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The Bear Cave

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Have you overtraded today?

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I saw her today at the reception
In her glass was a bleeding man
She was practiced at the art of deception
I could tell by her blood-stained hands


(The Rolling Stones)


Hey Mick, you wanna talk about the art of deception? One minute, it feels as if the Minx is gonna moon shot and then -- blink! -- it feels like it's rollover city. The reality? The S&P has been in a ten-handle range all day and traders are shuffling back and forth trying to find their way. In case you were wondering, it's NOT you... it really is that cloudy out there!

I've spent the session jockeying between my positions (rolled some puts higher), tonight's earning's models and making calls around the street. As I was ruminating, postulating and hypothesizing with my good friend Succ, we discussed the dynamic of trading and how it's evolved over the years. What's interesting -- and this is consistent with the nature of a bear market -- is how traditionally reliable gauges and styles have become obsolete.

As we continue to wade through the grizzly (and regardless of how long this bullish phase lasts, I've no doubt that it's within the context of a larger bear cycle), the tools we've come to rely on will slowly start to fail us. The only consistency we can expect is that the market is inconsistent and, as such, the onus is on us to adapt. Remember, the Minx has the staying power -- we're the ones with limited amount of chips.

How do we conform? For starters, we allow for a greater margin of error in our approach (regardless of bias). Second, we look for new ways to find the ever-elusive edge. Third, we maintain humility, discipline and patience while managing our emotions. Fourth, we factor all potential outcomes into our risk profile. And fifth, we strive for a balance in our lives that allows us to maintain the proper perspective.

For example, my downside ducks have started to quack in unison (with the notable exception of the NDX field position) but, as always, I've been early. However, I've attempted to employ a methodical approach that affords me the opportunity to (hopefully) use price to my advantage. Is it right? Time will tell -- that's not the point. I simply want to be in a position to prosper if my view pans out and manage if it doesn't.

The entire world is focused on Microsoft (MSFT:Nasdaq) and Intel (INTC:Nasdaq) tonight for the "sign" of the times. They'll surely move the tape (particularly if they've got anything good to say) but I plan on factoring them into my mix rather than letting them dictate my mix.

There are a lot of variables affecting the equity price action (dollar, geopolitics, structural, emotion -- and things we can't even fathom), so please take a deep breath tonight before unleashing the hounds.

Fare ye well.

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Position in QQQ

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.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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