX (failed again at 725), Cisco and Microsoft (sentiment), Europe (probing the recent lows), retailers (consumer proxy), the macro tells (particularly the dollar), the cyclicals (GE) and the internals. I would also urge you to read Warren Buffett's take on derivatives at This is one of the reasons that I remain such a big picture bear on the financial stocks and they do a superb job of explaining the risk imbedded in many institutions.

There's certainly a lot to chew on this morning and the opening promises to be charged with excitement. Remember, the first half hour is typically "noisy" before a true tenor begins to emerge. With the volume whisper thin and the macros flexing their muscle, we must be on our toes and respect the process. Focus on the minutes, fellow Minyans, and the hours will take care of themselves.

See you after the opening.
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position in s&p, smh
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