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Stepping Stone


I'm gonna git you, sucka!


Rich man step on my poor head
When you get up you better butter my bread
Well you know it's like I said
You better head back to Tennessee, Jed

(Grateful Dead)

The morning session comes to a close as the Minx squirts higher and, I'll tell ya, it's thin out there. The S&P's were fluttering around up 4 and one buyer stepped in and bought a chunk of futures. The locals got caught leaning the wrong way and -- blink and ya missed it -- the futes are up 9. That's thin, Lizzie!

The constructive elements of this morning's action --t he "solid" earnings, breadth on the big board and the traction in the banks -- has thus far emboldened the boyz from Matador City. We saw similar sentiment last week and, as the day wore on, supply was summoned and some selling ensued. Will today's script follow a similar pattern? Let's take a peek at the tea leaves and see what we can find.

The pop in the futures (coincidently) coincided with a smack in the bonds and that immediately raises my alligator antennas. I haven't seen the tracks yet, mind you, but we know that the structural metric has been in play and we must respect the potential that they're out there. How do I incorporate that into my chosen strategy? I'm still using strength to add puts, but I've widened my scale a bit as I sniff it out.

What concerns me on the short side? The stochastics in tech are closer to buy signals than sell signals and that bears watching. We also must be conscious of the potential for "upside confirmation" in the form of "better" earnings or stronger economic releases. Finally, the tape has been sideways for a few weeks and while my gut senses that it's a topping process, there remains a chance that it's been basing.

On the other side of the coin, the combination of low volatility readings and bullish sentiment has been the death knell for this market in the past and the onus is on the bulls to prove that this time is, in fact, different. With the focus shifting from the war to reality, there will come a point when we'll need to see results rather than conjecture.

While the Minx acts splendid and unknowns remain, I always strive to make my metaphorical posture consistent with my thought process and risk profile. As such, and with the indices tickling first resistance,I'm gonna slip that other leg back into the bear costume (makes 50% conviction on the short side) and attempt to use these prices to my advantage.

If YOU are bullish, my friends, you may want to think about gaining exposure via calls rather than stock. With vols down here, you can garner the same upside exposure while defining your risk. Just a random thought as we find our way.

As always, I hope this finds you well.

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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

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