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Numb and Number

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May peace be with you!

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Relax...
I need some information first
Just the basic facts
Can you show me where it hurts?


(Pink Floyd)

Alright, baby, it's time to find out which of the three faces of Eve will emerge. During March's spirited sprint, the bulls successfully triggered a vicious squeeze during the last hour. A few weeks ago, the two camps fought to a virtual standstill. Last week, the bears took control into the closing bell and flexed their fur. Which critter will be the top sitter in today's tape? Heading into the final hour, it's Hoofy's game to lose but, as we know, we've come to expect the unexpected.

As discussed, there are legitimate concerns for the bears here. The 200-day moving averages (Dow, S&P) are weakening with each test (higher), the banks have (thus far) absorbed supply, the breadth hasn't blinked all day and, by and large, expectations are very low for technology stocks. Despite my posture and regardless of your view, those inputs must be respected and factored into our thesis.

Why, then, do I have two legs in my metaphorical fur? I learned a long time ago that it's possible to nail the direction or the timing, but gaming both is a lesson in futility. The combination of lower highs (technical), pervasive bullishness (psychology), low VIX (complacency) and the complete discounting of geopolitical risk is enough for me to "trade around" a short side thesis. I may be wrong -- it's surely happened before -- but I plan to sell hope and buy despair until it stops working.

IBM (IBM:NYSE) and Novellus (NVLS:Nasdaq) highlight tonight's earning's parade while Bank One (ONE:NYSE), Check Point Software (CHKP:Nasdaq), Emmis Communications (EMMS:Nasdaq), GM (GM:NYSE), Johnson & Johnson (JNJ:NYSE), Mellon Financial (MEL:NYSE), Parker Hannifin (PH:NYSE) and Wells Fargo (WFC:NYSE) (among others) will report before tomorrow's opening. For good measure, Beeks will swing by tomorrow with industrial production (expected at -.2%) and capacity utilization (expected at 75.3%). Lest we forget, Thursday is also April expiration and, as we know, that has a tendency to exacerbate the near-term volatility (see March).

I'm gonna juggle hats and focus my attention on my overnight positions. In my mind's eye, I'm factoring in everything from an IBM (IBM:NYSE) upside surprise to an out-and-out disaster. In other words, we need to prepare for any and all scenarios as we craft our risk profile. Expect the best, prepare for the worst and always allow for a margin of error.

Have a peaceful night.
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